By Scott Anderson
TORONTO (Reuters) - Biovail Corp
But Melnyk is threatening a court challenge, arguing the meeting lacked a quorum after he withheld his personal holdings from balloting.
Among shareholders who participated, 97.6 percent of the vote was in favor of the existing board. Before the meeting, the company sought to outflank Melnyk by changing the bylaws to make the vote official.
Melnyk, who launched the company almost 20 years ago and held numerous posts before stepping down last year, decided to oppose the board after losing confidence in Biovail's corporate strategy and the board's abilities earlier this year.
Shares of Biovail, Canada's biggest publicly traded drug company, have dropped 45 percent in the past four years.
John Lute, president of Lute and Co., a communications firm that specializes in proxy battles, said there was no clear explanation for Melnyk's strategy.
"I have been through a number of proxy contests and I have never seen one where a major shareholder revoked in order to prevent a meeting from going forward," he said. "I can't guess (why), other than to prolong the contest."
Melnyk said his removal of about 18.8 million shares, coupled with another large shareholder withdrawing 6 million shares, meant the meeting lacked the obligatory 50 percent shareholder representation. But minutes before the vote, the company held a snap board meeting in which it changed the bylaws to reduce the required quorum to 25 percent.
Melnyk said his lawyers would go to court to declare that the meeting "was illegally held," and he will also "request that a proper meeting be convened."
"They knew that without my shares they would not have a quorum to hold the meeting and so they secretly met early this morning to change the rules to suit their purposes in violation of applicable law and a negotiated protocol..." he said in a statement.
Melnyk planned to hold a press conference later on Wednesday.
"JUST NOISE"
The company dismissed the former chairman's latest salvo in the lengthy proxy battle as a distraction.
"It's up to the courts to decide at this point some of these corporate governance issues, but in reality this is just noise," Chief Executive Bill Wells told reporters.
"We are confident that we are going to resolve this shortly and we are fully focused on operating this company and moving our strategy forward."
Biovail shares were up 2 Canadian cents at C$10.82 on the Toronto Stock Exchange and down 9 cents at $10.67 in New York.
Under Melnyk's plan, a development committee headed by Bruce Brydon -- who was CEO from 1995 to 2001 -- would have emphasized the company's product pipeline, including a return to "difficult to manufacture" generic drugs, as well as acquiring more products and technologies.
Meanwhile, the current board stands behind strategic changes unveiled last month, including shutting down operations in Puerto Rico and shifting to new treatments for disorders of the central nervous system.
The company, which has faced growing criticism for its dependence on a narrow stable of treatments, said the focus on CNS treatments, which represent a $70 billion global market, will allow Biovail to get away from direct competition with the big transnational drug firms and concentrate on niche markets such as Parkinson's disease and multiple sclerosis.
Wells said Biovail has identified a number of licensing and acquisition targets and has already "initiated contact with a number of these key targets."
Shifting to the CNS niche markets could also shield Biovail for a longer period of time from generic versions of its new treatments. It has seen its revenue hit by copycat versions as early as three years after its products first hit the market.
The company said it would also continue its focus on anti-depression and sexual dysfunction treatments.
(Additional reporting by Wojtek Dabrowski; editing by Rob Wilson)
($1=$1.01 Canadian)
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