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Rockwell Medical dismisses CEO, NASDAQ temporarily halts trading of stock
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Pharmaceutical company Rockwell Medical has dismissed its president and CEO Robert L. Chioini after he challenged the board of director’s authority to fire him along with chief financial officer Thomas Klema. NASDAQ temporarily suspended trading of the company’s stock on May 23 and resumed trading on May 25.
Rockwell sells iron therapy drug Triferic and Calcitriol, a generic drug indicated for the treatment of secondary hyperparathyroidism in patients on dialysis.
In a statement released May 22, the company said Chioini “has been terminated from his positions, effective immediately” and that he has resigned as a member of the board of directors. The board also formed a special transition committee to provide board-level oversight over the strategic direction and day-to-day operations of the company and has initiated a formal search process to identify a permanent CEO.
“Having completed a top to bottom review of our business, it was determined that a change in leadership at this time is in the best interests of all our key stakeholders, including shareholders, employees, patients and providers,” board member Ben Wolin, said in the statement. “The board believes this leadership change is necessary to enhance the company’s ability to execute on its plans for growth and best position it for future success.”
In a separate statement released by the company the next day and sent to shareholders, however, Chioini said the agenda of the board meeting where his firing took place — a meeting he had called for to investigate other matters — did not include discussion of his future at the company and therefore made the firing of him and Klema invalid.
“ … I called an emergency board meeting for the purpose of discussing a shareholder demand letter requesting an independent investigation and alleging breaches of fiduciary duties and other possible violations of securities and other laws by various directors,” Chioini wrote in the May 23 statement. “The special meeting was called for the sole purpose of discussing various allegations of misconduct by directors and inform the full board of steps the non-conflicted independent directors have taken to retain counsel and initiate an independent investigation. The call was convened and the directors whose conduct was the subject of the allegations of breaches of fiduciary duties, with securities counsel present, asserted the position that they voted to fire the CEO. As that action was not the purpose of the special meeting, the termination of the CEO, in the opinion of the non-conflicted independent directors, was not effective.”
Chioini said he notified the Security and Exchange Commission of the action taken by the directors and that he “continues to serve as the CEO consistent with the terms of his employment agreement,” adding that “I have no information to suggest that the governance requirements for the creation of [the transition] committee were followed … I remain committed fully to acting in the best interests of all shareholders.”
In a statement released May 24, the company said, “Despite the duly authorized termination by the board, Mr. Chioini refuses to accept the decision and has since taken action purportedly on the company’s behalf without authorization to do so.” According to the company statement, these actions include filing a current report on form 8-K and making “assertions regarding the five independent directors who voted in favor of Mr. Chioini’s removal.” As a result, the company filed a verified complaint in the Oakland County Circuit Court in Michigan seeking declaratory relief and a temporary restraining order.
On May 10, the company reported sales for the first quarter of 2018 were $14.9 million, an increase of 2.4% compared to the first quarter of 2017. However, gross profit was $29,507 compared with $2.4 million in the first quarter a year ago. Expenses related to drug sales hurt the company’s bottom line, Rockwell said. Net loss was $6.5 million compared to $4.7 million in the first quarter of 2017. The company has been working with Medicare policymakers to obtain separate reimbursement, outside the dialysis payment bundle, for Triferic.
“Although we cannot be certain, based on our progress to date, we believe that Triferic has the potential to be granted separate reimbursement,” Chioini said at the time. On May 22, Rockwell stock was trading at $5.94 per share before being halted by the NASDAQ. The stock price hit a high of $8.52 in October 2017. – by Mark E. Neumann
References:
http://ir.rockwellmed.com/news-releases/news-release-details/rockwell-medical-issues-statement
www.nasdaq.com/press-release/nasdaq-halts-rockwell-medical-inc-20180523-00790