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If Probe of Shacknai Deaths Lingers, Medicis May Contemplate Life Without Its CEO

The longer the investigation into the deaths of Medicis (MRX) CEO Jonah Shacknai's son and girlfriend goes on, the more of a media circus it becomes -- and the more pressure Medicis' board will come under to ask Shacknai to step aside.

There is no sign of that happening now. Shacknai is the founder of the company and is heavily identified with it. No one wants to see Medicis without Shacknai. And yet if the police eventually declare that the hanging death of Rebacca Zahau Nalepa at his Coronado, Calif., mansion is a homicide, it's difficult to see how he could continue to run the company.

The case would surely turn into a Casey Anthony-style media free-for-all, due to its bizarre circumstances: The death of his 6-year-old son in a fall down the mansion stairs; music loud enough to be heard by neighbors playing the next night; and the body of his girlfriend, naked and bound, found hanging from a balcony the morning after that.

The case has already made the leap from the business and local news pages into the Hollywood gossip sheets. Shacknai has hired a PR agency known for celebrity crisis management to handle the media interest.

The Zahau family has not been shy about insisting to reporters that Rebecca was not suicidal. Someone within the Shacknai circle has given out a number of family photos to the media. And it doesn't help subdue media interest that Zahau and Shacknai were an attractive couple, or that Shacknai planned to propose to Zahau before she died.

The financial backdrop
Easing Shacknai out of his company would be more of a psychological problem than a financial one. A severance could net him an annual bonus plus $6.7 million in unvested stock, according to SEC disclosures. He took home $6.3 million in compensation last year.

He also netted $1.4 million on July 6 when he exercised 276,290 options at $26.95/share (total $7,446,015) and sold 224,426 of them at $39.70 on the same day (total $8,909,712). The month before, on June 10, he moved 123,222 shares to an irrevocable trust for the benefit of his children.

Shacknair currently owns 832,856 shares of MRX, which has 150 million Class A shares, 1 million Class B shares and 5 million preferred shares outstanding.

MRX has fallen since Zahau's death. If the police were to bring charges in her death -- even if Shacknai had nothing to do with it -- Shacknai would be drawn in as a witness, distracting him from the business. Outside Medicis, the cosmetic pharmaceutical business is proceeding through a crucial period of consolidation, which would normally require strategic responses from Shacknai. Allergan (AGN), Medicis' main rival, agreed to acquire Vicept this week. That deal came on the heels of Valeant (VRX)'s $345 million acquisition of the skincare unit of Johnson & Johnson (JNJ); and its planned $425 million buyout of Sanofi (SNY)'s Dermik skincare business.

If the police return a verdict of suicide, Medicis has a chance of getting back to normal. If not, then Shacknai faces some unpleasant, and unfair, conversations with his colleagues.

Updated Timeline of Deaths at Jonah Shacknai's Coronado Mansion:

*Correction: This report originally said said that Max's sister was present. A source close the investigation tells BNET that none of Max's siblings were in the house at the time.
Related: Image: family photo.
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