June 10, 2018 | Posted by


Dear Ms Vainikka

I write this letter to you in an open format as Align Research is all about transparency and, collectively with other shareholders, as ultimate owners of the company, we believe that all shareholders should be given the courtesy of weighing up the points we raise here.

Whilst not wishing to be overly aggressive, should you ignore this letter and the points detailed herein, I can now confirm that we have commitments for in excess of 5% of the shareholder register to bring an EGM for your and potentially other BoD members’ removal and will, if it is necessary, not hesitate in catalysing this.

I bring to your attention the following concerns we have with regards to the current stewardship of the company:

  1. Since 2016 I count that there has been six outright equity placings (with warrant overhangs to the placing brokers) aswell as the Yorkville and Bracknor facilities totalling funding of £7.75m. The share count during this period has risen from just over 43m shares to an incredible 407m – a near ten fold increase. It is safe to say that those loyal shareholders over the past two years have been veritably decimated unless they had bottomless pockets. More disconcertingly, during this period I cannot see any director participation in these fund raisings but yet you felt it appropriate in February of this year to award to the management slate options over 10% of the company. I believe the words complete misalignment are appropriate here. It is quite laughable that the prior options had strikes ranging between 43.125p and 125p – a prime example of “heads we win, tails you lose” that shareholders have suffered.
  1. As if the above is not illustrative of the fact that you are (a) disconnected from shareholders and (b) actually appearing to act at cross purposes to their interests, you have collectively as a Board taken just shy of £1m during the last 2 years. This, whilst the stock price has fallen from near 60p to less than 1p at the low point. If ever the moniker “reward for failure” was applicable, that very point surely is it.
  1. The third most damning observation re non alignment with shareholders is that your collective holding of stock is de minimis. Indeed, I cannot see that you hold any shares from the last set of Report and Accounts nor have you as a BoD participated in any of the placings over the last 2 years aside from a nominal & derisory £10k purchase apiece last spring. This is utterly incredible and to me and spells one of three things – either (a) you are collectively “potless” which is not a good position for any management personnel to be in let alone for their shareholders, (b) you do not believe in the company’s products and development stage or (c), such is the system in place allowing you to reprice share options that you do not believe it is actually necessary to “step upto the plate” and show your alignment with your long suffering shareholders. Each of these scenarios are clearly not good for the company’s owners.
  1. The Yorkville and Bracknor de facto death spiral financings have been, in large part, the primary decimants of the stock price. As a shareholder, and given the stage of development that Valirx is now at, I want reassurance that this type of financing is no longer to be used – it is the death knell for many a company and reflects to the wider market that normal equity financing of such volume is not available. Again, not good for shareholders.
  1. Towards the tail end of last year the stock actually did rise materially on the VAL201 Clinical trial results. Given that there was a decent chunk of warrants in issue (43m) with an exercise price of 5p expiring March 2019 why did you believe it necessary to cut shareholders legs from beneath them again with a placing at 4.25p when they were beginning to be exercised? The exercise of these would have brought in over £2m – in excess of the placing sum and have been less dilutive of course. I posit that this is again illustrative of the abject disregard for existing minority shareholders by you and the BoD and that it has continued to foster the belief that management cannot be trusted not to continually throw prior placee participants under a bus.

You can see from above that there is a quite damning list of non shareholder friendly activities that have taken place on your watch and the share price collapse presents, we believe, an unarguable case. The course you have taken this last few years has only served to cut both the market cap and the credibility of the company.

To be clear, the purpose of this letter is to bring the current course that has been so damaging to all shareholders to a halt and with as minimum disruption to the company as possible. I do actually believe that Valirx is now on the cusp of real commercial applications of its key products but my confidence in current shareholders benefiting from this is, for obvious reasons as relayed here, extremely low.

With the above in mind I would like you to show collectively as a BoD a new commitment to your shareholders through the following actions:

  1. A rebasing of your and Dr George Morris’ salary to £60,000 p.a. From a performance bonus perspective you are more than adequately incentivised now re the generous share options you recently struck yourselves with an exercise price of just 4p and near 10 years of life. 
  1. The appointment of a new NED to represent shareholders interests and replacing Kevin Alexander. I am happy to liaise on an appropriate party in this role. 
  1. I note CFO Mr Dessler has a loan repayable from the company of £41,030. Subject to restricted period dealing clearance I would suggest that this be converted into stock at the current price in showing his faith in the way forward. 
  1. Collective directors purchasing of stock on market (subject to non restricted period dealing issues) of a minimum of £100,000 in, again, showing your faith in the way forward. 
  1. A clear funding pathway disclosure over the next 18 months with a commitment to not utilise death spiral financing and a dual commitment that any such funding requirements be offered to existing shareholders by way of an open offer.

I sincerely hope that you take seriously the points raised here and that you communicate with all Valirx shareholders on these issues. I repeat again, ignorance of these matters will result in the calling of an EGM for wholesale BoD replacements.

Yours faithfully

R Jennings