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 facilities.
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 special dividend?
- 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 business?
- Alternatives: What other strategic alternatives did the board consider? Which had the highest present value? What were the differences in risk profiles between alternatives?
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 proxies.
SOURCE: William (Bill) M. Wells and Greg Gubitz
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