Investor calls for Icagen changes

Durham firm's leaders criticized

One of Icagen's largest investors is pushing for a sale of the Durham drug-development company and may seek to oust its top executive.

In a letter to Icagen's board of directors, Xmark Opportunity Partners blamed co-founder and CEO P. Kay Wagoner for the company's "embarrassingly precipitous loss of share value."

Icagen's stock, which began trading publicly in February 2005 at $8, has fallen 60 percent in the past year. The stock rose 5 cents Tuesday to 61 cents.

As with other small pharmaceutical companies in the Triangle, Icagen has no products and is a long way from making a profit selling prescription drugs. The company does have a partnership with massive drug maker Pfizer to develop painkillers and also is working on experimental treatments for asthma and epileptic seizures.

But last year Icagen halted research on an experimental treatment for sickle-cell disease because of disappointing results in clinical tests, highlighting the risks that drug-development companies and their investors face.

Xmark officials wrote that Wagoner and the company's board have not acted aggressively enough to "navigate the market's troubled waters" by taking steps to cut costs and find strategic partners. The letter, dated Nov. 29, was included in a filing with the Securities and Exchange Commission.

"At this point, we believe that the company's only legitimate option to salvage the value of its proprietary technology is to pursue" a buyer, Xmark officials wrote. "We believe that this is actually an ideal time for the company to pursue a sale" because many large pharmaceutical companies are looking to acquire small companies with promising experimental drugs.

But the Ridgefield, Conn.-based investment firm believes that Icagen's management is "entrenched and unwilling" to formally explore a sale because they don't own much stock and would lose their "historically high salaries."

Wagoner, a UNC-Chapel Hill alumna who has been CEO since 1996, made $493,529 in salary, bonus and stock awards last year, the company reported to the SEC.

If Icagen's management doesn't take "appropriate steps to benefit all shareholders," Xmark wrote that it is considering seeking Wagoner's removal because "we feel she is ill suited to lead the company." Xmark also may try to remove several board members who it thinks have "lost touch."

Xmark officials have asked several times to observe Icagen board meetings and the requests have been rejected, the letter states. "We have been met with platitudes, but nothing else," Xmark writes.

Xmark began buying Icagen stock last year and owns nearly 4.1 million shares, giving it a stake of about 8.6 percent, according to the SEC filing. In October and November, the firm bought more than 500,000 shares at prices between 45 cents and $1.25 each.

Pfizer is Icagen's largest investor, controlling more than 18 percent of the company's shares, according to data compiled by Bloomberg News.

Wagoner and Icagen chief financial officer Richard Katz did not return calls Tuesday.

Xmark chief operating officer David Cavalier could not be reached for comment.