By Debbie Strickland

HealthMed Inc., of Los Angeles, has offered to lend Lidak Pharmaceuticals Inc. between $80 million and $130 million over the next 18 months in exchange for control of Lidak's voting stock.

The infusion would dwarf the La Jolla, Calif.-based company's existing cash reserves, which totalled $14.4 million on Sept. 30.

Lidak's board of directors has formed a four-person committee to seek "more specific information" on the financing offer, which would convey voting rights but would not involve the issuance of new shares to HealthMed, a firm affiliated with health care financiers such as National Century Financial Enterprises Inc., of Dublin, Ohio. National Century has assets of more than $1 billion, HealthMed said.

At least one key Lidak executive — President and CEO David Katz — has expressed support for the deal.

Katz has already sold about 30 percent of his Lidak holdings to HealthMed and agreed to place the remainder into a voting trust with HealthMed as the trustee, "in order to facilitate HealthMed's desire to acquire control of the company's voting stock," HealthMed said.

Also, Medical Biology Institute, a nonprofit corporation of which Katz is president and a director, has sold a portion of its 217,000 shares of Class A common stock to HealthMed and agreed to place the balance of its Class A shares in a voting trust with HealthMed as the trustee.

These transactions involve about 1.5 million of Lidak's 39 million shares outstanding.

"We are very fortunate to be able to create this new partnership with the principals of HealthMed Inc. and its affiliates," said Katz in a prepared statement. "I am particularly excited about the opportunity this partnership will provide for the future growth of our company and the potential for Lidak to maximize shareholder value."

Details of the financing's terms, structure and potential implementation are sketchy.

Lidak Seeks To Clarify The Offer

"We're trying to seek additional clarification," said Jeffrey Weinress, Lidak's vice president and chief financial officer. "But it does basically appear that the nature of this financing would be in the form of debt. . . . It appears that the provision of this financing is subject to their receiving 'sufficient entry' of shareholders into the voting trust arrangement, but it isn't clear what 'sufficient entry' means."

The financing, if approved (and it's unclear what the approval procedure will be), would come in three stages, with the first $30 million due approximately 30 days after acceptance of the proposal by Lidak's board. A second $30 million would come within four to seven months of receipt of an approvable letter from the FDA for Lidakol. Lidak would receive an additional $50 million to $70 million "within nine to 18 months based on progress in ongoing development programs and the marketing and distribution support requirements for Lidakol."

Lidak filed a new drug application in December for Lidakol, a topical cream treatment for oral herpes. Days later Bristol-Myers Squibb Co. withdrew from a marketing agreement. (See BioWorld Today, Dec. 29, 1997, p. 1, and Jan. 6, 1998, p. 3.)

New York-based Bristol-Myers Squibb said its decision did not reflect Lidakol's viability; the product "just doesn't fit into our long-term strategic business plan," a spokeswoman said.

In addition to oral herpes, Lidakol is in clinical development for Kaposi's sarcoma. The company's portfolio also includes the LP2307 melanoma vaccine, which completed Phase I/II clinical trials in June 1997.

Lidak's shares (NASDAQ:LDAKA) closed Thursday at $2.188, down $0.031. *

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