BioWorld International Correspondent
The co-CEOs and supervisory board of LION bioscience AG resigned last week because of prohibitive costs for obtaining new directors and officers' insurance for its executives.
Daniel Keesman, chief operating officer and co-CEO, and Martin Hollenhorst, chief financial officer and co-CEO, both resigned, effective immediately.
The company's supervisory board subsequently appointed Joseph Donahue and Thure Etzold as co-CEOs. Then the board resigned, also effective immediately, citing the same concerns that prompted Keesman and Hollenhorst to leave. The members of the board had been Juergen Dormann, former CEO of Hoechst AG and former vice chairman of Aventis; Klaus Pohle, an investor and member of Aventis' board of directors; and Richard Roy, an independent business consultant.
The local trade court in Heidelberg, Germany, where LION is headquartered, will appoint a new supervisory board.
"The court is working with Friedrich von Bohlen to set up a new board," Tracy Coffey, a representative of the company, told BioWorld International. Von Bohlen is one of LION's founders and remains one of its major investors. In German corporate governance, the supervisory board exercises an oversight role, while the board of management is responsible for day-to-day operations.
Asked if the management change signaled a change in LION's strategy, Coffey said, "Absolutely not."
LION's new co-CEOs were promoted from within the company. Donahue was chief business officer and president of LION bioscience Inc. in North America. He joined the company in May 2003. Etzold has been with LION since July 1998, most recently as senior vice president for research and development, and as managing director of LION bioscience Ltd. in the UK.
For a company that remains unprofitable, the costs of maintaining its Nasdaq listing are substantial, and the company is considering delisting. It said that an insurance policy for the executives would have cost about $550,000 plus tax, with a new policy running 15 percent to 20 percent more. For its 2004-2005 business year, LION expects to have a net loss of €11 million on sales of €12 to €13 million.
The insurance would have covered the executives against serious management errors, shareholder lawsuits and personal liability. "The new co-CEOs are not worried about insurance," said Coffey. Going without it is "a risk they were comfortable in taking."