MicroProbe Corp. could become one of the first major casualties ofDavid Blech's financial tumble as the Bothell, Wash.-basedcompany reported Thursday it has been informed Blech will not beable to honor his financing commitments.Allan Cochrane, MicroProbe's president, told BioWorld Today thatBlech had agreed to fund the company through June 30, 1995. Ifsubstitute financing cannot be found, Cochrane said, MicroProbewill have to suspend operations.Cochrane would not comment on how long the company cancontinue without additional money, nor would he say how muchcash MicroProbe has left. He said no changes have been madewithin the company in response to the financial problems."We're working on other solutions to meet our financing needs forthe short term and the long term," Cochrane said, adding thatpossibilities include finding new investors, seeking a merger ornegotiating corporate partnerships.MicroProbe isn't the only company in Blech's biotechnologyportfolio facing a potential crisis. Blech's New York investmentfirm, D.Blech & Co., was forced to suspend operations as a marketmaker Sept. 22 because it could not meet minimum capitalrequirements. The company now is in the process of disbanding.Josephthal Lyon & Ross, of New York, stepped in Sept. 23 andpurchased D. Blech's customer accounts and sales force.Scott Weisman, Josephthal's director of investment banking, saidhis firm is analyzing Blech's portfolio of companies, whose stockshave plummeted an average of 54 percent since Blech discontinuedmarket making operations.Weisman told BioWorld a number of the Blech companies are in afinancial bind. "We have a good sense as to what the companies'needs are and to the extent that we like what they're doing, we willassist them," Weisman said. He added it would not be appropriateto identify the companies facing financing shortfalls. He also saidhe has not discussed MicroProbe's problems with his firm.Many companies in Blech's portfolio continued their downwardtrend Thursday. (See chart at right). MicroProbe(NASDAQ:MPRO) closed at 16 cents, down 22 cents, or 58percent. Since the close of trading Sept. 21, the day before D. Blechsuspended operations, MicroProbe's stock has dropped 89 percent.One immediate change for MicroProbe occurs after today when thecompany stops trading on NASDAQ. In August, MicroProbereceived a waiver through Sept. 30 concerning requirements forlisting on the market.Because of its current financial troubles, Cochrane said,MicroProbe cannot meet minimum levels of NASDAQ's NationalMarket System or Small-Cap System. The former requires at least$4 million in net tangible assets and the latter requires companiesto have in excess of $1 million in cash.As a result, Cochrane said the company's stock and warrants willbe listed on the OTC Bulletin Board and the securities will begoverned by regulations for trading penny stocks.Cochrane said Blech, as a principal investor in MicroProbe, hadagreed to provide whatever financing was necessary to sustain thecompany through next June. Blech was one of two underwriters forMicroProbe's initial public offering in October 1993.To help raise capital, Cochrane said MicroProbe has informedBlech the company is exercising its option under a December 1993agreement to sell Blech MicroProbe's interests in RiboneticsGmbh, of Gottingen, Germany, and some assets in AnimalBiotechnology Cambridge Ltd., of Cambridge, England.Cochrane said his company would have realized $3 million fromthose two sales, but MicroProbe has been told Blech will not beable to honor that commitment."We don't know what Mr. Blech can do," Cochrane said, addingthat MicroProbe has been unable to contact Blech. Cochrane saidhis company had no advance warning of Blech's unusually fastfinancial fall last week."I would think a lot of [David Blech's companies] are in the sameboat and they're all reassessing how to restructure their financing,"Cochrane said.Among 12 stocks in Blech's portfolio, eight dropped againThursday. Four posted gains. Only Ariad Pharmaceuticals Inc.(NASDAQ:ARIA) has climbed near its closing price Sept. 21 of$2.31. The Cambridge, Mass., company ended trading Thursday at$2.25. n

-- Charles Craig

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