Biovail board of directors declared elected at reconvened annual meeting
Published Friday August 8th, 2008
TORONTO - Biovail Corp.'s (TSX:BVF) management now has a mandate to implement its new strategy for growth, said chairman Doug Squires, after its nominees for the board of directors were declared elected Friday.
The vote took place at a reconvened annual meeting, after founder and former CEO Eugene Melynk withdrew his proposed dissident slate, dropping his efforts to displace the current board.
"We're pleased with the result," said Squires, claiming 90 per cent support.
More than 75 per cent, or more than 121 million shares, of the more than 161 million outstanding were represented at the meeting, giving it more than enough for quorum.
Said squires, "we're glad it's over. It's been a distracting, expensive process," adding "we have a mandate to move forward and implement a real fundamental change in the business model. We're excited."
Biovail CEO Bill Wells called the vote "very representative."
"The support that management and the slate ... received increased amongst the shareholders. Not only did we see a bigger turnout, we also saw an increase in the support for management and its slate."
There is no question, said Wells, "that we have a mandate from our shareholders to move the company forward."
"We've been working aggressively ... over the last three months" on a new strategy for growth, which will emphasize the development of drugs to treat diseases of the central nervous system.
"We're already full speed ahead on implementing that strategy," he said, including shuttering two plants in Puerto Rico and a research facility in Dublin, Ireland.
Duncan Fulton, a spokesman for Melnyk, said the outcome was expected, adding that Melnyk would not be making a statement on the vote.
However, said Fulton, a preliminary tally indicated "that 50 per cent of shareholders represented voted for the company's slate of directors, 25 per cent voted against it and 25 per cent did not vote."
Eighty million of the shares represented voted in favour of the incumbent slate, while 40 million abstained and 40 million voted against including Melnyk, he said.
Biovail later said on its website that a total of 80.5 million shares were voted in favour of the management's slate of nominees - an increase of more than 25 million shares over the approximately 55 million shares that were voted in favour of the Biovail nominees at the June adjourned meeting.
Melnyk, owner of the National Hockey League Ottawa Senators, has always disagreed with the growth strategy put forward by the company, preferring that it stick with its traditional hard-to-replicate generic drug business.
"Management has promised big execution," said Fulton. "Eugene's saying 'Great, go do it.' The share price was $25 a year ago when Eugene left. It's $10 today."
"The whole way down, management has used Eugene as a crutch to explain away a falling stock," said Fulton. "Now the crutch has gone. The ability to blame Eugene is no longer there."
Wells and Squires have promised "great execution and now Eugene, the biggest shareholder, is watching closely to see it and he wants to see that share price go past $25," said Fulton.
If it does go above $25, Biovail is "not going to have any more problems from Eugene Melnyk," said Fulton.
Melnyk "has always said that all his options are on the table" and as a major shareholder "he can requisition a shareholders' meeting at any time" to challenge management's handling of the company, said Fulton.
In the meantime, Melnyk will focus on building Trimel Biopharma, a new drug company being set up with another former Biovail CEO, Bruce Brydon. Trimel will be privately held and led by Brydon as CEO.
Melnyk controls about 12 per cent of Biovail's shares and the trusts control another six per cent for a total of about 18 per cent.
Friday's meeting was convened by lawyer Jonathan Levin, the independent chairman appointed to chair the earlier session of the meeting on June 25.
Levin was chosen in June to fill the role after Squires stepped aside when a Melnyk representative threw the shareholders' meeting into chaos, charging that it could not proceed as Melnyk had withdrawn its proxies.
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.
The withdrawal of Melnyk's proxies, which left fewer than half of Biovail shares represented meaning no quorum was present, followed a dispute between Melnyk and the company over the direction that Biovail should take.
Melnyk wanted the company to stick with its generics business while Squires and Wells advocated producing central nervous system drugs.
Immediately after the June meeting, both sides went to an Ontario court seeking a ruling on the validity of the vote for the board of directors at the meeting.
A judge last month ruled that the vote at the June meeting was invalid and that the meeting had to be reconvened. The June count went heavily against Melnyk.
Biovail then said it would hold the meeting on Aug. 8 for a second vote on Melnyk's move to change its board and strategic direction.
The record date to vote at the Aug. 8 meeting remained April 28, which was affirmed by the court in another ruling in July .
Melnyk withdrew his dissident slate of nominees after the record-date ruling, suggesting that his position would have been stronger with a July record date, and saying he had decided to let Squires and Wells proceed with their strategic plan.
On the TSX, Biovail's shares closed up 12 cents at $10.65.
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