TORONTO, May 22, 2013 /CNW/ - Today the group of concerned shareholders
(the "Concerned Shareholders") of Bioniche Life Sciences Inc.
("Bioniche" or the "Company") led by William (Bill) M. Wells, former
Chief Executive Officer of Biovail Corporation, and Greg Gubitz, former
General Counsel and Senior Vice President of Corporate Development at
Biovail Corporation, questioned the Company's announced sale process
for Bioniche's animal health business.
The jewel in Bioniche's crown is the animal health business. It is the
only business in the company that produces revenues and positive cash
flows and is highly scalable. The remaining development programs,
centered around Econiche and Urocidin, produce no revenues, burn cash
and have to date destroyed shareholder value with no payoff visible for
years, if ever. Now Bioniche's management and board have decided to
divest the animal health business, the core of the company, leaving
shareholders with an interest in two non-revenue producing products
with a troubled development history and large, idle manufacturing
The recent announcement did not address the use of proceeds from the
divestiture of the animal health business. The Concerned Shareholders
doubt that the company's long-suffering shareholders will receive any
of the sale proceeds. Instead, the Concerned Shareholders expect that
the sale proceeds will be used to repay debt and to sustain or enhance
management's and the board's compensation. Further, any remaining
proceeds will be in the hands of a board and management team who have
demonstrated that they are unable to manage this business, leading to a
continuing cash burn on the further development of products whose day
never seems to come.
Shareholders have seen this story before. In 2006, Bioniche sold its
sterile injectibles manufacturing subsidiary to a private equity firm,
realizing approximately $21 million in total proceeds, with the stated
intention of using the money to pay down debt and to fund the Econiche
and Urocidin programs. In 2010, the private equity buyer of that
business re-sold it for $550 million after having scaled the business.
Meanwhile, Bioniche significantly increased its debt, provoking the
current crisis, and has yet to generate one dollar of product sales
from its Econiche or Urocidin programs. Based on the results of their
past decisions, this current board and management team have no
credibility when it comes to making strategic decisions.
As concerned shareholders who hold a major stake in Bioniche, we have a
plan to revive the company. However, Canadian proxy rules restrict us
from discussing our plan with shareholders until the Bioniche board
calls the special shareholders' meeting in response to our requisition.
The current board is obstructing shareholder rights and should
immediately call the special shareholders' meeting to ensure a proper
dialogue and to allow shareholders to be heard.
As concerned shareholders, we believe that any change which improves
shareholder value at Bioniche is welcome. Nevertheless, such change
must be the best possible alternative to produce maximum value and
should not benefit only certain stakeholders to the long term detriment
of all shareholders.
All shareholders must be given the right to vote on a transaction of
this magnitude and consequence. Shareholders should insist on full and
candid responses to the following questions from the management and
board; who, after all, serve at the shareholders' pleasure.
QUESTIONS SHAREHOLDERS SHOULD ASK MANAGEMENT AND THE BOARD
Governance: Given the animal health business constitutes a substantial portion of
Bioniche's business, will the board confirm that shareholders will be
given a right to vote in a timely fashion on the sale of the animal
health business before any such sale becomes final?
Proceeds: Will the board commit to share the proceeds of the sale of the animal
health business with shareholders through an appropriately sized
Strategy: Without the animal health business, Bioniche appears to be a high
risk, pre-revenue biotech company with significant cash burn and no
realistic prospect of value creation for many years to come. Is this
perception correct? How does the board intend to create value for
Bioniche shareholders quickly after the sale of the animal health
Alternatives: What other strategic alternatives did the board consider? Which had the
highest present value? What were the differences in risk profiles
All Bioniche shareholders must have the opportunity to be heard at a
special meeting of shareholders to be held as soon as possible. By
November 5th, any sale of the animal health business is likely to be irrevocable.
Management and the board are proposing to fundamentally change the
Company, possibly to the great detriment of all shareholders, without
allowing every alternative to be raised, examined and voted upon.
As significant shareholders of Bioniche, we are aware of our rights and
will take all necessary steps to enforce them should the board choose
to continue to ignore its fiduciary duties and responsibilities. In
this regard, the Concerned Shareholders have retained Blake, Cassels &
Graydon LLP, as well as CST Phoenix Advisors.
This press release is not, and does not constitute, a solicitation of
SOURCE: William (Bill) M. Wells and Greg Gubitz
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