[Editor's Note: This letter was sent today to Dendreon chairman Richard Brewer.]
Dear Mr. Brewer:
Just over five months ago I wrote to you expressing serious concerns about the composition of the board of directors and its oversight of Dendreon's (Nasdaq: DNDN) management. I appreciated the opportunity to discuss these views in person with management at company headquarters in May, and to briefly speak with you at the June annual shareholder meeting. In the meantime, Dendreon has experienced one of the most sudden and significant erosions of shareholder value in recent memory.
However, the consequences of this misfortune extend well beyond shareholder interests. Employees have been abruptly laid off, press reports are tarnishing Dendreon's brand reputation with each passing day, and many experts have even speculated that this might diminish investor appetite for our nation's biotech industry as a whole. It is hard to believe that the company that produces one of the most innovative and groundbreaking treatments on the market could have triggered such a debacle. All of Dendreon's stakeholders deserve much better.
I hope you will see why it is so critical for Dendreon to quickly act and put this innovative company back on the path to success that it deserves. While there is no quick answer to all of the questions facing the company, an immediate boost of confidence is greatly needed. The clearest way to accomplish that is a change in personnel. Therefore, I renew the call for Dendreon to nominate one or two new board members who come from the ranks of outside shareholders and are outside of the biotech industry.
After Wednesday's stunning events, I urge you to finally see the light on this issue and send a clear message to the market that Dendreon respects shareholder interests and intends to bounce back stronger than ever. This issue has clearly taken on a new sense of urgency and I believe decisive action is necessary. I have the upmost confidence in Dendreon's long-term success, but to get there the company first needs to instill much more confidence in the short term.
In my February report, and during our discussions, I laid out five key issues that were testing investor patience with the company. These are serious and have painted a puzzling picture of Dendreon for quite some time. It is telling to review them again in the context of Wednesday's news. They have clearly become much worse while the board has stood still. Please recall the five key issues:
- The company's settlement of shareholder lawsuits is concerning.
- Important statements and guidance communicated by management to the investment community have often conflicted with reality or changed significantly throughout time.
- Disclosure of pertinent and, I believe, material, information to shareholders has been lacking.
- Many actions by the board and individual company executives have not been shareholder-friendly and send the wrong message to long-term investors. These include generous gifts of stock and options to executives, dilutive financings, and significant insider sales.
- Management, in my view, seems unprepared to effectively recognize and answer the public-relations challenges facing the company that are outside the scientific realm.
While these things were obviously apparent in the past to some, I think most would agree they are now indisputable. They cannot be left to linger if Dendreon seriously expects to regain the faith of its investor base. Something must be done.
When we spoke in June, you indicated that you agreed with the need for improvement on many of these ideas. However, no clear path forward was given on a change to the board, which is by far the most important factor for getting these things back on track. In my view, Wednesday's events have confirmed the need for a new solution and a new path forward. I hope you agree.
In light of recent events, I would be interested to hear your updated thoughts on this issue. I have the upmost respect for this company and want to see it succeed.
Best Regards,
Brad Loncar
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