Voyager hit by new lawsuit

Investor says stock transfer backdated

Voyager Pharmaceutical's top two executives are facing a shareholder lawsuit that alleges they misled investors by inflating the company's value when it tried to sell stock to the public in December.

Voyager executives had hoped to raise $100 million through an initial public offering of stock. The money was needed to help the Raleigh company further test and develop an experimental Alzheimer's treatment called Memryte. Investors had committed $65 million when the IPO was abruptly canceled Dec. 13.

Unable to get venture capital or corporate sponsorships to replenish its dwindling cash reserves, Voyager told shareholders a week ago that it had halted two late-stage studies of Memryte.

Now, in a lawsuit filed Oct. 11 in Delaware, John Stone, a South Carolina businessman who owns 1,000 shares in Voyager, claims that the IPO was tainted from the beginning. Stone is one of nearly 500 private investors whose shares in the company aren't publicly traded.

In his lawsuit, Stone alleges that about 1.44 million privately owned shares were transferred from Dr. Richard Bowen, Voyager's co-founder and chief scientific officer, to his co-founders, CEO Pat Smith and chief financial officer David Corcoran. Stone's lawsuit also alleges that the documents transferring the stock were backdated.

Stone alleges that the share transfer dated November 2001 was actually done in January 2004, when Voyager was preparing its financial statements for the IPO. He submitted documents -- including a letter dated Jan. 29, 2004 -- to support his claim.

If the transfer happened in 2004, Voyager would have been entitled to an income tax deduction of about $17.3 million, Stone claims in his lawsuit.

"By omitting the deduction, Smith and Corcoran have intentionally caused the net worth of Voyager to be overstated in its financial statements which have been distributed to investors, the ... [Securities and Exchange Commission] and others," Stone claims in his lawsuit.

By backdating the share transfer to a time when the company's stock wasn't worth as much, Smith and Corcoran also avoided paying income taxes, the lawsuit alleges.

Stone is asking the court for access to the company's books and other financial records. He has also asked Voyager's board of directors to sue Corcoran and Smith and recover damages he says the company suffered.

Stone and his attorney declined to comment further.

Gary Parsons, a lawyer with Troutman Sanders in Raleigh who represents Voyager, said a response to the allegations is in the works. Voyager's board of directors on Oct. 17 formed a committee to investigate Stone's claims.

A response is due Nov. 2, and Parsons said Voyager may ask the Delaware court to dismiss the lawsuit. "I haven't seen anything corroborating this lawsuit," Parsons said. He declined to provide further details.

This is the second time Stone has tried to gain access to Voyager's financial records. This spring, he unsuccessfully tried to intervene in a legal fight between the founders. In March, Voyager sued Bowen in Business Court in Raleigh, alleging he had derailed the IPO by acting erratically and spreading false information.

Stone tried to piggyback onto that lawsuit. In his motion to intervene, Stone suggested that Voyager pulled the IPO when WR Hambrecht, the investment bank handling the IPO, raised concerns about the accuracy of documents Voyager had filed with the SEC between Sept. 9, 2005, and Dec. 12, 2005.

In the SEC filings, Bowen was always named as Voyager's chief scientific officer. Stone submitted records that showed Smith had actually relieved Bowen of his management, clinical and medical operations duties Nov. 22.

The judge rejected his motion to intervene, saying the Raleigh Business Court was the wrong venue.

So Stone turned to the Delaware Chancery Court to track down the paper trail that could answer the questions surrounding Voyager's failed IPO.

"Smith and Corcoran's withdrawal of the IPO caused substantial harm to the corporation by handicapping its ability to raise sufficient capital," Stone argues in his lawsuit.

(News researcher Susan Ebbs contributed to this report.)