US-based biopharmaceutical company AtheroGenics has filed for Chapter 11 bankruptcy citing a “substantial debt burden”.

The move comes at a bad time, as further development of the company’s lead candidate AGI-1067, which has recently completed a Phase III trail for the treatment of diabetes, has been stalled as a result of the financial problems faced by the company.

The company was reported to have said in early September that it had defaulted on $302 million in debt, Bloomberg reported yesterday.

“We believe that the Chapter 11 filing is a necessary step in response to the creditors’ involuntary liquidation petition,” said Dr Russell Medford, President and Chief Executive of AtheroGenics.

“We remain hopeful that AGI-1067 will ultimately continue to be developed, as we believe that it has real potential to be the first diabetes treatment that could reduce serious cardiovascular events. There remains a significant medical need and commercial opportunity for a drug with this profile.”

During the bankruptcy proceedings, AtheroGenics expects to sell the company and/or its key assets, with proceeds from any transaction distributed to the company’s stakeholders, but the company could not predict whether such proceeds would exceed the company’s liabilities.

On the back of the news yesterday, shares for the company fell as much as 83%.

Drug candidate AGI-1067
AtheroGenics’ drug AGI-1067 has had a muddy history. Back in December 2005, when AstraZeneca announced it would license the drug, AGI-1067 was being touted as a being worth as much as $1 billion as a heart disease drug.

But AtheroGenics met with controversy over the drug’s Phase II studies for this indication, which showed the drug was not significantly better at regressing atherosclerotic plaques than the placebo, while the company was criticised for its analysis of the Phase II data.

The drug’s Phase III trails in March last year were unsuccessful; not meeting its primary endpoints of reducing the risk of death, myocardial infarction, stroke and other cardiovascular complications. On the back of this, AstraZeneca announced a month later it was ending its agreement with AtheroGenics.

However, the Phase III trial did achieve a number of other predefined endpoints, notably in patients suffering from diabetes, which have since been pursued by AtheroGenics leading to the recently completed Phase III trial as a diabetes treatment.