Epix Pharmaceuticals Inc. (Nasdaq:EPIX) has taken two complementary steps to stave off bankruptcy. It warned last week that it was in danger of filing for bankruptcy protection if it did not restructure its debt. Last week, it sold the US, Canadian and Australian rights for MS-325 (formerly marketed as Vasovist) to Lantheus Medical Imaging Inc. for $28 million, under pressure. Last December, the company valued MS-325 at $100 million.
MS-325 is an imaging agent used in blood pool magnetic resonance angiography (MRA) that Epix bought from Bayer Schering Pharma AG (XETRA: SCH). It will pay Bayer $10.5 million to cover development costs in the three countries.
Epix also moved to reduce its debt by offering to exchange notes to equity in a $100 million exchange offer for all of its convertible senior notes, which mature in 2024. It will offer $180 in cash and 339 shares for each $1,000 of convertible notes. The company will also give one contingent value right, which gives bondholders the right to participate in future exchange offers. The company added that 83% of its bondholders have already agreed the offer.
A quick buyback of the notes is essential, since the bondholders have the right to demand early redemption if Epix is relegated from the Nasdaq main market.
The company said that if the offer is accepted in full, the bondholders will receive $18 million and 33.9 million shares, amounting to 44.7% of all shares. It added that it is using the proceeds from the sale of MS-325 rights to finance the offer.
Currently, Nasdaq is not enforcing its minimum value regulations, because so many companies are not in compliance. Nonetheless, Epix's auditors have issued a going concern warning for the company. Epix closed at $0.33 on Friday, giving a market cap of $13 million.
Epix is trying to survive until additional it receives additional results from the clinical trial for Alzheimer's treatment, which showed excellent results in its Phase IIa trial.
Epix has an agreement with GlaxoSmithKline plc (NYSE; LSE: GSK), which also covers the Alzheimer's treatment. If the Phase II trial succeeds, Epix can expect to receive substantial funds, and if the drug passes the Phase III clinical trial and it obtains marketing approval, the company can expect to receive as much as $1.2 billion, and at least several hundred million dollars.
Published by Globes [online], Israel business news - www.globes-online.com - on April 13, 2009
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