Nicusa Capital Calls for Leadership Changes at BioClinica

NEW YORK, Sept. 28 /PRNewswire/ -- Nicusa Capital is calling for the resignations of Dr. David Nowicki as Chairman of the Board, Mr. Mark Weinstein as CEO, and Mr. Ted Kaminer as CFO of BioClinica, Inc. (Nasdaq: BIOC).  Nicusa owns 854,119 shares, or approximately 5.6%, of the Company's shares.  We believe that BioClinica's core imaging business is worth substantially more than the current stock price, but management's corporate strategy is flawed and is destroying shareholder value.  We have communicated our concerns to the Board of Directors on several occasions and, in June 2010, we publicized these concerns in a 13D filing.  

Nicusa Capital Partners is a concentrated, fundamentally-driven, value-oriented private investment fund focused on smaller capitalization companies primarily in North America.  The Fund was launched in early 2003.

September 28, 2010


Dr. David E. Nowicki

Chairman of the Board

BioClinica, Inc.

826 Newtown-Yardley Rd.

Newtown, PA  18940



Dear Dr. Nowicki and the Board of Directors of BioClinica:

As of September 28, 2010, Nicusa owns 854,119 shares, or approximately 5.6%, of the outstanding shares of the Company.  We have owned BioClinica stock since May 2007 and have been on file as a 5% holder since July 2007.  

We continue to believe that the Company's core imaging business has the potential to create shareholder value and is worth substantially more than the current stock price.  However, management's eclinical acquisition strategy is flawed and is destroying shareholder value.  Furthermore, management has failed to demonstrate that there are any synergies between the two businesses.  

In the most recent quarter revenues were the second highest in the Company's history, while operating margins were the lowest since June 2007 and 32% lower than the average of the prior three quarters, continuing a trend of deteriorating financial performance.  We have formulated three scenarios to account for this: the profitability of the imaging business has been reduced; the profitability of the eclinical business has not met expectations; or the integration of the businesses has proven more difficult and less synergistic than management expected.  Due to management's unwillingness to provide a financial breakout of the two businesses, we can only make conjectures.  Regardless, each of these scenarios calls into question the management of either the core imaging business or the eclinical strategy.  

We have communicated our strategic concerns to the Board of Directors on several occasions and, in June 2010, we publicized these concerns in a 13D filing.  We have yet to receive a response, necessitating this public filing.

We are advocating to BioClinica's shareholders that:

  • Dr. David Nowicki resign as Chairman of the Board of Directors
  • Mr. Mark Weinstein resign as CEO
  • Mr. Ted Kaminer resign as CFO

Although Dr. Nowicki possesses, according to the Company's proxy, "medical training and knowledge of the healthcare industry" we would like our Chairman to also have outside business experience.  As such, we do not believe he is qualified to be Chairman.  

Moreover, the Chairman of the Board at any company, in our view, should serve as a check on any excesses by management, and represent the owners of the business.  As stated in the Company's proxy, "The Company's board leadership structure has separated the Chairman of the Board and President and Chief Executive Officer roles into two positions."  This should serve to institutionalize the balance of power between the named executives and the Board, enabling the Chairman to serve as a check on management.  

However, Dr. Nowicki has failed in this role.  He has been co-opted by management and has bought into a failed strategy, even participating as management on the two most recent quarterly earnings calls.  Dr. Nowicki cannot claim to be objectively evaluating a strategy that he is actively, and publicly, defending.  As such, he can no longer claim to be an advocate for shareholders, and he should resign as Chairman.

Mr. Weinstein is personally responsible for the Company's failed, and costly, investment in CapMed.  Following that debacle, the Board has allowed him to embark on a costly, imprudent, and poorly executed eclinical acquisition strategy.  Despite a lack of evidence that this strategy can succeed, he has increased our commitment to it.  In the meantime, the core imaging business appears to have been under-managed.  

Moreover, he is unwilling to engage in a constructive discussion with shareholders as to how the eclinical business might produce an attractive return on the $30 million spent so far.  A CEO must be responsive to and willing to engage with shareholders, especially in challenging times.  Mr. Weinstein is the architect of multiple failed investment strategies, and is unwilling to engage in a substantive dialogue with shareholders.  

We also believe that the Company needs a stronger CFO.  Mr. Kaminer has repeatedly proven unable to articulate the Company's financial strategy and has refused to provide even the most basic transparency into the relative performance of BioClinica's two businesses.  Furthermore, he has neither a command of the Company's financials, nor a willingness to explain them to shareholders.  

The stock closed at $3.46 on September 27, 2010, down 13.7% from one year ago and up only 13.8% from five years ago, while the S&P 500 is up 13.3% and 12.0% over the same periods.  You have accused us in the past of focusing only on the short term, but in five years, despite increasing the Company's book value by 193% from $17.9 million to $52.6 million, you have added only 13.8% to the stock price.  Put another way, you have nearly tripled the amount of money invested in the business, but the stock has barely budged.  

Investors have voted.  They do not trust management and they have no confidence in the Company's strategy.  The stock now trades roughly at the Company's most recent book value of $3.47 per share.  Despite an investment of $30 million, investors believe that BioClinica is worth no more than the accounting value of its assets.  We do not believe this is a fair valuation, as we stated earlier, but only a different management team will be able to realize value at BioClinica.

If the Board cannot find suitable replacements for Mr. Weinstein and Mr. Kaminer and a new Chairman to replace Dr. Nowicki, the Company should explore strategic alternatives.  The imaging and eclinical industries are consolidating, and shareholders might be best served if we take advantage of current acquisition activity.  

The Company's proxy states "Stockholders may recommend individuals to the Nominating and Corporate Governance Committee for consideration as potential director candidates", while requiring that "the stockholder or group of stockholders making the recommendation has beneficially owned more than 5% of our common stock for at least one year."  

While we would prefer to have our demands met voluntarily and expeditiously, and think that would be best for all stakeholders, we are prepared to propose a slate of Directors in 2011.  We have experience and have had success in similar situations.  Please refer to our March 2, 2010 13D filing in Metropolitan Health Networks and subsequent events there for illustration.  As we noted in our last letter, you received only 67% of shares voted via the 2010 proxy.  Please consider how shareholders will vote when presented with a credible alternative.

Sincerely,

Paul Johnson

SOURCE Nicusa Capital

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