In Canada, the Ontario Securities Commission has commenced a hearing in its proceeding against Biovail Corp founder Eugene Melnyk, in which it alleges Melnyk used a trucking accident as an excuse for an earnings shortfall to protect Biovail Corp.’s (BVF) reputation and stock price. The WSJ reports that an OSC lawyer cross-examining Melnyk at the hearing Tuesday argued that Melnyk “seized upon” the truck accident in October 2003, in which a large shipment of the company’s Wellbutrin XL drug was lost, because it would be “less damaging” than admitting it was management’s error.
Biovail initially said the value of Wellbutrin XL product on the truck was $10-$20 million, but later disclosed that the actual value was $5 million. Melnyk denied the allegation, saying Biovail disclosed two other factors as well in the earnings warning. He reportedly reiterated that it was a chaotic time, and he had the added challenge of managing the crisis from Biovail’s offices in Barbados, thousands of miles away from the rest of the team in Toronto. “This was not perfect, but it was the best we could do given the time we had,” he told the panel, adding that if there was more time “I don’t think I’d be here today.”