TORONTO – Biovail Corp founder Eugene Melnyk said Monday he was abandoning his plan to oust the Canadian drugmaker's board of directors and elect his own team at Biovail's shareholders meeting next month.

Instead, Melnyk, Biovail's biggest shareholder, said he would proceed with alternate plans to develop his own private drug company, to be called Trimel Biopharma.

In a setback for Biovail last week, an Ontario judge ordered the company to reconvene its annual shareholders meeting, held on June 25. Biovail's slate won the overwhelming support of shareholders who voted, but the judge ruled that the vote had been taken improperly.

The reconvened meeting is scheduled to be held on Aug. 8 in Toronto.

In trying to reassert control over Biovail at the June meeting, Melnyk had proposed a new emphasis on the company's product pipeline, including a return to “difficult to manufacture” generic drugs, as well as acquiring more products and technologies.

He said he had lost confidence in the board and wanted it replaced.

Biovail's current management wants to shut its manufacturing operations in Puerto Rico and shift the company's focus to new treatments for disorders of the central nervous system.

“Biovail has said that their new plan will return the company to greatness. As the company's largest shareholder, I hope they are right. It is time for excuses to stop and for them to perform,” Melnyk said in a release Monday.

“I will continue to monitor the actions and progress of the Biovail board and will take such action as I feel is appropriate in the interests of myself and the remaining Biovail shareholders.”

Biovail in a release on Monday said it was pleased that the process will end soon, and that it would focus on executing its new strategy.

Scotia Capital analyst John Maletic said Melnyk's decision was not surprising as the founder seemed destined for a second defeat at the August meeting.

“He didn't have a lot of momentum. Even with the court's decision there wasn't a lot going in his favor and he can't have expected a huge swing in his direction over the next month or so,” Maletic said.

“Maybe this is him just accepting the reality of the situation.”

Melnyk said he will now turn his attention to the start-up of his new company.

Trimel Biopharma, which was Biovail's original name 20 years ago, would have start-up costs of between C$50 million ($49.5 million) and C$100 million, Melnyk said last month.

He said Bruce Brydon, who was Biovail's chief executive from 1995 to 2001, would head the new company.

Biovail's shares have lost more than 60 percent of their value in the past year, hurt by competition from generic products and a string of regulatory and legal concerns.

On Monday, the stock was down 34 Canadian cents at C$10.68 on the Toronto Stock Exchange Monday morning.

Before the June 25 meeting, Melnyk had pulled his own block of about 18.8 million shares in an attempt to have the vote postponed so that he could build more support for his plan.

Later in court, Melnyk argued the meeting had been held improperly because it lacked a quorum. Just moments before it started, the company had changed the quorum requirement that 51 percent of shares be represented to 25 percent so that the meeting could proceed.

An Ontario court subsequently ruled that Biovail must abandon the results of the first vote and reconvene the meeting.

($1-$1.02 Canadian)

(Reporting by Scott Anderson; Editing by Frank McGurty)