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Graeme McRae, president and CEO of Bioniche Life Sciences Inc., is seen in this file photo. Two former Biovail executives have slammed Bioniche’s board and management over the company’s performance. (Michelle Siu For The Globe and Mail)
Graeme McRae, president and CEO of Bioniche Life Sciences Inc., is seen in this file photo. Two former Biovail executives have slammed Bioniche’s board and management over the company’s performance. (Michelle Siu For The Globe and Mail)

Investment group urges Bioniche to narrow focus Add to ...

Canadian biotech company Bioniche Life Sciences Inc. is facing pressure from a shareholder group to narrow the company’s focus and boost its languishing share price.

The group, led by former Biovail Corp. chief executive officer Bill Wells, sent a letter to the Bioniche board criticizing the company for its “dismal record” of “destroying shareholder value,” and demanding talks between the company and shareholders.

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Belleville, Ont.-based Bioniche makes a diverse range of animal and human health products, but it has consistently lost money. Its best known product is an innovative cattle vaccine that prevents cows from shedding E. coli in their manure.

In the letter, Mr. Wells and another former Biovail executive, Greg Gubitz, point out that Bioniche’s share price has lost more than 90 per cent of its value since 1996.

“Despite this obvious failure, the same CEO [founder Graeme McRae] has managed the company throughout this period,” the letter said. “The board has failed in its duty. Bioniche’s long suffering shareholders deserve better.”

In an interview, Mr. Wells said he wants Bioniche to go through a strategic review and become “more focused” on a narrower range of products. In addition, it has to emphasize the creation of shareholder value, something that “has been missing in this company for a long time,” he said.

If his group doesn’t see positive change in a timely fashion “we may need to take other steps,” Mr. Wells said. He would not specify what those might be, but said “the company needs change and if this board is not going to do it, then there would need to be changes to the board.”

Mr. Wells ran Biovail from 2008 to 2010, a period when that company refocused its product line and its shares more than doubled in value. He left shortly after Biovail merged with Valeant Pharmaceuticals International Inc. late in 2010.

He said his group owns more 5 per cent of Bioniche’s shares, and that he has received many messages from other shareholders who have been frustrated by the declining share price and are very happy these issues have now been raised publicly.

Bioniche chairman James Rae and Mr. McRae, Bioniche’s CEO, declined to comment on the shareholder letter. But in a news release the company said it is aware of the issues around the stock’s performance and that the board has been working over several months to “unlock the inherent value in the company’s assets.”

It said Bioniche has received “several strategic partnering and investment related offers” that are currently under review, there have been talks with outside advisers, and a major U.S. investment bank is being hired.

Bioniche added that the “individuals behind the letter” obtained access to confidential corporate information over the past few months and have made “two overtures to the company which do not favourably compare to the opportunities under review.”

The activist shareholder group said in their letter that they first contacted the board in the summer of 2012 to offer advice and “provide tangible solutions to fix the company.” They followed up with other offers but their “best efforts to help Bioniche were stalled and dismissed” by management and directors.

Last Friday, Bioniche said major shareholder Fonds de solidarité FTQ had sold its entire stake in the company. The Fonds – a big Quebec labour-sponsored investment fund – held a stake representing about 5.7 per cent of Bioniche’s shares, and lost about $7-million on its investment.

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