Martin Rogers was 28 when he took the helm of biotechnology company, Prima BioMed (ASX:PRR). The company was in big trouble. Its share price was half a cent. Its corporate structure was complicated, its efforts to develop a new cancer therapy lacked focus. Shareholders were disillusioned.
Over the next four years, Rogers turned the company around, focusing the research effort on its best candidate, CVac, and persuading shareholders, one by one, to fund the company’s future.
“He passed the ‘Hush Puppies test’,” says David Blake, biotechnology analyst and publisher of newsletter, Bioshares. “That means he wore out lots of shoe leather talking to shareholders. He really did a fantastic job of turning the company around and getting it funded. He got it – one of the first rules of biotechnology, of any company, is to get funded and stay funded.”
Last year, the share price reached its height of 38 cents, putting the company into the S&P/ASX 300, the 300 biggest companies on the ASX. In April, the company completed a dual listing on the American technology stock exchange, NASDAQ.
Yesterday, Rogers resigned, effective August 31.
The new CEO will be Matthew Lehman, the company’s chief operating officer.
Lehman’s appointment was welcomed by the chair of the board, Lucy Turnbull, who pointed out that the company is now in an “operational” phase, in newspaper reports.
Too often, boards will not replace entrepreneurial CEOs, even when their job is done and the company needs a different style of leadership, says Paul Hunter, CEO of the Strategic Management Institute. They are worried about the risks. “The CEO has carriage over the culture and momentum of an organisation,” he says. “A new leader needs to create a new dimension to the culture, to put their stamp on it, which is more disruption than continuity.”
The company’s senior management is also getting a shakeup with the leadership change, with three senior staff changing roles.
Hunter says that in knowledge-based organisations (like biotechnology companies), a lot of knowledge can leave with a leader – another risk.
Blake says four years is a typical tenure for a CEO, and the change is a good move. “There is a pattern when you get a young tyro, more of a start-up guy, who sets things up,” he says. “Then, when it comes to the tedious part of the business, another business personality type or skill set comes in. My read on Martin is that he is a guy who is full of beans, and so now he is thinking, well what am I going to do here, doing boring work for ages?”
The “boring work” is a Phase III study of its cancer therapy, CVac, the last trial for the drug before the company can apply to register it, and start selling it.
Phase III studies are expensive and difficult. Prima BioMed expects to enrol 1,000 patients in the study, which will be conducted across 100 sites in countries around the world.
It’s a make or break moment for the company: the study will prove whether or not the treatment – designed to prevent a recurrence of ovarian cancer after chemotherapy – is effective and safe, compared to a placebo. A mistake can invalidate the results, wasting hundreds of thousands of dollars. Success will vastly improve the value of the company.
Lehman has experience in running clinical trials.
Rogers has left his stamp of success on the company. But over the past year his shine has been fading: the share price has bounced around from 34 cents to 14 cents over the past 12 months, and is now sitting at the bottom end.
The decision to replace him was agreed between Rogers and the board, Turnbull told newspapers. Rogers remains as a non-executive director.
Strategically, the advantages of the board’s move are:
- Bringing in the correct skills – more operational, less entrepreneurial – at the correct time.
- Allowing Rogers to bow out while the company is strong, and reap the reputational rewards for his hard work.
- Reassuring shareholders that the board is in control of the company’s management.
- Reinvigorate the company’s share price (however it fell on the news).
The risks of the leadership change includes:
- A shakeup of the corporate culture and senior leadership ranks that is unsettling and can lead to staff turnover.
- It might be too soon; Rogers is strong on stakeholder communications, which is still critical for the company’s success.
- Internal changes makes companies look inward, and the company is currently recruiting for the major value-creating trial of its therapies, a complex task.