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Director of Miami-Based Drugmaker Buys Company Shares Weeks Before Merger

Posted on: Thursday, 28 July 2005, 12:00 CDT

Jul. 28--Nineteen days before Miami-based Ivax Corp. announced it would be acquired by Teva Pharmaceutical Industries Ltd., a new Ivax director and prominent Broward County cardiologist bought 35,000 shares of Ivax stock. He now stands to make more than $175,000 on that purchase when the deal closes around year's end.

The director, Dr. Zachariah P. Zachariah, chief executive officer of the Fort Lauderdale Heart Institute, bought those shares on July 6 in six separate purchases ranging in price from $20.68 to $20.95, according to an SEC filing on the same day. The agency requires corporate directors, officers and those who own at least 10 percent of a company's shares to report purchases and sales of securities in their firm.

That transaction came two months after Zachariah bought 30,000 shares of Ivax on May 4 in four separate transactions at prices ranging from $18.50 to $18.72, according to another SEC filing. He stands make more than $220,000 on those shares based on Teva's buyout price of $26 per share.

Zachariah, who also is director of cardiology at Holy Cross Hospital in Fort Lauderdale, was named to the Ivax board on April 29. He reported to the SEC on May 2 that he owned 5,000 shares of Ivax stock.

"I'm new on the board and I don't know a lot about it," Zachariah said on Wednesday. A reporter's call to his cellular phone was disconnected during a question about his stock purchases.

One of Zachariah's assistants, Helene Whalen, called back and said the physician had been summoned to an emergency. She said he had been instructed by Ivax management "not to say anything" about the deal -- or his personal stock purchases -- until an Ivax proxy statement is issued that will include a timeline of events.

Ivax President Dr. Neil Flanzraich, also a board member, said in a telephone interview that the directors' opinions were part of the decision-making process leading to the $7.4 billion deal with Israeli-based Teva to create the world's largest generic drug maker.

"You don't do a transaction like this unless the board has been actively involved. The members were kept abreast of the developments during the period of serious developments," Flanzraich said.

He declined to say who knew what, and when they knew it, adding that the proxy statement is expected in about a month. "It will all come out and I am sure everything that was done was fully appropriate," he said.

Company shareholders have a choice of receiving $26 or 0.8471 of a Teva American depositary receipt for each share. Depending on demand, the apportioning could include both cash and Teva stock.

Corporate mergers frequently attract scrutiny of numerous regulators including the Federal Trade Commission and European authorities who look for potential antitrust violations. The Securities and Exchange Commission reviews merger proxy statements.

The SEC also can look for possible illegal insider trading.

"There are no specific rules, but cases are brought under broad anti-fraud provisions of federal law," SEC spokesman John Heine said from Washington, D.C.

Illegal insider trading, he said, refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of nonpublic information about the security.

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IVX, TEVA,

Source: South Florida Sun-Sentinel

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