PharmaKinetics Laboratories Inc. of Baltimore announced yesterday that it intends to file for protection from creditors under Chapter 11 of the federal bankruptcy code, probably today.
V. Brewster Jones, PharmaKinetics' president and chief executive officer, said in a statement that the 125-employee drug-testing and consulting company expects to keep operating while it puts together a reorganization plan that could allow it to stay in business.
The Chapter 11 filing prevents creditors from seizing the company's assets while it works on the plan.
"This step is being taken to ensure, as best possible, the conduct of business as usual in regards to our clients," Mr. Jones said in the statement.
He did not return repeated phone calls seeking further comment yesterday, and the company's Baltimore attorney also was unavailable.
Ferris, Baker Watts Inc. analyst David L. Beeghly said it is too soon to tell whether PharmaKinetics will be able to emerge from bankruptcy as a going concern.
But he said stockholders are likely to lose the little value their shares still have.
The company's shares closed yesterday at less than 10 cents each on the national over-the-counter market.
"The shareholder usually loses out," Mr. Beeghly said, because most of the company's resources will go to pay off creditors.
He said PharmaKinetics' biggest creditor is Maryland National Bank, which he said issued a $6.5 million industrial revenue bond HTC that financed the renovation of PharmaKinetics' Fayette Street headquarters and a $2.5 million note. PharmaKinetics said Nov. 8 that it is in default on the note.
Yesterday's announcement comes less than a week after a deal to sell PharmaKinetics' domestic operations to Applied Bioscience International Inc. of East Millstone, N.J. fell through.
That deal would have given PharmaKinetics $4.8 million up front, $2 million more if certain conditions had been met within five years and would have required Applied Biosciences to take over the $6.5 million bond.
Applied Bioscience's chief executive made comments last week that seemed to leave the door open for more negotiations, but the New Jersey company's top financial officer, John H. Timoney, said yesterday that no new talks have been held.
"There's nothing going on with us," Mr. Timoney said. He declined to say whether Applied Bioscience would be interested in a restructured proposal but said PharmaKinetics hasn't made one.
The deal would have stripped PharmaKinetics down to its German subsidiary, which it acquired last year, Mr. Beeghly said.
"The West German company is healthy," he said. "It has a royalty stream."
Overall, the drug-testing company lost $3.8 million, or 40 cents a share, in the fiscal year that ended June 30.
PharmaKinetics has been rocked by the problems of its one-time biggest customer, Bolar Pharmaceutical Co. Inc., a Copiague, N.Y.-based generic-drug company whose business accounted for half of PharmaKinetics' revenue in fiscal 1989.
Bolar has been enmeshed in a scandal since it was accused of giving PharmaKinetics fraudulent drug samples for testing. Instead of giving PharmaKinetics samples of a generic drug it was developing to treat hypertension, Bolar allegedly submitted samples of the drug that the generic product was supposed to imitate.
PharmaKinetics and co-founder Mark B. Perkal were notified in August that they had become targets of a federal grand jury investigation into the case.