Biovail confirms founder MelnykIs board slate falls short; meeting in question

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This article was published 25/06/2008 (6350 days ago), so information in it may no longer be current.

TORONTO – Biovail Corp. (TSX:BVF) founder and ex-CEO Eugene Melnyk went to court Wednesday to contest the validity of the company’s annual meeting after failing overwhelmingly to install his slate of directors at the drug maker.

Melnyk also told a news conference that he will set up a new private pharmaceutical company, Trimel Pharmaceuticals, if he doesn’t prevail in the court battle to overturn the vote against his proposed board for Biovail.

“If nothing changes, this is the start of Trimel Pharmaceuticals,” he said.

Melnyk said he is seeking a declaration that the annual meeting was illegally held after Melnyk withdrew his proxies before the directorial vote.

A judge has set a hearing for July 8 on the case, he said.

At the heart of the case is a decision by the company’s incumbent board to pass a special bylaw to reduce the number of shareholders needed for a quorum so the annual meeting could go ahead.

Melnyk said he would use his ideas, and as much as $100 million of his own funds to start Trimel.

Trimel would manufacture “difficult to replicate” generic drugs, an area that Biovail has said it is giving up as it moves into treatments for the central nervous system.

He also said Trimel, which he said is already well into the planning stage, would be folded into Biovail if he wins the case for a new annual meeting.

“Either shareholders will support my plan at a properly called AGM, or otherwise I will found a nimble, R&D focused pharmaceutical company called Trimel Pharmaceuticals, which will capitalize on new technologies and new regulatory environments emerging in Canada and the U.S.”

On Wednesday, a Melnyk representative threw the contentious annual gathering of shareholders into chaos after charging that the meeting could not proceed as the dissenting group had withdrawn its proxies, leaving fewer than half of Biovail shares represented.

However, the board decided to pass a bylaw so that 25 per cent, instead of 51 per cent, of shareholders at the meeting would suffice for a quorum, setting up a fight over the meeting’s legitimacy.

Despite the dispute, lawyer Jonathan Levin, who led the annual meeting in place of company chairman Doug Squires, ruled that the meeting would go ahead.

Levin took over for Squires after Melnyk and Biovail’s incumbent board agreed that a person with independent credentials should chair the event.

After some shareholders requested a board vote by ballot, there was a lengthy pause while the votes were counted, even though Melnyk’s slate had been withdrawn.

Levin later declared the management slate elected by a vote of 97.6 per cent in favour.

Melnyk said he withdrew his proxies after learning that 10 per cent of the shares voted in favour of the management slate had been revoked.

“The momentum was shifting,” Melnyk said.

After the meeting, Biovail CEO Bill Wells said that “this last desperate ploy of Mr. Melnyk’s to thwart the will of the shareholders really is unconscionable.”

The vote, said Squires, represents “an overwhelming mandate for change for Biovail which is desperately needed and has been needed for years.”

Melnyk has been challenging Wells and the board of directors, chaired by Squires, a former CEO, for control of Canada’s largest publicly traded pharmaceutical company.

Melnyk, who used his Biovail fortune to buy the Ottawa Senators hockey team, remains the largest shareholder with 12 per cent of the company.

He and his proposed 10-person board slate led by Bruce Brydon, CEO from’95 to 2001, took action because the company’s development of new products has “become absolutely stagnant.”

Wells and the existing board stood behind Biovail’s recently announced strategic changes including shutting operations in Puerto Rico and developing treatments for the central nervous system.

Two proxy advisory firms had recommended that their institutional shareholder clients vote in favour of the management slate of directors.

Biovail stock closed up five cents, at $10.85, Wednesday on the TSX, with a 52-week high and low of $27.68 and $10.30.