The war of words coming out of the battle for control of Biovail Corp is heating up as the Canada-based firm has fiercely criticised ex-chief executive Eugene Melnyk and his bid to change the make-up of the board.

Mr Melnyk recently sent a ‘dissident proxy circular’ to shareholders including a list of individuals he has nominated to run the company and Biovail says it also contains “a number of unfounded and misguided attacks” on the board. In response, current chairman Douglas Squires and chief executive William Wells have written their own, long, letter in order to “correct the more significant errors and omissions” in Mr Melnyk’s circular.

The two executives say that he uses the company's performance from the 1990s as an argument “to return to a Melnyk-dominated ‘old guard’ now, while ignoring the reality of significant change in both the pharmaceutical industry and the capital markets in the intervening years”. They claim he “prefers to look at what he calls the ‘golden years’ but not what can rightly be called ‘the lost years’ at Biovail”, the period from 2001 to 2007 when he was CEO or chairman or both”.

The letter goes on to say that it was during this period that the firm “lost much of its competitive position, its product pipeline and its shareholder value”. The company adds that “nostalgia is not a strategy. Selective memory is not management” and “allowing Biovail to be controlled by Eugene Melnyk is not in the best interests of Biovail shareholders”.

At the company's annual meeting on June 25, shareholders will vote between Mr Melnyk's candidates for the board and Biovail's own list. Messrs Squires and Wells claim that the nominees on the other side “are tied to a vague, archaic and poorly conceived plan that does not reflect the realities of the pharmaceutical industry today” and that in summary, “Eugene Melnyk is attempting to take control of Biovail without paying you for it.”

Biovail board "disrespectful and dismissive'
The Biovail missive led to a sharp reply from Bruce Brydon, the firm’s CEO from 1995 to 2001 whom Mr Melnyk has proposed for the same post again. He said that the company’s management has been “disrespectful and dismissive of senior and successful executives” who make up the dissident nominees. He added that seven of those 10 nominees “are deemed to be independent” and many “have not even spoken to Eugene Melnyk in years and a number had never spoken to Mr Melnyk prior to this proxy contest”.

Mr Brydon said that as the largest stockholder, with a 12% stake, Mr Melnyk's interests “are completely and unequivocally aligned with those of all shareholders”. As for the ‘lost years’ tag, he noted that Mr Melnyk retired when the stock was over $25 per share “and increasing in value - with an optimistic outlook for the immediate horizon”, but today the share price is around $12. His supporter “felt he left the company in good hands at the time” but “subsequently, failure upon failure occurred under the incumbent management team,” Mr Brydon claimed.

Despite all the kerfuffle, “regardless, this is not about Mr Melnyk…it's about the dismal failure of the current management and board”, said Mr Brydon. He concluded by saying it is also about “my track record and pharmaceutical experience compared to Doug Squires' track record and William Wells' pharmaceutical experience - or lack thereof”.

His parting shot was that “the company will not succeed in misleading shareholders, respected institutional analysts and Biovail employees. A response to their letter will follow shortly."