In the summer of 2006 Epix Pharmaceuticals Inc. (Nasdaq:EPIX) was showing enormous promise. The company had signed agreements with two international pharmaceutical companies - GlaxoSmithKline (NYSE: LSE: GSK) and Amgen (Nasdaq: AMG) - to commercialize products that had yet to prove their effectiveness.
The lead deal was with GlaxoSmithKline involving an agreement worth over $1 billion for a Phase I trial for an Alzheimer's product. They just had to wait for the results of the trial.
Yet by the summer of 2008, Epix was trading on the bulletin board in New York with a market cap of $15 million with enough cash to last two months. The company had succeeded in moving its Alzheimer product forward to the Phase II clinical trial but that did not interest anybody. Epix is looking for a buyer to save it before all its cash runs out. Meanwhile, the company is not reporting any progress.
How can it be that for this amount, which is virtually nothing compared with the amount paid for the company's products at a much earlier stage, the company is having difficulty finding an investor or buyer for its products? The answer throws light not only on Epix's plight but also the chances of other companies to survive.
Why is GlaxoSmithKline not riding to Epix's rescue? After all it has already invested $35 million for four products and needs to make every effort to ensure that the products continue to be developed. It will pay dearly if Epix ceases to exist. But if Epix closes or is sold, then GlaxoSmith Kline will be the only one to enjoy the end product without buying the company, or even the product.
It could be that GlaxoSmithKline does not want Epix to complete its clinical trials just now because it would result in milestone payments that were priced high in line with market conditions two years ago.
But why is Epix not being acquired by another pharmaceutical company or a strategic investor? Large pharmaceutical companies probably don't see anything unique in Epix beyond the sum of tradable products and technologies.
In these circumstances it is preferable to wait until the company goes into receivership and thus snap up products and technologies even more cheaply.
So why isn't there is an investor providing bridging finance. According to Epix's most recent statements the progress of its lead product should earn a significant $19.6 million milestone payment from GlaxoSmithKline, which would settle the ship.
Financing for such "bridging with a gamble" has generally come from the public, institutional investors or venture capital funds. These are sources of capital that have disappeared with the global financial crisis.
So the only people left with a significant interest in investing in Epix are patients organizations. An Alzheimer's product in Phase II clinical trials might save their lives, and these people don't have many alternatives.
Published by Globes [online], Israel business news - www.globes-online.com - on May 26, 2009
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