A boardroom dispute at Cambridge, MA-based Ariad Pharmaceuticals exploded into public late today. Four of the biotech company’s nine directors quit over “vigorous disagreements” with CEO Harvey Berger, accusing him of “grossly inappropriate” and “manipulative” conduct in pushing through a merger with a gene therapy operation, according to a filing today with the Securities and Exchange Commission.
Ariad, (NASDAQ: [[ticker:ARIA]]) was founded in 1991 and has no marketed products. Its cancer drug candidate deforolimus is in the final stage of clinical trials, in a partnership with Merck.
The dispute, as described in a letter of resignation from the four directors, sounds like downright Shakespearean tragedy. The letter was addressed to Berger, dated Dec. 1, and written by Michael Kishbauch, Sandford Smith, Burton Sobel, and Elizabeth Wyatt. The directors accuse Berger of “self-interested, combative and obstructionist actions” over the last month regarding a merger with Ariad Gene Therapeutics. They focus on a board meeting on Nov. 3, in which they accuse Berger of recomposing the board to allow his allies to control the decision to merge without the other directors’ input; removing the vice chairman of the board; installing a close family friend as lead director, and for violating agreements the board approved that he disagreed with.
“The acts of unfair dealing against the four independent directors by you and the current Board majority have created a toxic environment within the company’s leadership ranks and inside the boardroom,” the directors wrote in their resignation letter. “Regrettably, you are now responsible for causing the departure of four more independent directors, as well as the prior departures of officers and other directors who were not full supporters of what we now recognize to be your personally motivated agenda for running Ariad.”
They don’t say specifically what they objected to about the merger, other than to say they worked to ensure a “level-playing field for all Ariad shareholders” and that Berger and director Jay LaMarche had a “clear conflict of interest.” The group of resigning directors includes, by their description, “a senior officer of a sizeable publicly traded biopharmaceutical company and former vice chairman of the Board who has served Ariad since its inception, a long-serving director who was a nationally respected member of Ariad’s scientific advisory board, a CEO of a publicly- traded biotech company, and the former head of technology transfer of a major pharmaceutical company.”
“In our many decades of public company experience, we have never before witnessed the egregious misbehavior in which you have engaged during recent weeks,” they added.
Ariad’s continuing directors, including Berger, added their side of the story in the filing. The continuing directors “strongly disagree” with the resigning directors, and added that they see the resignation letter as a false attack. “The independent directors believe that the comments and characterizations of Dr. Berger’s leadership, actions, behavior, motivations and dealings with the resigning directors are inflammatory and false, and contrary to one of the company’s key corporate values—mutual respect.”
The continuing directors go on to explain that the Nov. 3 meeting was called in accordance with the company’s bylaws, and proper notice was given for all directors. It says the board appointed Athanase Lavidas, the CEO of Greece-based Lavipharma Group, as lead director, replacing Sandford Smith, “in an effort to strengthen the leadership of the non-management directors and their ongoing interactions with management.” The continuing directors add that the resignations will help the board, and that they support Berger, who founded the company more than 15 years ago. The remaining directors are Berger, Lavidas, Jay LaMarche, Massimo Radaelli, and Wayne Wilson.
Raedelli and Wilson joined the board in October, just one month before the disputed board meeting.
The resigning directors, in their closing line of their resignation letter, said the scientific team and programs at the company “are first-rate, and we continue to hope that they will be commercially successful.”
