By M. William Salganik and Tricia Bishop , Sun reporters|July 03, 2008
After eight years of struggling to make a success out of MiddleBrook Pharmaceuticals, chief executive and founder Edward M. Rudnic agreed to step down after a management shake-up and a $100 million investment from a private Chicago investment firm. It's the company's latest effort to bring its version of a time-released antibiotic to market.
The announcement, made late Tuesday, took a punishing toll on the company's stock, which fell $1.55 - 50.5 percent - yesterday to close at $1.52.
Investors had been counting on the ailing Germantown biotech to find a buyer and cash out. Few seemed to expect that MiddleBrook would continue to operate independently, in large part because the company faced such a tough time on its own during the past few years.
Equity Group Investments LLC said it will buy more than 30 million MiddleBrook shares for $3.30 apiece, as well as a five-year warrant to purchase an additional 12 million shares for $3.90 each (the company has about 56 million outstanding shares). Equity executives are betting that the funds will be enough to turn MiddleBrook's antibiotic into a success in hopes it could provide an easier way to deliver medicine.
MiddleBrook will also buy back rights to Keflex, a drug the company previously sold to raise funds. The remaining money from the Equity Group investment will be used to create a sales and marketing team to sell Moxatag, a once-a-day version of the top-selling antibiotic amoxicillin approved for patients age 12 and older. The company also hopes to restart clinical development of a pediatric version of that drug as well as Keflex, a time-released adaptation of the popular antibiotic cephalexin.
The investment firm - founded by real estate mogul Sam Zell, who also owns The Sun's parent company - will replace Rudnic with John Thievon, a former executive vice president with New Jersey's Adams Respiratory Therapeutics, which markets the expectorant Mucinex. Adams' former chief financial officer, David Becker, will replace MiddleBrook's CFO, Robert C. Low.
The transaction is expected to close within 90 days if approved by shareholders, which is likely. MiddleBrook's three largest shareholders, representing 37 percent of the company, have agreed to vote for the deal.
