Adam Feuerstein
Struggling Alliance Puts Oxygent on Hold
Alliance Pharmaceuticals (ALLP), a biotech firm already struggling to survive, said Wednesday night that it has halted development temporarily of its most promising product, an experimental blood substitute called Oxygent, because of a dispute with its partner, Baxter International (BAX).
As a result, Alliance has fired 55 employees, or 40% of its workforce, tied to the work being done on Oxygent. While Alliance is seeking to end its partnership with Baxter and take back full control over Oxygent, the company acknowledges that the blood substitute will remain on the shelf until significant capital can be raised to begin new clinical trials. Unfortunately, Alliance needs cash just to stay solvent. The San Diego-based firm is running on fumes, announcing two weeks ago that it was cutting costs and management salaries in order to preserve what little money remains in its coffers. Its only approved product is expected to begin generating sales this fall, but revenue will be minimal. Nasdaq has told the company that it is in danger of being de-listed. Its stock closed Wednesday at 48 cents per share, down 88% since the beginning of the year. Earlier this month, TheStreet.com reported on efforts Alliance executives made late last year to raise money to save the company. But it turns out that this controversial financing scheme only served to significantly dilute existing shareholder equity, while potentially enriching company insiders, including its chief executive and an outside director. Alliance's banker, which also profited from the deal, had family ties to Alliance management, and a majority of the company's "independent" directors were actually shown to be well-paid Alliance consultants. Wednesday night, Alliance said it was unilaterally pulling out of a joint venture, PFC Therapeutics, created to develop Oxygent as a human blood substitute. Alliance co-owns PFC with Baxter. The details are somewhat complicated, but essentially, Alliance accused Baxter of undermining Oxygent's development plan by changing terms of the partnership and withholding payments -- in the form of cash and stock purchases -- to Alliance.TheStreet Premium Services
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