Biovail shares drop on uncertainty over strategy

Thu Jun 26, 2008 3:01pm EDT
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TORONTO (Reuters) - Shares of Biovail Corp BVF.TO dropped almost 5 percent on Thursday amid uncertainty about the growth prospects of the biotech company and concern over more legal wrangling over a leadership challenge.

A shareholder vote on Wednesday overwhelmingly rejected a dissident slate of directors proposed by Biovail founder Eugene Melnyk, in favor of the current board. But Melnyk plans to challenge the result in court on July 8.

Melnyk argues the meeting was improperly held because it lacked a quorum, after he pulled his shares from the vote. The company then passed a special bylaw to allow voting to proceed.

Biovail said on Thursday it was "confident the court will confirm the validity" of its annual meeting.

Even so, the shares, which were as high as C$27.68 on the Toronto Stock Exchange 11 months ago, were off 4.7 percent, at C$10.34 on Thursday, just above their March 24 low of C$10.30.

Melnyk withdrew his shares after learning that about 10 percent of the shares voted in favor of the management slate had been withdrawn. That suggested to him a shift in momentum toward his proposal.

Melnyk was traveling on Thursday and was not immediately available for comment. Should he lose the legal battle, the colorful owner of the Ottawa Senators National Hockey League team said he would launch his own drug start-up company.

Biovail's sliding share price may also reflect underlying investor uncertainty with the company's strategy.

On Wednesday, a five-minute presentation by the recently installed chief executive raised more questions than it answered, said Claude Camire, an analyst at Paradigm Capital, in a note to investors.   Continued...