Ariad CEO Fires Back at Resigning Directors and Their “False and Misleading” Attacks
Ariad Pharmaceuticals Chairman and CEO Harvey Berger defended himself this morning in a conference call with investors, after a nasty boardroom dispute spilled out into plain view and four directors accused him of “grossly inappropriate” conduct.
The controversy emerged late Friday when Ariad disclosed in a regulatory filing that four of its nine directors resigned on Dec. 1, citing “self-interested, combative and obstructionist actions” by Berger in the handling of a merger with a company subsidiary called Ariad Gene Therapeutics. Ariad, (NASDAQ:ARIA) was founded in 1991 and has no marketed products. Its cancer drug deforolimus is in the final stage of clinical trials in a partnership with Merck.
Berger, in prepared remarks on the call this morning, said he was “extremely disappointed” with the way the directors chose to resign. “I will not stand idly by and let them potentially damage the reputation of the company they once served,” he said.
The roots of the dispute, as described by Berger, go back a couple of years. Ariad Gene Therapeutics (AGTI) was a subsidiary Ariad set up in 1994 to in-license technology from Harvard University and Stanford University focused on a process called dimerization, he said. This technology has become critical to Ariad’s strategy, and to its ownership of deforolimus, which is being tested as a treatment for multiple tumor types. Ariad has long owned 80 percent of AGTI, and the board has been discussing ways to buy out the remaining minority interest held by the universities and various scientists for years, Berger said.
Ariad announced on Sept. 12 that it had reached an agreement for such a buy-out after years of discussion about the timing, methods, and valuation, Berger says. Berger and another director Jay LaMarche abstained from the vote because they had personal interest in the deal, which gave shareholders in the subsidiary two shares of Ariad stock for each one they held—a ratio determined by the other directors of Ariad’s board. This exchange rate ended up giving the AGTI shareholders about a 3.1 percent ownership stake in Ariad, the company said.
Berger opposed this deal, but once the board approved it, he said he felt duty-bound … Next Page »