Read this on a board that was posted on Yahoo which I sent to our CEO and Mr. Kelly. Great read:
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Posted on YMB by Nick
AN OPEN LETTER TO DR. POURHASSAN
Dear Dr. Pourhassan:
By way of introduction, I, like you, immigrated to the US some 35 years ago to go to graduate school, speak with an accent, but I do not think with one. I, like you, hold a PhD in science and have been an executive in a NYSE listed company so I fully understand what it takes to satisfy the various company stakeholders, including the BOD, shareholders, employees, suppliers, partners, etc.
I bumped into CYDY accidentally a few months back through a link to Dr. Patterson’s paper. Not being my field of expertise I gave it to my wife to decode it for me. My wife is a PhD in molecular immunology with research experience in juvenile diabetes, lupus disease, and cancer having worked at some of the most prestigious research institutions in the US. After a few minutes of studying Dr. Patterson’s paper she proclaimed: “You know, this could be used for a lot of other autoimmune diseases and could even be taken prophylactically by people over 60 as most of them get afflicted by autoimmune diseases. I can see it becoming the botox-equivalent of the autoimmune system, if they let it”. At the time my wife was totally unaware of HIV or any of the other potential indications of LL which form the broader investment thesis in CYDY.
My wife’s last conditional sentence bothered me so I prompted her to expand on it, here is the deal. Based on the Bayh-Dole Act of 1980, any institution, academic or otherwise, whose research is funded by federal grants holds the Intellectual Property licensing rights to the outcome of its research. This in turn means that the people who worked on an idea that ultimately became a commercial product by a third party receive licensing royalties as are the institutions that they worked for. “People” include those in management positions who are always listed as authors in scientific publications, albeit at the bottom, and in this context NIH/NIAID satisfy the definition of research institutions. In turn, this creates an inherent conflict of interest as the introduction of a new drug may have a direct personal financial impact on those who decide, or at least influence the decision, as to whether the new drug should be approved. Indeed, the health sciences machinery of which Big Pharma is a part is extremely fraternalistic, incestuous, and corrupt.
I have since done my own independent research on Cytodyn and have accumulated a number of shares now approaching 80K with a minimum of 5-year investment time horizon. Along the way, I have watched every public CYDY event since March and I have come to “know” you somewhat. Unquestionably, you need to be congratulated for your foresight, single-minded focus, resolve, and perseverance that took an unknown molecule and have brought it to the cusp of something potentially very big. But as Cytodyn knocks on the door of the premier league, there are certain adjustments that you need to personally make while addressing the public because, plagiarizing the title of a published book, “what brought you here is not going to get you there”. Here are some suggestions:
1) Limit your use of superlatives. The word “fantastic” that you commonly use carries a huge weight and for most people it implies something that is two standard deviations out of the ordinary, which is rarely the case. Words like “positive” and “encouraging” are far more appropriate for the vast majority of the cases.
2) Never express an affinity for your colleagues in public. In a recent event you introduced Dr. Kelly as “my favorite Board member”. Dr. Kelly as an executive of the company and yourself should be singing from the same hymn sheet and there is an expectation of zero dissonance between the two of you. What message does this comment send to the other independent board members or to those who listen regarding your relationship with the other board members?
3) Never comment about the stock price in public. Yes, the stock price can be manipulated and driven to extremes on either side of what it should be based on a reasonable valuation of the company. But to my knowledge, CYDY has never put up any financial model of revenues and profitability over time on which such valuation can be based so any references as to what the stock price should be is pure speculation. If you really want to support the stock price, rather than trying to talk it up, I would advise that you, along with the other executives and the BOD, should instead consider buying the stock in the open market. Spending a modest amount on the order of ~$200K should be more than enough to send a very powerful signal to the market. After all, the only reason an executive buys his company’s stock is to make money.
4) Never comment on what it might take in terms of valuation for the Company to be bought out. You did so during a recent event while commenting on the purchase of Immunomedix by Gilead. First, it is not your decision. And second, the BOD can only make a recommendation but at the end it is only the shareholders who have the power to approve it. Besides, why discourage a possible conversation that may start at X and end up at 2X or 3X as the Immunomedix case amply demonstrates.
5) Message the timing expectations of events extremely conservatively. You should know from experience by now that you have no control regarding the timing of something being completed when the ball is in the court of a third party. And even when the ball is in CYDY’s court and you have full control, you should always put out an expectation that is at least twice as long as you realistically think it might take. Murphy’s law dictates it.
6) Never under any circumstances read verbatim documents sent to CYDY by public institutions or regulatory agencies while also revealing the author’s name, as you have done a number of times recently. While you might think this provides credibility to what you are presenting it is in fact undermining the trust with the people and agencies you are dealing with. Depending on the sensitivity of the issue you may even be creating inadvertently a personal liability for them.
7) Never put your subordinates into a position of trying to defend or at least explain certain events that involve yourself or others in the executive team. In a recent call while discussing the proxy for the employee incentive plan you asked “please Mike tell us, am I going to get 25M shares of stock?” If you want to discuss the topic, it is always best to take out all personal references and concentrate on the “what” and the “why”. A better route would have been “please Mike tell us how is the incentive compensation plan structured and what is the rationale behind it?”.
8) Keep the internal workings of the Company out of the public eye. It is not appropriate for you to tell investors that you call Mike every morning while commuting to work to find out about the status of the NASDAQ listing or whether S. Kelly had a chance to read his email prior to an interview.
9) Certain sensitive topics, such as for example CYDY’s relationship with IncellDx, should be addressed with a prepared script where words are carefully chosen and the full explanation can be saved and pointed to when the question comes up again. Otherwise, the verbal rejection of the question when raised again, with an obvious undertone of irritation, is sending out to investors the wrong signal as to what may have transpired.
10) To the extent possible, limit your references to CYDY’s competitors and their products. You are in no position to know what they are working on behind the scenes, and what the relative merits of one drug may be against another prior to their full introduction into the market place. Remember, you are by definition deemed to be biased and any comparisons coming from you carry little weight, so let others who do not have a vested interest make such comparisons. Concentrate instead your comments on CYDY and LL.
Thank you for reading and good luck navigating the treacherous path of receiving regulatory approval for LL, I hope you are extremely successful.
Yours truly,
ISWAA (I Speak With An Accent)
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GLTU/A.
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