The Proxy Battle Between Broadfin Capital and Cardica (CRDC) Is Heating Up Just As New CEO Is Unveiled

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The battle between Broadfin Capital and the Board of Cardica, Inc. (NASDAQ:CRDC) is heating up. As promised in a recent letter, Broadfin Capital and manager Kevin Kotler have stepped up their activist efforts and have issued a proxy statement, seeking shareholder support at the company’s next annual meeting. According to a recent filing with the Securities and Exchange Commission, Broadfin and Kotler are seeking an overhaul of the company’s Board, having put together a list of eight nominees. In 2014, Cardica shareholders elected three members nominated by Broadfin and now Kotler is looking to have them re-elected and replace the remaining five directors. Together, Broadfin Capital holds 8.97 million shares of Cardica, or 10.1% of its common stock, which makes it the largest shareholder.

Kevin Kotler

Broadfin Capital has celebrated its 10th anniversary this year, having grown into a fund with a public equity portfolio valued at more than $1.8 billion at the end of the second quarter. Kevin Kotler is mainly interested in bio-technology companies, having invested 81% of said funds in the healthcare sector, while also holding some finance stocks, which account for 12% of his public portfolio. At the end of the second quarter, his largest equity position was in Horizon Pharma PLC (NASDAQ:HZNP), despite having made a 32% reduction in it, to 4.81 million shares. Kotler also dumped 27% of his holding of Retrophin Inc (NASDAQ:RTRX), leaving Broadfin with 2.16 million shares, but increased his bet on Flamel Technologies S.A. (ADR) (NASDAQ:FLML) by 6% to amass 4.97 million shares.

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Broadfin and Kotler are accusing the five board members they seek to offload of incompetency and of intentionally marginalizing the three members that were nominated in 2014: Gregory D. Casciaro, R. Michael Kleine and Samuel E. Navarro. Furthermore, Broadfin criticized the board’s attitude towards shareholders, their poor use of cash, and missed expectations in a presentation alongside its latest filing. As a result, Broadfin has now compiled a list of eight director nominees, including Kotler, to be elected at the company’s next annual shareholder meeting. The fund is also pushing for a revision of the executive compensation schemes, as well as the election of a new audit company, BDO USA, LLP, for Cardica, Inc. (NASDAQ:CRDC)’s fiscal year ending June 30, 2016.

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