Arundel company gains a partner

PharmAthene to list on Amex

PharmAthene to get cash boost

January 23, 2007|By Allison Connolly | Allison Connolly,Sun reporter

Privately held PharmAthene Inc. will get a stock symbol and an infusion of cash through a merger announced yesterday with an Iowa investment firm.

It's the second time that the Annapolis-based company, which develops countermeasures for anthrax and other biological and chemical weapons, has agreed to pair with a suitor. Another potential merger unraveled last year, but this time PharmAthene is hopeful its engagement to Des Moines-based Healthcare Acquisition Corp. will end with a trip to the altar.

The marriage would bring PharmAthene $70 million in cash - which Healthcare Acquisition raised through an initial public offering last year - and help it advance its two main products, Valortim, for the prevention and treatment of anthrax infection, and Protexia, to prevent and treat nerve agent poisoning.

The arrangement would also allow the company to access the capital markets much more readily, spokeswoman Stacey Jurchison said.

"It provides us the resources to go out and execute our business plan," she said.

Five-year-old PharmAthene would keep its name and headquarters in Annapolis, and its shares would be traded on the American Stock Exchange.

PharmAthene's president and chief executive officer, David P. Wright, will retain his title. Wright was meeting with Healthcare Acquisition's shareholders yesterday and unavailable for comment, Jurchison said.

Healthcare Acquisition will issue 12.5 million new shares to PharmAthene's shareholders, who will own 52 percent of the company's outstanding basic shares. They cannot sell any shares for at least six months after the merger, and half of the shares would be locked up for 12 months after the close of the deal. If PharmAthene signs a government contract for more than $150 million for the sale of Valortim by Dec. 31, shareholders would be eligible to receive a payout of up to $10 million.

The Annapolis company's biggest stakeholders are venture capital firms, including Bear Stearns Health Innoventures; HealthCare Ventures LLC; MPM Capital; MDS Capital Corp.; Ontario Teachers Pension Plan; and Canadian Medical Discoveries Funds.

The deal has been approved by the boards of both companies and a majority of PharmAthene's shareholders, but hinges on a vote by Healthcare Acquisition shareholders and the required regulatory approvals. The investment company has until Aug. 3 to complete the deal or else it will be terminated.

Healthcare Acquisition Corp. is a shell company: It invests in other companies and has no other operations other than prospecting for potential purchases. Co-founding investor John Pappajohn will serve as PharmAthene's chairman. He was unavailable for comment yesterday but said in a statement that his team has commercialized 30 pharmaceutical products that have generated more than $4 billion in revenue.

According to a Forbes magazine article posted on his Web site, Pappajohn prides himself on his investments, and he doesn't "bail out" when times get tough. Many have paid off handsomely. A $200,000 investment he made in the home health care company Quantum Health Resources netted him $25 million over six years, the article said. He says he wants to be the director the company turns to for help, but he doesn't interfere with his businesses. The Greek immigrant is also known for his philanthropy.

Less than a year ago, PharmAthene had planned to merge with another publicly traded company, SIGA Technologies Inc., which would have bought a third of PharmAthene's shares and provided $3 million in interim financing, not to mention a ticker symbol on the Nasdaq stock market.

The New York City-based company was developing a smallpox vaccine and other biodefense products, which would have made it a good match for PharmAthene. But SIGA terminated the agreement in September after receiving $27 million worth of research grants, including $16.5 million from the National Institutes of Health, the company said in a filing with the Securities and Exchange Commission.

If this merger is successful, PharmAthene would be the seventh biotechnology company in Maryland to go public in the past two years, said Alex Euler, spokesman for MdBio Inc., which represents the state's biotechs.

Most companies that pursue public offerings are looking for access to capital, as in this case, and attention, Euler said. However, he said it could be a distraction, especially for a biotech company, which typically has a long road to market.

"To me, it's sort of neutral," Euler said of the PharmAthene deal.

Healthcare Acquisition stock closed yesterday at $7.40 a share, down 6 cents.

allison.connolly@baltsun.com

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