By Mary Welch
After Oncor Inc.'s deal fell through to sell its wholly owned subsidiary, Codon Inc., the parent company's existence rests on its ability to repay a $4 million loan — and the lender has demanded an accelerated payment of the note, which bears an Oct. 31 due date.
Oncor, of Gaithersburg, Md., has cut staff by almost half (from 64 to 34), reducing the burn rate by two-thirds, and is trying to sell some of its assets, as well as Codon, said John Coker, chief financial officer of Oncor. Perseus Capital LLC, of Washington, had signed a letter of intent to buy Codon, a gene-repair company.
"Why they backed away is unclear," Coker told BioWorld Today.
In its 1997 year-end report, Oncor said cash reserves would last only through April 1998. The company's accountant, Arthur Andersen LLP, after last year's report issued a statement, doubting Oncor's chances of staying afloat.
After last year's report, Oncor sold three of its four divisions. Gene Products was sold to Vysis Inc., of Downers Grove, Ill., in April, for an undisclosed amount. Research Products was sold to Intergen Co., of Purchase, N.Y., in June for $3.2 million. OncorMed was sold to Gene Logic Inc., of Gaithersburg, Md., last month for an undisclosed sum.
Only Codon remained to be unloaded. The demise of the deal with Perseus prompted Norwest Bank, of Minneapolis, to immediately call in a $4 million loan, saying the sale's collapse was a "material adverse event," and therefore an event of default.
"Obviously, we couldn't satisfy the loan immediately, so the lender sold the note to a group of five guarantors, made up of investment fund companies, major shareholders and directors of the company," Coker said. "Now, it's their note and they are working with us."
Oncor is also trying to develop strategic partnerships around its intellectual property in DNA amplification and DNA signal detection, as well as a number of DNA tests not ready for market. These tests are in the areas of bladder, cervical, prostate and lung cancer, among others.
Coker said a "lengthy list of people have surfaced — this morning I got a call from France — who are interested in our assets. And Codon is still on the block. Our secured creditors know we are working hard, but [Norwest] can call the note in at any time."
Oncor's lead product, the Inform HER-2/neu Gene Detection System for cancer, was launched in March, and sales have increased each month. Oncor is seeking a marketing partner for the system. The company has kept, and is further developing, several cancer-based detection systems, Coker said.
If Norwest demands immediate payment, Oncor's inability to pay "would probably result in a filing for reorganization or liquidation in bankruptcy, which would mean the company would likely cease all operations," Coker said.
The guarantors "are continuing to work with us," he added. "It's all being conducted in good faith."
Oncor's stock (AMEX:ONC) closed Thursday at $0.125, unchanged. *