Acerus Founder Sues Company Over 'Gross Mismanagement'
March 9, 2016
By Alex Keown, BioSpace.com Breaking News Staff
TORONTO -- Eugene Melnyk, the owner of the Ottawa Senators and the founder of Acerus Pharmaceuticals Corporation , is seeking $145 million in damages from his former company over claims of gross mismanagement.
In the lawsuit filed recently in Ontario Superior Court, Melnyk is claiming that “gross mismanagement” from company executives has caused the loss off millions of dollars in share value and has driven the company “into the ground,” the Globe and Mail reported. Ian Ihnatowycz, chairman of Acerus’ board of directors, and chief executive officer Tom Rossi are named as defendants, as is the company itself, the Globe and Mail said. There are also six other unnamed executives being referred to as John Does in the lawsuit.
“Under the stewardship of the individual defendants and some or all of the John Does, Acerus has been grossly mismanaged and its business and affairs have been conducted in a manner that is oppressive and unfairly prejudiced to its shareholders, specifically including the plaintiff,” according to the legal filing, the Globe and Mail reported.
Because of such mismanagement, the lawsuit said Melnyk “suffered significant damages” from the stock’s fall. The lawsuit claims the defendants are liable for those damages. Acerus stock has been in decline for most of the past year and continues to fall. Currently shares are down 5 percent, trading at 7 cents per share. In February 2015, the company had a high of 65 cents per share and has traded as low as 6 cents per share. The stock had a high of $4.65 per share in 2012.
Acerus said it has been made aware of the lawsuit, but “no formal statement of claim has been validly served on Acerus or the named co-defendants.”
“In addition, the notice of action does not contain details supporting the notice received and the company considers the allegations to be without any factual or legal foundation. In the event that a formal statement of claim is filed and served, the company shall review it and act accordingly,” Acerus said in a statement on its website.
Acerus, which has a market value of about $20 million, has not reported a profit for the past five years. The company reported a $9 million loss on revenue of $16.9 million, the Globe and Mail said.
When Melnyk founded the company it was known as Trimel Pharmaceuticals Corp. It changed its name to Acerus last year. He was the company’s largest stockholder, but has sold down his shares over the years. He is currently the third-largest shareholder in the company, the Globe and Mail said.
Acerus is the maker of Natesto, a testosterone nasal gel used as replacement therapy in men for symptoms related to a deficiency or absence of endogenous testosterone.
This is not the first time Melnyk has been part of a lawsuit against a pharmaceutical company. The Globe and Mail said he was part of the group of whistleblowers who denounced Valeant Pharmaceuticals tax strategies to the U.S. regulatory authorities.