Bioniche Life Sciences Inc., (TSX: T.BNC, Stock Forum) a company that is locked in a battle between management and unhappy shareholders, has not been a winning proposition for investors.
Trading this week at 33.5 cents, the stock has fallen all the way from 70 cents in August 2012, leaving the company with a market cap of $35.2 million, based on 105 million shares outstanding.
The stock was trading at over $1.40 in August, 2011.
Hopes for a quick turnaround may have been dashed this week when the company’s board of directors rejected a request from dissident shareholders, who want Bioniche to call a meeting to allow for talks between company and its shareholders, potentially setting the stage for the election of a new board of directors.
The dissident group, led by former Biovail Corp. chief executive officer Bill Wells, is unhappy about the stock price performance and wants to see the firm become more focused on a narrower range of products. [Biovail merged with Valeant Pharmaceuticals InternationalInc. (TSX: T.VRX, Stock Forum) in 2010.]
Based on Wells’s published comments and the company’s reaction, it now seems that both sides are digging in for a protracted battle.
Bioniche makes a wide range of animal and human health products, including a vaccine that prevents cows from shedding E. coli in their manure.
But turning profits has been a challenge for this Belleville, Ont., company.
The third quarter ended March 31, 2013 proved to be no exception, when it reported a net loss of $5.5 million or 5 cents a share, compared to a year earlier loss of $5.8 million or 6 cents.
Revenue in the quarter was $7.3 million, down 12% from $8.4 million.
Criticism has been targeted towards Bioniche Chief Excutive Officer Graeme McRae, who the dissidents say has remained at the helm even though the company has been a consistent money loser.
In an April 22, 2013 news release, the company responded by saying it has long been aware of issues relating to its stock market performance. It also said the board of directors has been working for a number of months to unlock inherent value in Bioniche’s assets.
On May 13, the company said it has engaged U.S. based Evercore Partners to assist the board of directors and management in its divestment of the company’s animal health business.
This has clearly failed to satisfy the dissidents, who own roughly 5% of the company, and say the animal health business is the only business in the company that produces revenues and positive cash flow.
Wells’ associate, lawyer Greg Gubitz said dissidents are unhappy that there will be no shareholders meeting until November 5, 2013.
“They should call a meeting sooner,’’ he told the Globe and Mail. “We will have the court decide now.”
Wells said the dissidents will now ask an Ontario court to force a shareholders’ meeting, allowing the dissidents to present an alternative slate of directors.
Judging by the number of posts on the Stockhouse website, there is plenty of support for the dissidents.
“No decision the current management or board of directors has made in the recent past has made much if any sense,’’ said CorporateStooge in a Bioniche post.
“McRae has better hope that he gets the stock price up to $3 plus in a hurry or his legacy as the longest serving biotech CEO will come to a crashing end and probably sooner than his lawyers think.’’
In another post, Nohandlzep agreed that with no meeting scheduled until November, shareholders are being denied their right to voice their concerns.
“The only thing holding Bioniche’s value anywhere near one year’s revenue is the hope that GW [the dissident group] will oust the board and take over management.’’
If that doesn't happen, the stock may continue to fall from current levels.