In the face of a plunging stock price and leadership turmoil, Echo Therapeutics ($ECTE) must now confront an angry shareholder and its pitch for a course correction.
Platinum-Montaur Life Sciences owns about 20% of the outstanding common stock and is the largest shareholder at Echo, a Philadelphia developer of the Symphony needle-free, wireless continuous glucose monitoring system, plus similar tech designed to boost topical drug delivery. So far this year, the investor group has watched Echo's stock price drop from well above $17 per share in late September 2012 to $2.44 at the close of trading on Aug. 30. Last week, CEO Patrick Mooney also took an immediate leave of absence, with board member Robert Doman stepping in as interim CEO--the search for a replacement is now underway.
Lamenting the company's plunge in share price (95% over two years), the investor group made the unusual move of issuing a public letter detailing its plans to right the ship. Michael Goldberg, a portfolio manager with Platinum-Montaur, wrote the open letter to the board, urging company executives to replace "ineffective directors" with industry professionals, hire a "top executive recruiting firm" to find a new CEO, and also bring on an unnamed consultant it has in mind to help develop a strategic vision. Platinum-Montaur also wants Echo to link up with a partner in China to develop and make its continuous glucose monitoring system there and concoct a plan to achieve Chinese fast-track regulatory approval.
"Now is the time to act," Goldberg wrote. "Surely the board sees that each day it looks at the stock price and the burn rate. Yes, you were elected by the shareholders. Now show that their trust was justified by forcefully and publicly acting in their best interests."
Goldberg, in his letter, laments that "not once in our numerous discussions has a director or executive of Echo acknowledged the Company's free-fall and their role in it."
Echo did not respond at deadline to a request for comment. But it continues to focus on a U.S. and European Union regulatory pathway for Symphony, despite delays, and the money-losing company just raised another $11.3 million in a June public offering to keep the process moving, Clearly, however, Platinum-Montaur wants more, and is gearing up for a fight. Echo must issue a response before 5 p.m. on Sept. 4, after which Platinum-Montaur threatens to take its case "directly to our fellow shareholders." It's a dramatic development for Echo, which launched with a promising technology that has ties to MIT's revered inventor Robert Langer.
- read the full shareholder letter
- here's MedCity News' take
- here's the CEO change announcement