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Middlebrook Gets $100M and a New Management Team
(BioWorld Today Via Acquire Media NewsEdge) Financings Roundup
Shares of MiddleBrook Pharmaceuticals Inc. plummeted 50.5 percent Wednesday after the company announced that its CEO and CFO will step down as part of a $100 million equity investment agreement with Equity Group Investments LLC (EGI).
Under the deal, the Germantown, Md.-based company entered into a definitive securities purchase agreement with EGI for the sale of 30,303,030 shares of its common stock at $3.30 per share and a five-year warrant to purchase a total of 12,121,212 shares of common stock at an exercise price of $3.90 per share.
In addition, the agreement calls for the appointment of a new management team, largely composed of former Adams Respiratory Therapeutics employees, to head the company and to facilitate the launch of its lead product, Moxatag, an extended-release formulation of amoxicillin.
The change in leadership was a condition of EGI's participation in the deal, according to Bob Bannon, MiddleBrook's vice president of investor relations and corporate communications. The Chicago-based private investment firm has a controlling interest in the company, he said.
And despite the fact that EGI founder Sam Zell has concentrated most of the firm's work in real estate, EGI has dabbled in other arenas, such as energy, finance, media, pharmaceuticals, telecommunications and transportation. "Obviously, he has much of his focus on the real estate side, but EGI is a group that is focused on making equity investments in both public and private companies," he said.
In addition, EGI had experience working with management from Adams, and felt comfortable continuing its relationship with that company's leadership. "That was part of the proposal that was put in front of us by Equity Group, and resulted in this agreement, that in conjunction with making the $100 million investment, they would be bringing in their management team," Bannon said.
As a result, MiddleBrook's president and CEO, Edward M. Rudnic, will be replaced by John Thievon at the close of the transaction. In addition, David Becker has been appointed MiddleBrook's executive vice president of finance and CFO, replacing Robert C. Low as MiddleBrook's principal financial officer. Rudnic and Low will continue to serve as consultants to the company.
Thievon will be responsible for the launch and commercialization of Moxatag tablets and the continued development of the company's Pulsys products. Most recently, Thievon was executive vice president of sales and corporate accounts for Adams Respiratory Therapeutics, where he oversaw the Mucinex franchise into more than $350 million in annual revenues. Thievon left Adams in February 2008, following its acquisition by London-based Reckitt Benckiser.
Becker also was a former senior executive at Adams, where he was chief financial officer from 2000-2007. He completed Adams' initial public offering in 2005, and was appointed chief financial and administrative officer in 2007.
The news agitated Wall Street, which traded the company's stock at 30 times its normal volume. Shares of the company's stock (NASDAQ:MBRK) dropped to $1.52 by the day's close, losing $1.55.
Bannon speculated that the stock downturn was due to shareholder expectations that the company would be acquired outright, netting investors a hefty profit. "This was a publicly announced strategic process, he told BioWorld Today. "But there may have been hope that the company would be acquired at a significant premium to where we were trading at the time of the deal."
However, he said that MiddleBrook views the transaction as positive because it should allow the company to bring Moxatag through commercialization and to move forward with its business plan. "Hopefully, we will see the value of the product demonstrated in the market," he said.
MiddleBrook intends to use the proceeds from the financing to create a sales and marketing infrastructure for Moxatag. Moxatag is intended to provide a lower treatment dose, once-daily alternative to currently approved penicillin and amoxicillin regimens for the treatment of adults and pediatric patients 12 years and older with tonsillitis or pharyngitis.
In addition, the company hopes to restart clinical development of its once-daily Pulsys version of Keflex. Also in connection with the transaction, MiddleBrook has agreed to repurchase its Keflex assets, which previously were sold to funds affiliated with Deerfield Management in November 2007. The company will reacquire the Keflex assets as well as its ongoing royalty obligations to Deerfield for approximately $11 million.
Additionally, MiddleBrook will redeem the 3 million warrants issued to Deerfield in conjunction with the Keflex asset sale, for a total of $8.8 million.
The deal with EGI is subject to approval by MiddleBrook's stockholders, but is expected to close in 60 to 90 days because three of MiddleBrook's largest stockholders, HealthCare Ventures, Rho Ventures and Deerfield, have entered into voting agreements with EGI and the company.
Morgan Stanley & Co. Inc. acted as financial advisor to MiddleBrook in connection with the transaction.
In other financings news:
? AlloCure Inc., of Salt Lake City, closed a $14.5 million Series A financing. The round was led by SV Life Sciences with Novo A/S joining the syndicate. The company will use the investment to fund the progression of its acute kidney disease therapy through Phase II trials over the next three years. Funds also will be used to develop a robust pipeline targeting other large medical markets where its cell therapy technology can address chronic unmet needs.
? Enzon Pharmaceuticals Inc., of Bridgewater, N.J., said it successfully eliminated all of its remaining 2008 debt. In December 2005, Enzon had approximately $400 million in outstanding 4.5 percent convertible subordinated notes due this month. Since then, the company has improved its balance sheet through a combination of refinancing and repurchasing all of its 2008 debt. In 2006, the company refinanced $275 million of the notes by issuing new senior convertible notes due in 2013. The company said it successfully monetized 25 percent of its future royalties of PEG-Intron for cash proceeds of $92.5 million. The net proceeds were used to repurchase and repay the company's 2008 notes. Enzon paid down the remaining $12.5 million of its outstanding 2008 notes July 1.
? Pearl Therapeutics, of Redwood City, Calif., completed the closing of an $18 million round of financing. The financing was executed as an extension to its first venture financing, which closed in May 2007. Participating in the internal round were Pearl's existing investors Clarus Ventures, New Leaf Ventures, 5AM Ventures and Nektar Therapeutics.
? Sequenom Inc., of San Diego, said underwriters of its previously announced common stock offering that priced on June 25, have exercised in full an option to purchase an additional 825,000 shares of its common stock. Including the additional shares being purchased, the offering will total 6,325,000 shares at a public offering price of $15.50 per share, resulting in expected net proceeds to Sequenom of approximately $92 million. Lehman Brothers Inc. and UBS Investment Bank are acting as joint book-running managers in the offering. The co-managers are Leerink Swann & Co. Inc., Lazard Capital Markets LLC, Oppenheimer & Co. Inc. and Rodman & Renshaw LLC. n
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