Angry investors revolt against 'spray-on skin' company
The company charged with developing revolutionary "spray-on skin" technology developed by Australian of the Year Fiona Wood and used to treat victims of the Bali bombing is facing a revolt by its two largest shareholders.
Avita Medical, formerly known as Clinical Cell Culture, has run up losses of more than $100 million amid concerns over chief executive Bill Dolphin's pay and the progress of a key US clinical trial. The performance of former West Coast Eagles chairman Dalton Gooding, who during his 11-year reign as Avita chairman has overseen a 95 per cent plunge in share price, has also been questioned.
Biggest shareholder Australian Ethical Investments, which owns more than 20 per cent of Avita, plans to vote against the remuneration report at Avita's annual meeting on Friday.
Second biggest shareholder Bioscience Managers, which has two seats on the board, also slammed the performance of the company and Dr Dolphin.
David Macri, the chief investment officer at Australian Ethical Investments, told BusinessDay his fund would be voting against the remuneration report.
"That's the extent of our displeasure," he said. "We're not happy with the cash bonuses and the generous terms for the managing director [Dr Dolphin]."
Avita's 2013 annual report shows Dr Dolphin received pay worth more than $550,000, including a cash bonus of $103,000, while the company made a loss of $8 million.
Bioscience Managers investment director Bronwyn Dilley declined to reveal how the fund manager's 7.7 per cent stake would be voted at Friday's meeting, but said she had "concerns about the future direction of the company".
Bioscience Managers invested $3 million in Avita last September, after which its managing director, Jeremy Curnock Cook, and chief investment officer, Matt McNamara, joined the board. "We believe that the current leadership of the company is not necessarily best equipped to drive that technology through to commercialisation," Ms Dilley said.
"While Fiona Wood is an Australian of the Year and the technology is sound and has been approved in Europe and Asia-Pacific, we don't believe that there's been enough focus on bringing the product to market in those territories.
"Given the ongoing delays with the US FDA [Food and Drug Administration] burns trial we have concerns that they won't be able to generate enough value on which to raise capital, preferably at a premium to the last round."
Avita's key product, ReCell, involves taking a sample of the patient's own skin and spraying it on the burn wound, which, according to the company, reconstructs "a 'new' skin that matches the surrounding tissue in texture and colour".
The company has been conducting a US clinical trial of ReCell, funded by the US Department of Defence.
However, in its 2012 annual report the Armed Forces Institute of Regenerative Medicine said the trial had enrolled only 63 of 106 test subjects needed and was attracting "just two to three" new patients every month.
The AFIRM said that while the treatment appeared to work, three subjects had healed slowly after re-injuring their burn and "the FDA is likely to inquire about the robustness of ReCell versus [standard bandages]".
Ms Dilley said there had been a "substantial decline" in Avita's share price during Mr Gooding's tenure as chairman "which hasn't improved in the past five years".
"The current chairman doesn't have substantive industry experience in taking this type of product through the complex regulatory process required," she said.
"We notice the board hasn't changed much in that time with the exception of the addition of our directors last year.
"This company should be growing its revenue each year and the numbers for the past three years don't show any significant change in revenue. We basically think it's time for new leadership."
She said the company should shift the bulk of its resources to bringing the product to market in Europe and the Asia-Pacific.
And she echoed Mr Macri's concerns about Dr Dolphin's "high salary" and cash bonuses.
"While he has done a number of good things, perhaps it is time for the company to seek an MD who has sales and marketing skills rather than scientific and technical skills," she said.
Dr Dolphin was travelling and could not be reached for comment.