UPDATE 2-Melnyk cashes out on Biovail investment

* Melnyk held 6.25 pct of outstanding shares

* Will likely focus on other, new business ventures

* Biovail stock up 1.7 pct on Toronto Stock Exchange (In U.S. dollars. Adds analyst comments and share price.)

TORONTO, March 22 (Reuters) - Biovail Corp BVF.TOBVF.N founder Eugene Melnyk said on Monday that he has sold almost all of his shares in the company, ending a long and tempestuous relationship with the Canadian drugmaker.

Melnyk, who founded the Toronto-based company more than 20 years ago, said in a release that he has sold “substantially” all of his 6.25 percent holding.

Biovail shares were up 1.7 percent at C$16.36 on the Toronto Stock Exchange. They were ahead 0.8 percent at $16.04 in New York.

The sale of the 9.6 million shares is worth about C$157.6 million ($154.5 million).

Melnyk was not available for comment and a Biovail spokesman refused to comment.

“This closes the door for the current management who now has no more relationship with Eugene,” said Claude Camire, an analyst at Paradigm Capital. “The company can now come much cleaner going forward.”

Melnyk, the millionaire owner of the Ottawa Senators National Hockey League team and a stable of racehorses, stepped down as executive chairman of Biovail in 2007. Since then he has has been at odds with the company after it unveiled its new strategic direction into treatments for diseases of the central nervous system.

The shift in direction sparked a lengthy battle between Biovail and Melnyk, who had instead proposed a new emphasis on the company’s product pipeline, including a return to “difficult to manufacture” generic drugs.

Last year Melnyk called for a special shareholders meeting to vote on two board nominees backed by him, and on changes to the company’s governance. But he reached a compromise with management, which saw one of his two choices appointed to the board.

As part of the agreement, Melnyk promised not to participate in a proxy battle or make a shareholder proposal at any time until after Biovail’s 2010 shareholders meeting.

Melnyk told Reuters in a May 2009 interview that he would bide his time and assess the company’s progress before making a decision on his holdings.

“I haven’t changed my view that the strategic direction that they are taking is very different from where I would have taken the company ... so that hasn’t changed. What I am going to do is give them a year and hope that they succeed,” he told Reuters in the interview.

“Rather than talk about it every day, I will give them the time to succeed -- and I am going to be the biggest beneficiary of it.”

Since Melnyk left Biovail almost three years ago its stock has lost almost 40 percent of its value because of regulatory and legal issues.

He still faces regulatory issues in both Canada and the United States, surrounding his involvement in Biovail’s accounting and disclosure practices, dating back to 2001.

Melnyk is not content to ride off into the sunset, however, noting in Monday’s short release that he “remains active in the business community and is currently the founder and/or majority shareholder of a number private business enterprises.”

Melnyk will likely focus his attention on ventures such as his newly formed drug delivery company, Trimel BioPharma, and on Fusion Brands, a dermatology, cosmetics and biological sciences firm.

Trimel, which he formed in 2008 has four products under development, with one of the products well advanced and could see regulatory filings in the U.S. and Europe shortly.

“He needs a little bit of cash to get ready to invest in these new companies and accentuate their business plans,” said Camire. “I’m sure we’re going to see one or two of them going public in the next 12 months.”

$1=$1.02 Canadian Reporting by Scott Anderson; editing by Rob Wilson