Molecular Insight Pharmaceuticals, which shares a floor with Xconomy in the building at 101 Rogers Street, is in financial trouble.
The Cambridge, MA-based company, a developer of molecular medicines for cancer founded in 1997, has been in Chapter 11 since December 9. The company, which defaulted last year on a $150 million bond, has been unable to come to new terms with its bondholders. Since December 2009, the firm has more than halved its staff from 70 employees to about 30 workers today, said interim chief financial officer Mark Attarian.
Molecular Insight had total debts of $198.8 million and assets of $36.5 million, according to federal bankruptcy records. The lion’s share of the firm’s debt stems from the bonds it issued in November 2007 and accrued interest from them.
Nevertheless, Molecular Insight is trying to pull through this rough patch. There are at least two competing proposals to replenish the company’s coffers, including one from San Francisco-based private equity firm Savitr Capital and another from an informal group of Molecular Insight’s bondholders, according to court documents. Each of those parties is jockeying for a controlling stake the company in return for their money.
Still, Molecular Insight—which has four oncology products and one cardiac imaging drug at various stages of human clinical development—faces an uncertain future.
“We just don’t know who the new owner is going to be… [and] where will those new owners want to take the company,” Attarian said.
Attarian, a partner at the executive consulting firm Tatum, was part of a major leadership shakeup at Molecular Insight that the company announced at the time of its bankruptcy filing in December. That shakeup included the resignations of former CEO Daniel Peters and former CFO Charles Abdalian. Harry Stylli, a long-time board member, took the job of president and chief of restructuring. And Attarian was named to his interim post.
Also, the company said its common stock was de-listed from the NASDAQ in December and moved to the OTC Marketplace. The stock was trading around 20 cents per share on Thursday, January 27.
The company is still providing its cancer treatments to patients involved in its clinical trials, Attarian said. Azedra, its lead cancer drug, carries doses of radiation to tumors of the nervous and endocrine systems through injections. The company has begun enrolling patients in a pivotal trial of the product in adults with adrenal gland tumors, according to documents filed with the SEC.
Yet its lead product for cardiac imaging, Zemiva, is in a “holding pattern” right now, Attarian said. And the company has already told investors that it’s looking to out-license the experimental drug—designed to diagnose cardiac ischemia in patients who go to emergency departments complaining of chest pain—to help the firm focus on the cancer market.
Interestingly, Molecular Insight last year tried to sell itself to some of the leading providers of molecular medicines such as Bayer, Covidien (NYSE:COV), and North Billerica, MA-based Lantheus Medical Imaging. But those companies and others passed on Molecular Insight because of the “intermediate stage” of the company’s product candidates, according to a January 7 court filing made by the firm’s bondholders.
In the meantime, the company has some complex financial matters to resolve. For one, the company’s bondholders say in court documents that they disagree with the proposed financing deal from Savitr. The private equity group has committed $45 million to Molecular Insight under several conditions, including that the company can replace its some $195 million in existing bond obligations with $90 million in bonds.
Morgan Stanley and other bondholders oppose Savitr’s proposal, according to court records.They submitted an alternative plan that includes a $40 million cash infusion into Molecular Insight, among other terms.
The U.S. bankruptcy court in Boston has approved Molecular Insight’s motion to accept the investment agreement from Savitr, the company said last week. Yet the court also authorized the company to seek other financing proposals for the 30-day period starting January 20. No single proposal has been deemed the winner.
The Savitr financing deal requires Molecular Insight complete its corporate restructuring by March 31. The next scheduled hearing for the Chapter 11 proceeding has been set for February 16.
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