Bioniche settles proxy battle, CEO steps down

Bioniche Life Sciences Inc expects to emerge from a nasty proxy battle and the sale of two major divisions following the settlement with dissident shareholders and the resignation of its founder, president and CEO, Dr Graham McRae. The Belleville ON-based firm has also filed a final prospectus to raise $9 million to advance the Phase II clinical trials of Uricidin, a new technology for the treatment of bladder cancer and general corporate purposes.

Bioniche has been embroiled in a proxy battle with shareholders Greg Gubitz — former CEO of Biovail Inc (now Valient Pharmaceuticals) — and his business partner William Wells. They had opposed the sale of Bioniche's animal health business, which generates the bulk of the company's revenues.

As a result of the settlement, Bioniche will proceed with the sale of its animal health division as well as its $100-million vaccine manufacturing facility, which was constructed with at least $12 million in federal and Ontario government funding. The company's focus is now on its human health business. McRae will step down as president and CEO and will be appointed chairman emeritus as well as a consultant to provide business development support for several defined projects, including the divestment of the two above-mentioned divisions.

A new slate of directors will be appointed to a smaller board at a special meeting of shareholders November 13th. The board will include Gubitz who will also sit on Bioniche's corporate governance and nominating committee. Gubitz and Wells have agreed to purchase $250,000 of the current prospectus and refrain from "shareholder activism" for two years.

The animal health division was responsible for the successful development of a cattle vaccine for E.coli 0157 in collaboration with the Univ of British Columbia and the Vaccine and Infectious Disease Organization. But the company had difficulty convincing cattle breeders to pay the cost of the vaccine, despite the significant long-term savings use of the vaccine would produce.

Under the terms of the settlement, 90% of net aggregate proceeds derived from the sale of the two divisions exceeding $75 million will be returned to shareholders via share buybacks and/or dividends.

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