‘Weak evidence’ lost bid for Bioniche dissident shareholders

Share

A dissident group has lost its bid to force a special meeting of shareholders at biotechnology firm Bioniche Life Sciences Inc., but it will still try to shake up the company later this fall.

In a ruling issued Monday, an Ontario Superior Court judge said the dissident group cannot force the company to hold a special meeting, and that the group cannot go ahead with a shareholder meeting it had arranged for Aug. 27.

The leader of the dissidents, former Biovail Inc. CEO Bill Wells, had called the special meeting in order to present an alternative board of directors and oust the current Bioniche CEO, Graeme McRae, who is also the company's founder. The current board and management of Bioniche had turned down requests for a special meeting, arguing that the proposal is improper because the company has already set a meeting for Nov. 5.

In his decision, Justice David Brown ruled that the dissident group had the right under the Canada Business Corporations Act to call a meeting of shareholders, but that they presented "weak evidence" regarding the urgency of calling it ahead of the Nov. 5 annual meeting.

The judge said there was no evidence that waiting until the Nov. 5 meeting would result in any "material prejudice" and that the cost of holding two shareholder meetings in quick order outweighed the benefits.

Mr. Wells and his group take issue with Bioniche management's efforts to try to sell the company's animal health business, which generates most of its revenue and cash flow through the sale of a wide range of products.

Mr. Wells said in an interview Tuesday that he was disappointed by the ruling, but said that there were some positive features to the judge's 30-page review of the situation. It is now very clear that Bioniche must hold a vote of shareholders on any proposed sale of the animal health business, and that there can be no "break fee" involved in any such sale agreement.

In addition, "the judge has made it very clear that any deviation from Nov. 5, in terms of the meeting, would not be looked upon favourably," he said.

"I would have preferred that the decision had gone the other way," Mr. Wells said, "but we are going to get our chance to get in front of the shareholders and present our plan."

There will be no appeal of the court's decision, he said.

For its part, Bioniche said it will provide detailed information about its plans, including its proposed candidates for the board and details of a purchase offer for the animal health business, in a circular that will be distributed before the November meeting.

Mr. Wells said shareholders holding more than 20 per cent of Bioniche shares have joined his "concerned shareholders of Bioniche" campaign. That "indicates a lot of displeasure with the performance of this board and with the company," he said.

In addition to the animal health business, Belleville, Ont.-based Bioniche has a human health business that is mostly concentrated on developing a cancer drug, and a food safety arm that developed a vaccine against E.coli for cattle.

Mr. Wells said that if shareholders vote for his board slate in November, the first thing he will do is to get Bioniche's spending under control, and refocus investment in the animal health arm. Bioniche shares are trading at less than one-third the level they were at three years ago.