PharmaNet Development Group, the US-based contract research organisation (CRO) hit hard by a spate of project cancellations in its crucial late-stage business, says it is working with its financial adviser “to pursue strategic alternatives, including the potential sale of the Company and the exploration of alternatives to retire the Company’s convertible notes”.
The CRO has already received several confidential, non-binding written expressions of interest from “a number of parties, none of whom are direct competitors”. PharmaNet does not intend to comment further on the process “unless or until a definitive agreement has been reached or the Company changes its strategic direction”, it noted. UBS Investment Bank is acting as PharmaNet’s financial adviser.
The CRO’s board and management see this as a way of maximising shareholder value, explained president and chief executive officer Jeffrey McMullen, adding: “I strongly believe this approach will provide a more positive outcome for our clients and employees”.
The company decided to allow an exchange offer for its outstanding convertible notes, announced on 20 November 2008, to terminate on the expiration date of 18 December. “Subsequent to the commencement of the exchange offer, certain holders of the convertible notes who had indicated to the Company their intention to tender their convertible notes in the exchange offer instead sold them on the open market,” PharmaNet stated.
Based on discussions with the current holders of a majority of the aggregate principal amount of these convertible notes, the CRO “understands that they do not intend to tender their convertible notes in accordance with the terms of the exchange offer”, it added.
PharmaNet is also facing a wave of class-action lawsuits for alleged violations of federal securities laws, citing the decline from US$23.86 to US$17.10 in the CRO’s share price following an announcement at the end of April that it was lowering its financial guidance for 2008 to reflect the impact of late-stage cancellations.
The company cut its 2008 outlook for the second time in September, blaming largely the cancellation or postponement of clinical development projects in its late-stage segment and a lower than expected sample volume of early-stage business.
Better than expected third-quarter results last month prompted Jeffries and Co analyst David Windley to upgrade PharmaNet’s stock from ‘underperform’ to ‘hold’, although he was expecting a weaker fourth quarter and believed there was a 40% chance the CRO would go bankrupt.
