Directors revolt

It's one thing to go out with a bang. Directors of Ariad Pharmaceuticals Inc. who resigned their board seats quit in an explosion.

Four of Ariad's nine board members formally stepped down in a Dec. 1 letter that left no doubt how they felt about Harvey J. Berger, the longtime chief executive of the Cambridge biotech company. "We have never before witnessed the egregious misbehavior in which you have engaged during recent weeks," they told him in the letter disclosed in a public filing last Friday.

Berger had an answer for them in a conference call for stock analysts yesterday. The executive summary: Take a hike.

Berger was much more expansive than that on the call. He emphasized how Ariad's business plans remained on track and its crucial commercial relationship with drug giant Merck & Co. was unaffected.

He also said the letter from his former board members was littered with distortions and false statements. "While they have told an intriguing story, the facts speak scrupulously for themselves," Berger said.

Company directors rarely disagree like this, and they almost never let such hard feelings spill out into public view. I can't remember the last time any local company had to report that nearly half its directors quit in protest.

But the dispute inside Ariad was not a fight for the heart and soul of a corporate titan. Ariad has been a public company for 14 years, routinely producing little if any revenue but a reliable record of quarterly losses. Ariad shares have been pounded this year, down 70 percent, and the company's stock market value has shrunk to less than $90 million.

Ariad does have a promising cancer drug in development and a blue-chip partner in Merck, which could pay as much as $1.1 billion to help develop the compound. That sounds promising, but, keep in mind, Ariad stock is still worth less than $90 million.

The dispute that split the board at Ariad wasn't about the company's cancer treatment or Merck. The subject of all the angry words barely qualifies as a subplot to Ariad's business story. Mostly, it's about a deal to buy out minority shareholders of a company in which Ariad already owned an 80 percent interest.

Those directors who objected so strenuously are no yahoos. Sandy Smith was once chief executive of Repligen Corp. and now serves as an executive vice president of Genzyme Corp. Elizabeth Wyatt was a former Merck executive. Michael Kishbauch is the chief executive of a small publicly traded biotech company in New Haven. Burton Sobel is a professor of medicine at the University of Vermont.

All of them approved the deal to buy the remaining 20 percent of Ariad's majority-owned business called Ariad Gene Therapeutics Inc., or AGTI. Berger owned some of that 20 percent and did not vote on the deal.

The directors who quit said they objected to the way the transaction was actually executed and how appraisal demands by some AGTI shareholders were handled in court. But the letter really doesn't spell it out.

Clearly, there were some hard feelings before those events. "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," they wrote in the letter.

Those board members sounded miffed that Smith was replaced as Ariad's lead director and his vice chairman's title disappeared earlier this year. They complain about being cut out of the board's decision-making process.

Berger spoke at length yesterday refuting those claims and took questions from stock analysts. He even talked to me later in the day.

Berger backed his remaining board members. "We unequivocally refute the misstatements and innuendo" in the letter from the directors who quit, he said on the conference call.

"The important message now is that this is much ado about nothing," Berger told me yesterday.

I've read and listened to everything I could find about the Ariad dispute. I still don't know what really happened. But it is a very big deal indeed when nearly half the board of a public company walks out the door in protest.

Steven Syre is a Globe columnist. He can be reached at syre@globe.com.