Seattle-based Dendreon (NASDAQ: [[ticker:DNDN]]) has a passionate base of fans and detractors all over the web, but now it has a new and potentially volatile issue on its hands—an Internet-driven shareholder uprising that aims to shake up the company’s board of directors.
Battles for control of corporate boardrooms that hit the press are usually waged by powerful interests like billionaire Carl Icahn, or prominent activist Ralph Whitworth. But in this case, Brad Loncar, 32, has agitated for change with a Tweet and a posting today on a popular message board, InvestorVillage. Loncar, an individual Dendreon shareholder in Lenexa, KS, went public today with a 65-page, footnoted critique in which he details Dendreon’s managerial “missteps” of the past few years. After reaching out privately to Dendreon chairman Richard Brewer in February, and coming away unsatisfied with the company’s response to his concerns, Loncar went public with his call to add one or two new, independent directors to provide greater oversight on the existing eight-member board.
Within a few hours, hundreds of people had viewed the proposal, and dozens had written directly to the company to say they support it.
While Loncar said the company appears to be following of some of the suggestions, he wrote in a cover letter posted online today that, “it appears that management has otherwise chosen to ignore the proposal rather than work together constructively. That is why I have decided to reach out to other shareholders like you at this time. I am seeking your support in seeing that change is seriously pursued. Dendreon’s board might be able to ignore one shareholder, but hopefully they will more clearly see the importance of these issues if more of us stand together. Therefore, I respectfully ask that you contact Dendreon and let them know you support this proposal to add outside shareholders to the board.” [Editor’s Note: The bold emphasis is Loncar’s].
Dendreon, for those new to the story, faced intense skepticism throughout much of its history as it sought to develop the world’s first active immunotherapy against cancer, which works by stimulating the immune system to fight cancer cells as if they were viruses. The drug proved in a study of 512 men reported in April 2009 it could help prolong the lives of men with prostate cancer, with minimal side effects. The drug won FDA approval a year later.
While scientists and doctors (and more recently, Medicare) debated the merits of clinical trial data to support Dendreon, shareholder debates have raged for years about a number of controversial moves. In his critique, Loncar points to a number of reasons why he thinks greater board oversight of management is necessary:
—Dendreon paid a $16.5 million settlement to resolve a shareholder lawsuit, in which the company was accused of failing to properly disclose material information about its interactions with the FDA when it was seeking clearance of its drug, sipuleucel-T (Provenge), in 2007.
—The company has a history, Loncar asserts, of making forecasts to the investment community that have “often conflicted with reality or changed significantly over time.”
—Many company actions have been unfriendly to shareholders, Loncar says, citing the board’s authorization of dilutive rounds of financing, insider stock sales, and “generous gifts of stock and options to executives.”
—Dendreon management, Loncar says, “seems unprepared to effectively recognize and answer the public relations challenges facing the company that are outside the scientific realm.”
A Dendreon spokeswoman didn’t respond to my request for comment about Loncar’s complaints on Friday afternoon.
After reading Loncar’s cover letter and proposal, I followed up with him by phone to hear directly what he had to say, and find out more about him, and what motivated him to lead such a shareholder uprising.
Loncar isn’t a lawyer trained in the nuances of corporate governance, or someone skilled in waging the legal contests that big guys like Icahn know
