PHARMAKINETICS SELLING U.S. CLINICAL TESTING ASSETS
PHARMAKINETICS SELLING U.S. CLINICAL TESTING ASSETS to the toxicology testing services firm Applied Bioscience International under a letter of intent announced Oct. 4. Under the proposed agreement, Applied Bioscience would make a $4.8 mil. cash payment at closing plus further contingent payments totaling $2 mil. over five years. Baltimore-based PharmaKinetics, financially strapped by the fallout from the generic drug investigation, got a line of credit from its bank to cover cash needs while the deal progresses. Not included in the transaction is PharmaKinetics' German subsidiary International Bio Research, nor any potential licensing fee income "from three products under review at FDA" for which PharmaKinetics provided ANDA or NDA contract services. PharmaKinetics' sales for the fiscal year (ended June 30) were $27.1 mil., only 1.4% ahead of last year. Fourth quarter revenues were down 5% at $6.5 mil. For the year, PharmaKinetics had a loss of $3.8 mil. compared to a profit of $2.8 mil. in fiscal 1989. Much of that loss, $3.1 mil. worth, came in the last quarter and included nonrecurring expenses of $2.5 mil. The company had total one-time expenses of $2.9 mil. for "restructuring of the company's operations, legal fees, and other incurred and anticipated expenses," PharmaKinetics said in a same-day financial announcement. PharmaKinetics President and CEO Steven Woodman described the Applied Bioscience deal as "a desirable solution to the financing challenges currently facing the company." Alluding to the generics investigation and indicating the depths of those financing "challenges," a PharmaKinetics press release said: "Previously announced adverse events at the company and in the U.S. pharmaceutical industry have negatively affected the company's ability to meet the financing requirements of domestic operations as a going concern." The "adverse events" noted by PharmaKinetics have beset the company in rapid-fire succession. The latest negative news was the Aug. 10 announcement that the firm and its Chief Scientific Officer Mark Perkal, PhD, are under a Baltimore grand jury investigation in connection with the generic drug scandal ("The Pink Sheet" Aug. 13, T&G-1). German subsidiary IBR was acquired by PharmaKinetics in July 1989. The firm had revenues of $8 mil. for the fiscal year with operating income of $700,000. IBR is unaffected by the troubles at PharmaKinetics' U.S. operations; in April, IBR completed a$2.5 mil. private placement. The proposed agreement is subject to Applied Bioscience's completion of due diligence and the signing of a definitive agreement, which is expected to be made by mid-November. The deal has to be approved by both companies' boards and by PharmaKinetics' shareholders. Applied Bioscience International (headquartered in East Millstone, N.J.) had half-year sales of$36.1 mil. and $2.9 mil. in earnings. Formerly a part of IMS before it went public and independent in 1987, the company has operated in the U.S. since 1961 as Bio/dynamics, Inc. (also in Millstone) and in the U.K. as Life Sciences Research since 1972. Applied Bioscience completed a pooling of interests merger Sept. 7 with Washington, D.C-area based Environ, a privately held consulting firm specializing in chemical risk assessment (drugs, medical devices, cosmetics and foods) and environmental contamination. Other recent acquisitions have been the February 1989 purchase of the U.K. Phase I pharmaceutical testing services firm Cantab, which now operates as Clinical Science Research; and the September 1989 purchase of Georgia-based agrichemicals field testing service Landis.
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