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— Katz says that when he was chief executive, Yakatan, then head of clinical drug development, approached him about Neurodex. It was presented to the board. But at the time, Yakatan already had licensed Neurodex and did not reveal it, says Katz, adding, "It was a violation of his employment agreement."

"It is not true," says Yakatan, saying he did not have a financial interest in the product when it was brought to the board. "I hope we can get into a situation where we are in front of a judge, and we will find out what the story is."

As to IriSys being a conflict of interest, Yakatan says, "How can it be a conflict of interest if it is revealed? I am not hiding anything. Those shareholders wouldn't have a company [Avanir] if it weren't for me. I saved that company."

Gregory P. Hanson, Avanir's chief financial officer, believes shareholders are exaggerating how many shares the company would issue. "We are just a small company," he says. "It is an unreasonable assumption that all of these shares would be issued."

Maybe, but this company talks big. Hanson says it has "a wonderful pipeline" of drugs in development. Yakatan says that by the time Neurodex is approved and ready to be sold to patients (probably in 2006), the total market will be half a billion dollars, and there are now no major competitors. The company should get a fair chunk of that half billion, and there are other potential products, too, claims Yakatan.

Believing such statements, many shareholders expect Avanir to grow large -- and that's why they don't want their piece of the pie severely diluted. And several complain that Avanir's board members have questionable track records. For example, chairman James B. Glavin is also chairman of ailing biotech Immune Response, whose cumulative deficit of $292 million is three times Avanir's cumulative deficit. Glavin got in on the Immune Response shares for one-fourth of a cent each, as did other insiders. Another Avanir board member, Dennis J. Carlo, was a cofounder and longtime official of Immune Response. And another Avanir board member is former San Diego mayor Susan Golding. It was during her reign that San Diego got deliberate pension underfunding, the Chargers 60,000-seat guarantee, and the Padres ballpark, which was supposed to pay for itself but will cost almost $20 million annually.

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