Durus Capital Rattles Biotech

Both companies have responded to the big stock purchase by amending their antitakeover provisions to make it clear that Sacane's group is not deemed an acquirer under the law. Esperion also negotiated restrictions on Durus' ability to sell Esperion shares, essentially locking the hedge fund in for six months, Mayleben said.

But Mayleben said he could not guarantee that the selling restrictions placed on Durus would hold up if Durus' investors started redeeming shares.

Sizable Purchases

The purchases that Sacane dubbed as inadvertent were neither small nor random. The Durus fund, according to the filings, made purchases of stock in the two companies almost every single day for the past several months. And many of the purchases were big ones.

For instance, Durus bought 261,300 shares of Aksys on April 30. It bought another 97,900 shares the next day. It made similar big purchases in shares of Esperion, buying 157,000 shares of the Ann Arbor, Mich., company on June 18, then purchasing 93,359 shares on the following day.

Durus wasn't just buying stock in the two companies, it was selling shares too -- sometimes on the same day it bought them.

Meanwhile, the prices of both thinly traded stocks rose steadily during the four-month stretch Durus accumulated them. During that period, shares of Aksys and Esperion more than doubled in value.

Little Known

Not much is known about Sacane and his Connecticut-based hedge fund, which he started about a year ago. Before then, Sacane was a portfolio manager for Perseus Soros Biopharmaceutical Fund, a $400 million fund that's affiliated with Soros Fund Management. Sacane also used to be a stock analyst with NationsBank, now part of the brokerage division of Bank of America. His current fund is said to have about $400 million in assets.

The disclosures about Sacane come at a sensitive time for Esperion, which has been on the road promoting a 4 million-share stock offering, scheduled to close Thursday night. Tuesday afternoon's conference call was set up by Lehman Brothers, Esperion's lead banker, in an effort to calm nervous potential investors who might be inclined to bolt given the uncertainty over Durus' disclosures.

One institutional investor on the Esperion conference call -- and someone who was mulling over the financing deal -- questioned management's willingness to defend Sacane and his actions.

"Why wasn't [Esperion] management spitting mad?" he asked. "This is not a stock I want to own after hearing what I heard. There is no way Lehman should go ahead with this offering."

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