Wednesday, March 5, 2008

Melnyk and a Comeback

On February 28, Eugene Melnyk wrote the board of directors of the company he founded, Biovail, indicating that he's unhappy with their current direction.

He was the chairman of that board until last June, when he quit as part of a settlement with Canadian regulators over insider trading allegations.

Eight months of idleness appears to have been wearying, though. Melnyk, who owns 18.2 million shares (about 11% of the outstanding) writes: "I am at this juncture formally informing the Board that I have decided to explore, and am exploring, various options available to me in connection with my interest in Biovail, including the possibility of joining with a partner or partners to acquire the remaining shares of Biovail, selling all or a portion of my current Biovail shares to a third party, continuing to hold my shares for investment, or seeking changes to the composition of the Board of Directors."

Biovail is a pharmaceutical company specializing in making time-release versions of medicines (or, as their website puts it, "drug-delivery technologies.")

Between May and mid-July of last year, Biovail stock was trading in the neighborhood of $25. There was a sharp downward move in July, when the US FDA refused to approve a once-daily salt formulation of an anti-depressant. In August it found a floor at $16.

It fell trough that floor in December, when it announced it expected to settle a class-action lawsuit in the federal courts by making a payment of $85 million. The settlement, as is customary, includes no admissionof wrong-doing.

The stock price didn't find its new floor until mid January 2008, when it reached $12. It has rebounded a bit since then. But so far as I can tell, Melnyk believes that his successor has been inadequately aggressive as a litigant, leading to his 'decision to explore options.'

My own guess? (Just a guess folks, and don't take anything I say as investment advice -- if you do, you're an idiot!) My guess is that Biovail is better off without him, and ought to resist any "options" he explores that might put him back in a decision to make decisions. Melnyk was part of the problem, he isn't part of the solution. They can work their way through the tough times they've encountered.

"Once you went away, I was petrified/ Kept thinking I would never live without you by my side ... I will survive/ I will survive."

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