Former Biovail CEO questions timing of new CEO's appointment, lump-sum payment to chairman

By Lisa Kerner

Charlotte, N.C., May 8 - Former Biovail Corp. chairman and chief executive officer Eugene Melnyk said he was "astonished" that the company's board of directors appointed Bill Wells as CEO "on the eve of the upcoming shareholder referendum on the make up of the Biovail board and management."

Melnyk made his comments in a May 8 letter to the board included in a schedule 13D filing with the Securities and Exchange Commission.

According to Melnyk, if the dissident slate of director nominees is elected as he expects, Wells will receive, unless set aside, an immediate payment of some $3.44 million, or about $90,000 per working day from May 1 through June 25.

"How could the board find it so necessary to enter into this agreement with Mr. Wells when he was unemployed?" Melnyk, Biovail's largest shareholder, asked in his letter.

Melnyk believes Biovail failed to conduct a proper internal and/or external search for a new CEO before hiring Wells, who reportedly has no pharmaceutical industry experience.

Wells is also the chairman of the compensation, nominating and corporate governance committee, the letter said.

The investor also questioned the lack of public disclosure surrounding the lump sum payment made to Dr. Douglas Squires for taking the role of chairman.

"I had assumed that no lump-sum severance payments would be made to Dr. Squires upon his stepping down as chief executive officer to continue in another role - chairman - that he was already undertaking," Melnyk said in his letter.

In closing, Melnyk said he would hold the directors and management accountable and "personally responsible for any inappropriate action going forward" as well as for the "blatantly improper actions" they have already taken.

In April, Melnyk withdrew a March 20 application to the Ontario Superior Court of Justice (Commercial List) naming Biovail and Squires as respondents.

Melnyk's filing alleged that Biovail and Squires had improperly solicited proxies for the company's June 25 annual meeting on the day Biovail announced its financial results for 2007, it was previously reported.

Biovail, a Toronto specialty pharmaceutical company, maintained that the application was without merit.

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