By Jim Shrine
Eleven years of research and development at Alpha-Beta Technology Inc. came to an end with the news that liquidation proceedings are under way.
The company's dream of bringing new drugs to market died a few weeks ago, when an interim Phase III trial analysis of its lead product, Betafectin, failed to show efficacy. Worcester, Mass.-based Alpha-Beta, out of cash and near-term prospects, began an out-of-court process to liquidate assets - which are outnumbered by liabilities, so shareholders will get nothing, at least for now. (See BioWorld Today, Jan 25, 1999, p. 1.)
President and CEO Spiros Jamas said the failure of Betafectin not only dealt a blow to stockholders, but hit loyal employees hard.
"What was remarkable was, even though they knew we were down to our last payroll and we were hoping for positive interim results, they stuck with the company," he said. "There was a tremendous amount of dedication. Despite the disappointing results, the human aspect is really warming, in a way.
"It also shows the risk in drug development," he added. "Alpha-Beta is not alone in that. Unfortunately, shareholders take a large and long-term risk. These are not easy investments to live through and manage."
The company entered into an agreement with an assignee, whose legal duty is to liquidate assets and distribute them to creditors. That out-of-court process is an alternative to Chapter 7 or Chapter 11 court proceedings.
Largest Debt Is $28M
Alpha-Beta's largest debt is about $28 million owed on a loan agreement with the Rhode Island Port Authority and Economic Development Corp., which in 1993 financed construction of a $30 million facility for the making of biologics according to Good Manufacturing Practices guidelines. Alpha-Beta contributed about $10 million to the $40 million facility.
The current outstanding principal amount is $28 million, or $25 million considering a year's payments held in escrow. Alpha-Beta had been paying $300,000 per month, but now is in default.
"A high priority is to work with state of Rhode Island officials and find the best way to handle the facility," Jamas said. "One obvious approach would be to sell the facility and try to cover the outstanding debt. There may be other options. We will think as creatively as possible [about] this."
A second asset comprises the intellectual property and license agreements Alpha-Beta has with its beta glucan immunomodulator technology, from which Betafectin was developed. The technology's lead indication was in preventing infections following surgery. It also has applicability in wound healing, Jamas said.
The third asset is the antifungal research program, which will be continued at a wholly owned subsidiary in Denver called MycoTox Inc. Seven Alpha-Beta employees will continue at MycoTox, which has received $1.3 million in National Institutes of Health funding in the past year. It has three validated antifungal screens and compounds that have shown preclinical activity, Jamas said.
"To the extent that MycoTox can continue and become a fundable entity, we have every intention of doing that," Jamas said. "If we can keep some value there for our shareholders, that would be tremendous."
The rest of the company's 92 employees were let go, and all operations in Rhode Island and Massachusetts are ending. In addition, the company' stock was delisted on the NASDAQ market, effective Friday. It has not traded since before release of the Betafectin news, when the stock stood at 72 cents per share.
There are about 20.8 million Alpha-Beta shares outstanding. The company has lost about $160 million since its inception. The largest stockholder, with about 5 million shares, is a New Jersey-based private investment group, Ross Financial Corp. The State of Wisconsin Investment Board holds about 2 million shares.
Investors' largest hope starts with the sale of the manufacturing facility on favorable terms.
"We will do our best to maximize the value of our assets," Jamas said. "Our intent is to find ways to out-license or sell the intellectual property and [research-and-development] assets of the company. We think they could provide a lot of value to other companies." n