BioWorld International Correspondent

SYDNEY, Australia - Plans by BresaGen Ltd. to move most of its operations to the U.S. have been thrown into disarray, with the company going into insolvency administration following the collapse of talks with a key investor.

Most of the company's operations in Adelaide and the U.S. might now be sold off and the company broken up.

BresaGen's board announced last week that negotiations with CM Capital, a Brisbane-based venture capital company, had failed, with CM withdrawing from the negotiations.

As a result, the directors considered they had no choice but to call for a Voluntary Administration (VA). Analogous to Chapter 10 administration in the U.S., the procedure involves the directors temporarily stepping aside and the appointment of an independent administrator (usually an accountant), who then decides the fate of the company.

Bruce Carter, BresaGen's administrator and member of the insolvency administration specialist accounting firm Ferrier Hodgson, also of Adelaide, said the company remained in good shape with the directors calling for a VA before it ran out of cash.

He said that he had received several offers for different parts of the company's operations.

CM Capital executives could not be reached for comment.

BresaGen's problems appear to stem from the 2002 decision by British Biotech to end a collaborative development agreement involving the cancer compound E21R, after being unable to replicate published preclinical data concerning the ability of the drug to kill acute myeloid leukemia cells.

BresaGen has since sued the Institute of Medical and Veterinary Science, and its commercial arm, Metvet Science Pty. Ltd., both based in Adelaide, and IMVS employee Angel Lopez. The sum was in excess of A$7 million (US$5.4 million).

Since the failure of its joint venture with British Biotech (now Vernalis plc, of Winnersh, UK), BresaGen announced that it would shift most of its operations to the U.S., and raise $20 million to $25 million in private stock placements to develop two new lead compounds.

As part of the reorganization, the company planned to split into two separate ventures, with the Australian listed company remaining as a holding company. The protein pharmaceuticals manufacturing side of the company would be based in the U.S., with the drug development and research operations remaining in Australia. The separate stem cell research operations, which hold the rights to several stem cell lines eligible for U.S. government funding, will be merged with San Diego-based CyThera Inc. Most of the stem cell operations were already at the University of Georgia in Athens.

Carter said that on present indications the merger with CyThera would go ahead, but the protein pharmaceutical reorganization had depended on the CM talks, now ended.

Under Australian law, Carter and joint administrator Martin Lewis must compile a report to be presented to company creditors, and the creditors will then vote on what is to be done with the company.

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