PharmAthene to cut two-thirds of staff
Annapolis, Md.-based PharmAthene will launch a realignment plan that includes reducing its staffing levels by approximately two-thirds. Eric Richman, president and CEO, will remain a member of the board of directors but will no longer serve as an officer of the company, effective March 11. He will continue to play a key role in managing the ongoing litigation, other legal matters and strategic transactions in his role as director.
Linda Chang will continue as chief financial officer through April 30. Current vice president and controller Philip MacNeill will become chief financial officer. The board will be reduced from eight members to six.
The company expects its cost-saving initiatives will preserve cash and cash equivalents sufficient to finance its operations beyond the adjudication of the appeal of the decision of the Delaware Chancery Court awarding PharmAthene $195 million plus post-judgment interest. PharmAthene will maintain necessary resources in order to execute under its current government contract with NIAID and seek partners, co-developers or acquirers for its other biodefense programs.
Dr. Mitchel Sayare, chairman of the board of directors, said, "On behalf of the board, I would like to express our deep gratitude to all of the employees affected by this reduction. I wish to thank Eric and Linda for their outstanding leadership and valuable contributions to the company, including the favorable judgment in the SIGA litigation, awarding us nearly $195 million. We also want to thank our directors for their service to PharmAthene shareholders over the past several years."
Sayare continued, "The board is confident that our strategy adopted today is in the best interests of shareholders and provides the clearest path for value creation while maintaining the viability of our existing biodefense assets as we identify appropriate collaborators moving forward."
John M. Gill, a director of the company for the past nine years, will assume the role of president and CEO. Gill is a seasoned biotech executive with more than 30 years' experience in corporate development and strategic planning. Previously, he was co-founder and CEO of TetraLogic Pharmaceuticals and chief operating officer of 3-Dimensional Pharmaceuticals until its sale to Johnson & Johnson. In addition, Gill spent 20 years at SmithKline Beecham, where he worked in various positions. Gill is not expected to devote his full time to the company, which his compensation will reflect.
"We have undertaken this approach to preserve the value of the judgment award while maintaining and capturing the value of our underlying biodefense assets. I am looking forward to working towards effecting a positive return of value to our shareholders," said Gill.
Since 2001, PharmAthene has been a biodefense company engaged in the development of next generation medical countermeasures against biological and chemical threats. During this time, it has devoted substantial effort and resources to the development of medical countermeasures for the prevention and treatment of anthrax infection and the prevention of nerve agent poisoning. PharmAthene's biodefense portfolio includes the following product candidates:
- Anthrax vaccines, including SparVax, a second generation liquid recombinant protective antigen (rPA) anthrax vaccine, and a next generation lyophilized anthrax vaccine containing rPA
- rBChE bioscavenger, a medical countermeasure for nerve agent poisoning by organophosphorous compounds, including nerve gases and pesticides
- Valortim, a fully human monoclonal antibody for the prevention and treatment of anthrax infection.
On Jan. 15, the Delaware Court of Chancery issued its Final Order and Judgment in PharmAthene's litigation against SIGA Technologies, awarding to PharmAthene lump sum expectation damages for the value of PharmAthene's lost profits for SIGA's smallpox antiviral, Tecovirimat, also known as ST-246. In addition, the Court of Chancery ordered SIGA to pay pre-judgment interest and varying percentages of PharmAthene's reasonable attorneys' and expert witness fees. The court's determination of the final amount of the award, along with the decision itself, will remain subject to appeal by SIGA to the Delaware Supreme Court and PharmAthene's ability to collect a monetary judgment from SIGA remains subject to that appeal and further proceedings in the Bankruptcy Court.
Since then, SIGA has filed a notice of appeal with the Delaware Supreme Court in which it challenges various findings of the Court of Chancery and seeks to set aside the Final Order and Judgment, and PharmAthene has filed a notice of cross-appeal. As a result, the decision could be reversed, remanded or otherwise changed. There can be no assurances if and when PharmAthene will receive any payments from SIGA as a result of the decision. SIGA has stated publicly that it currently does not have cash sufficient to satisfy the award. It also is uncertain whether SIGA will have such cash in the future.
SIGA's ability to make any payments to PharmAthene depends in part on its financial and operational success, which is subject to a number of significant risks and uncertainties (certain of which are outlined in SIGA's filings with the SEC). Furthermore, because SIGA has filed for protection under the federal bankruptcy laws, PharmAthene is automatically stayed from taking any enforcement action in the Delaware Court of Chancery.
By agreement of the parties, and with the approval of the Bankruptcy Court, the automatic stay has been lifted for the sole purpose of allowing the Delaware Court of Chancery to enter a money judgment and to allow the parties to exercise their appellate rights. At this point, future government funding to support the development of Valortim, rBChE and SparVax is unlikely.
Finally, PharmAthene can offer no assurances that it correctly has estimated the resources necessary to execute under its NIAID contract and seek partners, co-developers or acquirers for its other programs under its realignment plan. If a larger workforce or one with a different skillset is ultimately required to implement the realignment plan successfully, or if PharmAthene inaccurately estimated the cash and cash equivalents necessary to finance its operations until SIGA's appeal has been adjudicated and it has received SIGA's payment, its business, results of operations, financial condition and cash flows may be materially and adversely affected.