Mind Medicine’s (NASDAQ: MNMD) filed its preliminary proxy materials on Tuesday with the U.S. Securities and Exchange Commission (SEC) for its yet to be scheduled annual shareholders’ meeting, lining up the proverbial battle lines against an activist investor run by the company’s co-founder.

In its proxy statement, MindMed laid out its nominees for the six-person company board, which consists of five incumbent directors that includes current board chair Carol Vallone and CEO Robert Barrow. The firm also nominated a new candidate, David Gryska.

“Mr. Gryska is a life sciences professional with over 35 years of experience as a senior financial executive, including as Chief Financial Officer of both Incyte and Celgene Corp,” the company said.

On the other hand, the company also received a proxy challenge from FCM MM Holdings by MindMed’s co-founder Dr. Scott Freeman. The latter is said to have notified their intent to nominate four directors and wage a proxy contest in opposition to the board’s candidates. If all is elected, FCM would gain a majority of the company’s board.

“This would be tantamount to giving FCM control of MindMed without FCM paying a control premium and would permit FCM to significantly alter the Company’s current strategy and management team to the detriment of all shareholders,” MindMed explained.

MindMed vs. co-founder

The rift between the activist investor and MindMed started in August 2022 when Freeman issued a release calling for changes at the company. Chief among the changes, is that he is demanding a new strategic plan to change the direction of the company. His intention is to have the company refocus on its core drugs for research while eliminating cash burn and ending dilution wherever possible.

The situation escalated after Freeman, through his holdings firm, formally filed a complaint with the SEC, alleging self-dealing, a lack of significant disclosure, false statements, and public statement fraud.

The shareholders’ complaint also highlights that should these allegations be proven true, these can be considered criminal acts by Barrow in violation of Sarbanes-Oxley.

Related to the filed complaint, the activist investor sent the company board a letter which is headlined by a call for Barrow’s termination–mainly for the latter’s inaction in a competitor firm’s use of MindMed’s intellectual property.

In MindMed’s recent release, the firm explained that it has met with Freeman and FCM “numerous times” since August 2022. But it has become clear to MindMed that FCM–which is run by Freeman, the firm’s co-founder and former Chief Medical Officer–“does not understand MindMed’s business or the associated regulatory processes.”

“Further, after careful consideration of FCM’s intended nominees, the Board has concluded that they do not – individually or collectively – possess relevant industry background or experience that would be additive, especially in comparison to the Board’s proposed slate of directors,” the company said.

During these talks, MindMed said it has “made several constructive settlement proposals to FCM, including by offering to expand the Board to seven members and appoint a qualified independent director mutually agreed upon” by both parties. FCM reportedly “rejected all of these offers, and most recently indicated that it would settle only in exchange for placing three representatives on our six-member Board.”

“In the interim, we strongly urge you to discard any materials you may receive from FCM,” the company added.

Mind Medicine Inc. last traded at $3.67 on the NASDAQ.

Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.