Belfast Telegraph

View from Dublin: Why troubles seem to be multiplying for Malin

By Richard Curran

When Irish people hear the world 'Malin', they think 'North'. But when it comes to Malin Corporation, the listed life sciences firm, so many things seem to be heading south.

The group's annual report, published two weeks ago, confirms the scale of severance payoff to its former chief executive Kelly Martin.

Mr Martin had his contract terminated by Malin last September.

Under the terms of his contract, he was entitled to two years' salary plus double last year's bonus. In total, he was due €130,000 in cash plus a total of 765,000 shares in the company.

The annual report discloses that Mr Martin agreed to take €3.1m as a cash severance payment in lieu of those shares.

Given that Malin's share price was trading at around €7.70, valuing his severance stock at around €5.8m, his decision to take a lower cash sum might not reflect too well on his view of the future prospects of the company share price.

Mr Martin previously received €55m in an exit deal from Elan Corp in 2013.

He took over as chief executive of Malin in 2015. In 2016 he earned a total remuneration of €3m in cash and shares at Malin. Last year he received €91,000 in salary plus the €3.1m in severance deal. His remaining 1.98 million shares in Malin are worth around €15.5m.

The company has simply not delivered for shareholders, which includes the state through an investment by the Irish Strategic Investment Fund of around €50m.

The new CEO Adrian Howd wants to cut operating expenses at the group by 33% to €12m. Non-executive directors are taking a 25% pay cut.

But the market is not convinced. In the annual report, the new chairman - former PwC managing partner and former Anglo Irish Bank director, Donal O'Connor - emphasised how much has changed.

"Our share-price performance in 2017 has been disappointing," he wrote. He believes the share price has been "significantly misaligned with the progress and value of our assets".

Malin, he says, will adopt a more pro-active communications strategy with investors, including a CEO quarterly newsletter and an investor day. That could be interesting.

Malin is also providing an international private-equity compliant valuation of its portfolio.

Analysts welcomed this as improving transparency. It is extraordinary it hasn't happened before now.

Malin has invested a net €369m in cash in its investment portfolio. Its fair value estimate of its investee companies is €401m.

Its market capitalisation is €352m. The group reported a loss after tax of €107m last year.

One of its bigger investments to date has been acquiring 65% of Altan, a firm that manufactures injectable medications for hospitals mainly in the Spanish market.

It could do with a few performance-enhancing injectables itself, given that it provides the bulk of Malin's revenues - which actually fell last year from €42.1m to €41.9m.

Despite forking out €34.5m for a 65% stake in the firm, (Malin's second-largest acquisition), its performance and future plans warrant just three paragraphs in the annual report.

Another €35m investment was in Nasdaq-listed firm Novan. Malin had a 16% stake in this business, but poor product trial results saw its Nasdaq shares plummet by over 83% last year. Malin decided not to participate in a fundraising round and so it has been diluted to under 10%. Its shareholding is valued at €6.7m.

The Malin board had been choc-a-bloc with former Elan directors, from Kelly Martin, Kyran McLaughlin and Kieran McGowan, to O'Connor, the new chairman.

McLaughlin left the board late last year. A lead independent non-executive director at Malin earned around €73,000 last year by sitting on various board committees. The chairman's fees were nearly €100,000.

Last year, founder equity and Malin share-based payment charges amounted to €18m, in a business that lost over €100m.

Malin has struggled to find a winning formula so far. Of course, it only needs to get lucky with one of these investments to land something big.

But there are problems with the concept. A listed entity that invests in expensive and high-risk new health products is inevitably going to have some tough days.

Investors knew that went with the territory. But some of Malin's wounds have been self-inflicted.

Belfast Telegraph

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