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Meldex chief executive quits

Created:
4 September 2008
Written by:
Richard Hemming

It's been a busy week for the healthcare sector, what with SkyePharma defusing its bond time bomb and now, two chief executive departures on the same day. In the case of Meldex, it's no great surprise that Richard Trevillion has had to go, given the extent of management upheaval at that company - and the rapid erosion of value over which he has presided.

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Mr Trevillion's background is corporate finance and his tumultuous three and a half years at the helm of Meldex was characterised by a programme of rapid-fire mergers and acquisitions. His determination to implement a buy and build strategy ultimately proved too much for a company whose shareholder base is primarily individuals, not institutions.

That's because the strategy necessitated the issuance of more and more shares to buy the rights to product after product. It came all unstuck earlier this year when one acquisition was made without sufficient due diligence. The shares started to slide, and a tumultuous general meeting rejected management proposals to issue up to 100m more shares.

Mr Trevillion "is to leave the company and ceases to have any executive responsibilities with immediate effect", and follows finance director Hira Patel out of the door. The company also changed its nominated adviser recently.

Chairman Jim Murray, one of the founders of Shire Pharma, will run the company pending the appointment of a replacement. Whoever takes over will inherit a groaning in-tray. Meldex will most probably require more funds from shareholders. Then there are the underlying tensions in the boardroom. Jim Murray and chief development officer Steve Martin don't see eye to eye on some matters of strategy, and Mr Martin did consider fronting a bid for the company. Meanwhile the roles of finance director and chief operating officer are now filled by two Austrian executives who joined Meldex following its acquisition of Melbrosin.

SHARE TIP UPDATE:

Sell

For all the other turmoil, there has been no update on the state of Meldex's finances since the company's prelims. The shares lurched another 11 per cent lower (to 29p) today and are now 33 per cent down on our sell recommendation. (45p, 17 July 2008). Unti lthe dust settles, sell.

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