Agrees With Long Overdue Decision to Terminate Nasulin Program on Which Arcadia Believes CPEX Management Misapplied $17 Million in Failed R&D in First Eighteen Months as Public Company
CPEX Management Has Consistently Refused to Meet or Even Speak With Richard Rofe Regarding
His Prospective, Fully-Financed Tender Offer Despite Repeated Requests
NEW YORK, April 13, 2010 (GLOBE NEWSWIRE) -- Arcadia Capital Advisors, LLC, part of a shareholder group that maintains a significant ownership interest in CPEX Pharmaceuticals, Inc., (Nasdaq:CPEX), commented on CPEX's recent press release which quotes current CEO John A. Sedor in an open letter to CPEX shareholders. Arcadia Managing Director Richard Rofe noted that the letter, part of proxy materials being sent to CPEX shareholders, is replete with extensive misstatements, false premises, and misleading information on factual events.
In reacting to the recent shareholder letter, Arcadia notes the following:
- Nasulin has been a disaster for CPEX shareholders and has consumed essentially all of the Company's earned revenue, with zero return on this investment
- With its failed Nasulin program finally in the belated process of being terminated by CPEX, CPEX has no pipeline and lacks sufficient capitalization, lacks adequate personnel, and lacks a successful track record necessary to undertake continued drug discovery
- CPEX has rebuffed any and every attempt by Richard Rofe at an in-person communication to negotiate friendly terms of his all-cash tender offer that would terminate the Company's existing poison pill
- CPEX has a history of excessive management and board compensation and a drug development track record of comprehensive failure excluding out-licensing of its drug delivery technology
In response to the letter, Rofe stated the following: "CPEX is a company with an enviable asset, its ongoing licensing stream, which has been mismanaged largely for the personal benefit of its senior management team at the expense of public shareholders. I have consistently expressed my interest in entering into negotiations with the purportedly independent board members to reach a friendly, structured transaction under which I would attempt to acquire ownership of the assets and liabilities of CPEX in an all-cash tender offer free and clear of the toxic poison pill. Recently, my group has undertaken to sell a meaningful portion of our collective stake in CPEX, but only after being consistently stonewalled by CPEX management. Moreover, we have witnessed the ongoing destruction of shareholder value by a management and board protected by extensive anti-takeover provisions including a staggered board, a highly toxic 'poison pill' and the selection of several other key corporate governance provisions insulating the board and management from concerned company shareholders."
Rofe continued, "CPEX management's unwillingness to negotiate or even speak with me and my group illustrates that they have no intention to engage in constructive dialogue and are instead still working to protect their lucrative status quo at the Company. Nevertheless, my group's efforts have had a positive impact for all shareholders by forcing management to abandon its failed Nasulin program, but regrettably only after they burned nearly $17 million on R&D and nearly $12 million on general and administrative expenses. While earning less than $27 million in revenue during their first eighteen months, management's decision to burn through nearly $29 million of shareholders' cash has produced no (zero) return on investment. Against this backdrop, it is understandable that we would desire to sell shares in the company, particularly when considering that CPEX directors and management remain unwilling to speak, despite the fact that our longstanding public concerns have proven absolutely correct by virtue of the complete and utter failure of Nasulin. Nevertheless, management's deafening silence continues unabated."
Rofe concluded, "Moreover, CEO Sedor states in his letter that the Company plans to 'build [its] development pipeline by developing and/or acquiring new compounds.' This statement is laughable and deplorable considering the totality of their drug development track record thus far. We expect that the extraordinarily conflicted senior CPEX management will now identify a new, wholly inadequate drug candidate, much like Nasulin, to justify their continued existence as an 'emerging specialty pharma' company while paying grossly excessive salaries and perks to key members of the management team, and in the process siphon off scarce shareholder assets and destroy additional shareholder value. Separately, if CEO Sedor actually wishes to know our funding sources, we certainly encourage him to pick up the phone and return our calls, as he might be surprised by our response. Finally, I would distinguish that unlike the board Chairman, the CEO and the other board members granted shares in the company, I have actually purchased all of my shares for cash in the public marketplace rather than having them bestowed, gratis, in return for non-performance and mediocrity."