While in the process of being acquired by Pfizer Inc., Esperion Therapeutics Inc. received $32.2 million plus interest payments after settling a federal lawsuit against its largest shareholder, the Durus Life Sciences Master Fund Ltd.
The fund and its related entities agreed to pay the Ann Arbor, Mich.-based cardiovascular disease drug development company as a result of a suit brought in the U.S. District Court in Connecticut in which Esperion sought to recover profits made by Durus through short-swing transactions. Esperion, the subject of a $1.3 billion buyout by Pfizer, filed the suit at the end of the summer, soon after learning that Durus had quietly acquired about a third of its shares since September 2002. (See BioWorld Today, Aug. 27, 2003.)
The Norwalk, Conn.-based fund group was in possession of about 9.7 million of the company's 29.4 million shares outstanding through June 30. As a result of a lock-up arrangement, Durus' holding has remained the same since July 24, though Esperion now has about 34 million shares outstanding following a $64 million public offering that closed shortly after the initial news of Durus' ownership. (See BioWorld Today, Aug. 4, 2003.)
"This closes the chapter on the Durus situation for us and all our investors, because there was a lot of uncertainty created around the situation and what was likely to happen," Timothy Mayleben, Esperion's chief operating and financial officer, told BioWorld Today. "I think this is a positive outcome in that the Durus team stepped up to its liability under Section 16(b)."
Section 16(b) precludes company insiders or shareholders with ownership exceeding 10 percent from profiting on purchases and sales of the stock within a six-month period. Doing so would subject that holder to short-swing profit liability.
He noted that the settlement amounts to about $1 per share to Esperion's stockholders, though the company has not yet finalized an accounting treatment for the funds, aside from its positive impact on the balance sheet. Esperion will release and discharge the Durus Fund, Durus Capital Management LLC, Durus Capital Management NA LLC and Scott Sacane from any and all further claims by Esperion and/or its stockholders arising under Section 16(b) with respect to the transactions. Sacane manages the funds.
In addition to Esperion, Durus also came clean during the summer in disclosing its large institutional interests in several other health care-related companies. The fund gained 23 percent of Allos Therapeutics Inc., a cancer drug developer based in Westminster, Colo.; more than three-quarters of Aksys Ltd., a maker of dialysis products based in Lincolnshire, Ill.; as well as significant holdings in Norcross, Ga.-based Novoste Corp. and Irvine, Calif.-based Cardiac Science Inc., a pair of cardiac device firms.
Durus maintained that it inadvertently acquired its beneficial ownership positions, and in October, Allos received about $5.1 million after settling its claims against the fund. The latest lawsuit's dismissal remains subject to the court's approval, which Mayleben said is expected.
Also this week, New York-based Pfizer began its tender offer for Esperion stock, a transaction expected to close by the end of the quarter. Late last month, the pharmaceutical giant said it would pay $35 per share, a more than 50 percent premium over the stock's value during the prior 20 trading days. The purchase provides Pfizer with Esperion's technology for raising the level of high-density lipoprotein (HDL) in the bloodstream. (See BioWorld Today, Dec. 23, 2003.)
Esperion's lead compound, ETC-216, is a human recombinant version of the ApoA-I Milano gene combined with a phospholipid to form a complex that imitates the structure and function of HDL. It is designed to mimic the positive properties of HDL and enhance reverse lipid transport, the body's process of removing excess cholesterol and other lipids.
Other compounds in its pipeline include ETC-588, a liposome designed to act as a cholesterol sponge - the product is in a Phase II program. Products in Phase I development include ETC-642, a protein/phospholipid complex that mimics HDL, and ETC-1001, an oral small molecule for boosting HDL and reducing triglycerides as well as low-density lipoprotein (LDL), also called "bad" cholesterol.
"There were a couple of us that were dealing with the Durus situation, but for all intents and purposes, the rest of the company continued to operate very well," Mayleben said. "We have a strong, mature management team that was not distracted by this. Evidence of that is the fact that we continued to hit all our milestones that we had laid out for ourselves and investors, such as releasing clinical data on time, publishing the ETC-216 data in November, and then we said we hoped to conclude a partnering agreement by the end of the year. We certainly achieved that in spades."
On Thursday, Esperion's stock (NASDAQ:ESPR) fell 1 cent to close at $34.58.