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Ottawa Senators owner Eugene Melnyk is suing Acerus Pharmaceuticals.Sean Kilpatrick/The Canadian Press

Canadian hockey magnate and former pharmaceutical executive Eugene Melnyk is taking legal action against Acerus Pharmaceuticals Corp., claiming that "gross mismanagement" by the maker of testosterone nasal gel has wiped out millions of dollars of shareholder value and driven the company into the ground.

According to people familiar with the matter, Mr. Melnyk, owner of the Ottawa Senators National Hockey League franchise, filed a notice of action with Ontario Superior Court in recent days seeking $145-million in damages from Acerus, which he founded. Such a notice can precede a formal statement of claim, which must be filed within 30 days.

Mississauga-based Acerus has been served with legal papers but has not communicated that information publicly, the sources said. Officials with the company did not immediately respond to a request for comment Tuesday.

What happened with Acerus "is quite unprecedented," said one industry source familiar with the company, saying its downfall dates to a change in senior leadership in January, 2013. "When you look at the transition in management, where what was required was execution of an existing program, and the execution became so befuddled that the company became virtually worthless, I think that's unprecedented."

Acerus chairman Ian Ihnatowycz and chief executive officer Tom Rossi are named as defendants in the legal action as is the company itself, according to a copy of the suit seen by The Globe and Mail. Six other defendants, believed to be current or former directors and executives of the company, are also named as defendants under the generic term "John Does."

"Under the stewardship of the individual defendants and some or all of the John Does, Acerus has been grossly mismanaged and its business and affairs have been conducted in a manner that is oppressive and unfairly prejudiced to its shareholders, specifically including the plaintiff," the notice of action states. As a result, Mr. Melnyk "suffered significant damages" from the stock's fall, for which the defendants are liable, the notice states.

Ken Villazor, a spokesman for Mr. Melnyk, declined to comment.

The damages sought dwarfs the market value of Acerus, which is currently about $20-million. The company, launched by Mr. Melnyk as Trimel Pharmaceuticals Corp. before it changed its name last year, reported a loss of $9-million for 2015 on revenue of $16.9-million. It has not reported an annual profit for the past five years.

The shares, meanwhile, have collapsed, closing Tuesday at 9 cents, from a peak of $4.45 in April, 2012.

Although he founded Acerus and was once its largest shareholder, Mr. Melnyk has sold down his position in the company over the years, even as he saw the value of his remaining shares dwindle. According to Bloomberg data, he now remains its third-biggest stockholder with a stake of about 15 per cent. The firm's two largest shareholders are First Generation Capital, a private investment holding company run by Mr. Ihnatowycz, and Toronto's West Face Capital.

This is the second time Mr. Melnyk, one of Canada's wealthiest individuals with a fortune estimated at $1.3-billion by Canadian Business magazine, has gone on the offensive against a company he created.

In 2014, he disclosed that he was part of a group of so-called whistle blowers that denounced the tax strategies of drug giant Valeant Pharmaceuticals International Inc. to U.S. regulatory authorities two years earlier. Valeant merged with Mr. Melnyk's first entrepreneurial brainchild, Biovail, in 2010, in part to win international tax advantages stemming from Biovail's operations in Barbados.

Mr. Melnyk rose to prominence in the 1990s as the founder and CEO of Biovail, a successful maker of slow-release pills, but later lost a fight to take it private. Eventually he left Biovail to focus on other holdings, including Trimel. He's no longer involved with the company other than as a shareholder.

Mr. Melnyk's personal fortune has been the subject of much speculation over the past several years with the Ottawa Citizen reporting in August, 2013, that his "once-staggering wealth" topping more than $1.5-billion had shrunk significantly since he bought the Senators in 2003 and was now in the hundreds of millions. He told Ottawa city councillors that summer that he had "no financial issues whatsoever."

Acerus has three main products: Natesto, a testosterone nasal gel; Estrace, a treatment for menopause; and Tefina, a nasal gel under development used to help women having trouble with orgasm. The company reported annual and fourth-quarter results March 2, with Mr. Rossi telling investors and analysts on a conference call that his team was making "good progress towards building for the future."

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