Telios Pharmaceuticals Inc. withdrew its offer to purchase securitiesthat shareholders bought in a September offering, shortly before atrial failure, because the tender offer likely would have led to thecompany's insolvency.
Also Thursday, Telios said Donald Grimm resigned as president,CEO and board member. M. Blake Ingle, president and CEO ofCanji Inc. and a Telios board member, was appointed actingpresident and CEO.
The series of events started when Telios closed on a financing Sept.29 that grossed the San Diego company about $14 million. A weeklater, the company reported that its lead drug, Argidene Gel, failed toshow statistical significance in the complete healing of diabetic footulcers.
The stock fell 60 percent on the results, falling to 81 cents per share.The next day, on Oct. 9, Telios offered to buy back all securitiesconnected to the September offering. Since then, Telios has cut itsstaff about 75 percent, to 35 employees, and implemented other cost-saving measures.
On Nov. 29, Telios, in an effort to keep some of the money from theoffering, proposed an amended offering giving investors a chance toown shares at the price they've been trading at since the disclosure ofArgidene trial results.
"It became apparent that the exchange offer was not going tohappen, so the outlay of cash was going to be $14 million," ToddSimpson, Telios' chief financial officer, told BioWorld. "Theresulting position would have been in breach of some of the financialcovenants we have in respect to the facility and equipment leases."
Simpson said Telios had about $18 million in cash, but thosecovenants require a letter of credit of nearly $3 million set asidewhen the company's net worth falls to a certain point. Telios hadhoped its amended offering would result in the company keeping atleast $2.8 million.
In addition to that being unlikely, Simpson said, other factorsinvolved the deterioration of the value of the company's stock: thecompany lost a corporate partner when Eli Lilly and Co. chose not tosponsor osteoporosis research; it has been unsuccessful in subleasingits facility; and has yet to enter into a merger or alliance agreement.All of those factors, before today's scheduled expiration date of theexchange offers, convinced company officials that the offer wouldlead to insolvency, and possible bankruptcy.
Simpson said Grimm joined the company in June, to help Teliosprepare for the launch of Argidene gel and lead its rapid-growthphase. The company's agenda now has changed, he said.
Telios' stock (NASDAQ:TLIO) closed at 20 cents per shareThursday, up 3 cents.n
-- Jim Shrine
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