Biovail Corp. chairman Eugene Melnyk will announce his resignation at the annual meeting Wednesday morning, ending a rewarding and troubling 20-year reign for the founder of Canada's largest publicly traded drug company.
Separately, the drug maker also acknowledged that Mr. Melynk and chief financial officer Ken Howling have been informed by the staff of the U.S. Securities and Exchange Commission that they will receive an early notice of alleged violations of securities laws.
Mr. Melnyk informed the board on Tuesday of a decision he has been wrestling with over the last several months. His resignation would be effective June 30.
"Eugene's contribution to Biovail is immeasurable and we understand that this was not an easy decision," Biovail chief executive officer Doug Squires said in a statement.
"We fully respect and understand his desire to spend more time with his young family, and his desire to dedicate more time and energy to his contributions in education, childhood development, health care and sport," he added.
In 2001 and 2002, Mr. Melnyk was Canada's highest paid executive, cashing stock options valued at more than $100-million (U.S.), which he parlayed into a large thoroughbred racing stable and ownership of the Ottawa Senators NHL team.
But high-flying Biovail ran into trouble several years later, missing profit forecasts that caused its stock price to plunge and attract the wrath of shareholders' lawsuits. He stepped down as CEO as a corporate governance move. In February, 2006, the company sued a big Wall Street hedge fund and analysts for engaging in an alleged conspiracy to drive down the company's stock prices.
But Biovail's operating problems also attract investigations from the SEC and Ontario Securities Commission, where he has been accused of repeatedly breaching the Ontario Securities Act by failing to file insider trading reports for trades in Biovail shares conducted by four trust accounts set up in the Cayman Islands.
The SEC notification against Mr. Melynk and Mr. Howling is called a "Wells Notice" and it gives the two men an opportunity to respond to the complaint before the SEC staff makes a formal recommendation regarding what action, if any, should be brought against them by the commission.
A similar notice was issued against the drug maker earlier this week.
Regarding Mr. Melnyk, the SEC staff also indicated its intention to recommend enforcement action with respect to "trading and reporting ownership positions in Biovail securities." With regard to Mr. Howling, the staff's allegations relate to "issues arising out of his former role with the company in managing communications and investor relations."
Biovail said it understands the SEC staff is also in the process of giving similar notification to a former financial officer of the company and one other current company executive. They were not identified.
The notices against the Mississauga-based drug maker reflect a more than three-year investigation of accounting and disclosure issues by the SEC.