WASHINGTON _ The fantastically complex financial affairs ofbiotechnology financier David Blech continue to unfold. In anapparent attempt to settle huge debts with one of his major creditors,Citibank's Private Bank in New York, Blech has transferred controlof more than $15 million worth of shares in 12 public and eightprivate biotechnology companies to Biotechnology InvestmentGroup, L.L.C. (BIG).

Documents filed with the Securities and Exchange Commission onFeb. 6 reveal that BIG was formed to "acquire, hold, protect, manageand dispose of equity, debt and derivative securities of biotechnologyand other companies." The manager of the new company will beJeffrey Collinson, president of Schroder Venture Advisors Inc.(SVA), a unit of Stamford, Conn.-based Schroder Ventures.Schroder Ventures has been a frequent investor in Blech's deals.

SVA owns 1 percent of BIG. Other owners include: the EdwardBlech Trust (a charitable trust established for Blech's minor son,Edward), with 35.6 percent of BIG; and Bio Holdings Inc. _ a firmowned in part by Esther Blech, Blech's mother, and Blech himself _with a majority of BIG (the SEC filings did not specify an exactfigure).

One notable element of the new deal: David Blech "retains no votingor dispositive power over the securities" of BIG. His ownershiprights have been relinquished to Citibank since he pledged the sharesof many of the companies involved as collateral for loans.Interestingly, Citibank accepted these shares as collateral despite thefact that many of them were subject to the standard language in"lock-up" agreement clauses that renders such shares"unpledgeable."

Motives for the new arrangement are not entirely clear.Representatives for Schroder were unavailable on Wednesday andCitibank officials declined to comment. The new deal may representan attempt by Citibank to passively salvage what is left of Blech'sassets by letting an experienced venture capital firm take charge.Rather than just liquidating stock in Blech companies, most of whichis currently trading at rock-bottom prices, Citibank may now stand achance of recovering more of the money it apparently loaned toBlech. The exact size of the loan or loans is unknown.

"Our objective is to manage these securities in a professional mannerfor a long-term capital gain," said SVA Fund Manager TimothyHowe in a press release prepared by GeneMedicine Inc., of Houston.That release also states that BIG plans to tend its assets in a fashionthat will "maximize the value of its securities over the next severalyears."

A source close to the situation who asked not to be identified saidthat Blech still believes he can best manage his portfolio and restoreits value. It's quite possible that the new arrangement, whichvirtually eliminates his powers, may not have been his idea.

Biotechnology company shares transferred by Blech to BIGincluded: 1.8 million shares of LXR Biotechnology Inc., ofRichmond, Calif., (24.2 percent of shares outstanding); 1.9 millionshares of Microprobe Corp., of Bothell, Wash., (23.5 percent); 3.8million shares of Interferon Sciences Inc., of New Brunswick, N.J.,(17.7 percent); 1.3 million shares of GeneMedicine (15.4 percent);904,856 shares of Neoprobe Corp., of Columbus, Ohio, (8.2percent); and 730,317 shares of Envirogen Inc., of Lawrenceville,N.J., (9.6 percent).

Blech also transferred smaller stakes _ under 5 percent in mostcases _ of Pharmos Corp., of New York, Bio-Technology GeneralCorp., of New York, Texas Biotechnology Corp., of Houston, andtwo other undisclosed public companies. In addition, he transferred alarge stake (31.8 percent) in a public device company, Princeton,N.J.-based Advanced Surgical Inc.

BIG also will take control over sizable chunks of Blech shares inabout eight privately held companies, including Cell TherapeuticsInc. (CTI), of Seattle, and Alexion Pharmaceuticals Inc., of NewHaven, Conn. A private offering memorandum floated for CTI anddated Nov. 14, 1994, revealed that the Edward Blech Trust owned2.7 million shares of the company (roughly 13.5 percent) at thattime. Based upon the proposed $4 per share price of that offering,Blech's shares would be worth about $10.8 million.

Mark Tomei, chief financial officer at LXR Biotechnology, toldBioWorld that he hopes investors will now focus on his company'sperformance instead of Blech's financing troubles. (For morebackground on Blech's fall, see BioWorld Today, Sept. 23 and 26,1994, p. 1.) The perceived negative "overhang" on Blech-associatedcompanies since D. Blech & Co. failed last October has caused stockprices to plummet. Investors feared that Blech could suddenly selloff huge chunks of companies at any moment, causing prices tocollapse.

"We're very excited that Schroder will be the manager of thisportfolio and that anxiety about the overhang question can finally berelieved," said Tomei, whose company used D. Blech & Co. as itslead underwriter for a $13 million initial public offering completedin May 1994. "LXR can now move on without the perception thatsome other shoe is going to drop with regard to David's shares." n

-- Lisa Piercey Washington Editor

(c) 1997 American Health Consultants. All rights reserved.