By this time of year, the flu and cold season is usually behind us. The windows are open, the jackets are packed away, and the cold medicines are shelved, as we get ready to enjoy the freedom that the warmth of summer brings us. But it's different this year. The "Swine Flu- (the H1N1 virus) is upon us. Schools are shutting down when a student turns up with the disease. People who contract it in a foreign country are being quarantined there. And health officials are warning everyone to be wary of the airborne virus. Worldwide, the Swine Flu has killed more than 230 people and infected more than 52,000 -“ and it continues to spread everywhere.
The government is scrambling to get a vaccine produced and distributed to the public as soon as possible. It has contracted with a number of pharmaceutical and biotechnology companies to get this done before winter, when the colder temperatures will make it even harder to contain the spread of the virus. Just last week, the government awarded one of these contracts to Protein Sciences Corp. -“ a small biotech company working with cutting edge technology that promises to speed up production of a vaccine. It's a five year, $150 million deal.
But there's a problem: The day before Protein Sciences received this generous contract, its creditors filed an involuntary Ch. 7 bankruptcy petition against the company, seeking to force it into liquidation. Emergent BioSolutions (EBS) is the largest of the creditors, claiming $11.5 million of the $11.7 million in debt that the petition says Protein Sciences is currently carrying. EBS is another biotech company involved in H1N1 vaccine production. The competitor had hoped to take over Protein Sciences, and it almost did. Last year, Protein Sciences agreed to let EBS acquire the company in exchange for around $80 million. In connection with the agreement, EBS lent Protein Sciences $10 million, secured by company assets. But the deal fell through, and EBS later sued Protein Sciences for fraud and breach of contract.
Both companies blame the other for the fall-out. Dan Adams, the chief executive of Protein Sciences, says EBS has been trying to push his company around and is using the bankruptcy in an attempt to leverage a cheap buy-out of its rival. Denise Esposito, EBS's senior counsel, says Protein Sciences is the bad guy here. In a statement, Esposito said, "Protein Sciences . . . committed fraud by encouraging us to lend them $10 million without ever intending to proceed with the asset purchase agreement. This is not a scheme to purchase the company for less than fair value. There's no way to protect the collateral except with court oversight.- EBS says it gave Protein Sciences numerous opportunities to pay back the loan before filing the bankruptcy petition.
It's difficult to say what will happen next. The government could try to pull out of its contract with Protein Sciences because of the pending bankruptcy petition. That's not likely, though. Despite the numbers in the petition, the Health and Human Services Department conducted extensive audits of Protein Services and concluded the company was stable enough to proceed with the vaccine production program. On the other hand, the executives at EBS may feel pressured to back off because of the government contract; it probably isn't good PR for EBS to force into bankruptcy a company that's running a government-backed project to produce a vital vaccine.
From: The Law Offices of John T. Orcutt, with convenient office locations in Raleigh Durham, Fayetteville, and Wilson. Call (toll free) +1-919-646-2654, to set up a free, confidential debt consultation. Visit www.billsbills.com for more information.