Staff Writer

MiddleBrook Pharmaceuticals Inc. investors took a big financial hit on news that it is filing for Chapter 11 bankruptcy, which sent shares in the company down 68.4 percent.

The Westlake, Texas-based firm anticipates that it will receive a delisting notice from the Nasdaq Global Market, and the company said it does not plan to appeal the decision. MiddleBrook plans to continue to manage and operate its business and assets while the bankruptcy case is pending. During the process, the company will promote its antibacterial Moxatag (amoxicillin extended-release tablets) through a third-party partner's electronic promotion program.

MiddleBrook is relying on its partnership with DoctorDirectory.com Inc. to continue Moxatag promotion. IncreaseRx, a virtual contract sales organization, is being used to promote Moxatag through web-based sales and marketing messages.

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 and/or pharyngitis secondary to Streptococcus pyogenes.

Keflex, MiddleBrook's immediate-release first-generation cephalosporin antibiotic, is indicated to treat several infections: respiratory tract infections, otitis media, skin and skin structure infections, bone infections and genitourinary tract infections.

Revenue for the full year of 2009 was $14.8 million, a 67.7 percent increase compared to $8.8 million the year before, an increase primarily driven by sales of Moxatag, which MiddleBrook launched in March 2009. But the personnel and marketing expenses for Moxatag resulted in increased employee-related costs in 2009. The company's net loss for 2009 was $62.3 million.

There had been trouble signs for months, with the firm reporting recurring operating losses and made repeated attempts to cut its work force. In addition, MiddleBrook's auditors included a going concern statement in their audit opinion for the year 2009. And by late last year, the company's stock began to spiral downward.

MiddleBrook had engaged Broadpoint Gleacher Securities Group Inc. as its financial advisor to help identify and evaluate alternatives, including a possible merger or sale, neither of which panned out.

In March, the company eliminated its field sales force and significantly reduced its corporate staff to help preserve its financial resources.

As part of the reduction in force, John Thievon, president, CEO and a board director, announced his resignation. MiddleBrook also terminated the employment of Susan M. Clausen, senior vice president of clinical research, regulatory and medical affairs. And three of its board members also resigned.

David Becker was named acting president and CEO, in addition to his duties as executive vice president and chief financial officer. He was not available for comment.

Those more recent cost-cutting measures followed a sales force reduction that occurred last year, in which MiddleBrook slashed the number of sales managers and field sales representatives by about 25 percent, to about 225. The company also took steps last year to reduce its corporate staff by about 20 percent.

MiddleBrook recently terminated a loan and security agreement that it had secured last year with Silicon Valley Bank. The agreement had provided the company with a revolving line of credit of up to $10 million. (See BioWorld Today, July 2, 2009.)

The loan agreement contained language requiring a minimum tangible net worth and other restrictive covenants. For example, it limited MiddleBrook's ability to dispose of assets, to be acquired or to make acquisitions, to incur indebtedness, to make distributions with its stock or to enter into transactions with affiliates.

MiddleBrook has said that it anticipates incurring aggregate restructuring charges of about $3.9 million, of which about $2.8 million relates to nonrecurring employee termination charges for severance payments and benefits and about $1.1 million of which relates to nonrecurring exit costs, such as vehicle lease termination expenses and the write-off of the remaining net book value of certain laptop computers and associated software licenses. The majority of those charges were expected to be incurred during the first quarter.

Shares in MiddleBrook (NASDAQ:MBRK) were down 21 cents, closing at 10 cents.