Financially strapped PharmaKinetics Laboratories Inc. plans to sell its key assets to Applied Bioscience International Inc. of East Millstone, N.J., for $4.8 million in cash and contingent payments of $2 million over a period of up to five years, the two companies announced yesterday.
Baltimore-based PharmaKinetics, which employs about 125 people, would operate as a wholly owned subsidiary of Applied Bioscience, according to Steven A. Woodman, president and chief executive officer of PharmaKinetics.
Applied Bioscience plans to to acquire the assets of the bioequivalency testing and clinical research business of PharmaKinetics.
Although the companies have signed a letter of intent, the transaction is subject to completion of a due diligence review and the execution of a definitive purchase agreement. It also needs to be approved by the boards of directors of both companies and by the shareholders of PharmaKinetics.
The letter of intent says that Applied Bioscience would assume certain specified liabilities associated with the acquired assets including equipment leases and bond debt on existing facilities.
"We believe this proposed transaction is an extremely positive development for our shareholders, employees and clients. This is a desirable solution to the financing challenges currently facing the company," Woodman said.
Kenneth H. Harper, president and chief executive officer of Applied Bioscience, said acquiring PharmaKinetics' assets was part of his company's strategy to "get into this business."
"I have known of [PharmaKinetics] for several years and been impressed by their organization and by Steve Woodman. We heard they were in trouble and were delighted to get into discussions with them and hopefully will come up with a win-win situation," he said.
PharmaKinetics has been hurt along with the rest of the generic drug industry by a government probe into falsified information submitted by several manufacturers, even though the FDA said PharmaKinetics is not one of the target companies.
The price of the company's stock has fallen from $5.50 a year ago to less than $1.
PharmaKinetics had a loss of $3.8 million, or 40 cents a share, in its fiscal year ending June 30, 1990. Included in the loss are nonrecurring expenses of $2.9 million relating to the restructuring of the company's operations, legal fees, and other incurred and anticipated expenses.