Epix seeks financial alternatives after weak Q1

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After booking net losses for the 2009 first quarter, Epix Pharmaceuticals reported that it has engaged J.P. Morgan and Canaccord Adams to assist the board of directors in its evaluation of strategic business, financing and capital structure alternatives.

Epix said its board intends to consider a full range of strategic alternatives, including a recapitalization, a sale or disposition of one or more corporate assets, a potential merger and/or a strategic business combination. The company said it does not anticipate making another announcement regarding this matter unless its board has approved a definitive transaction. However, it cautioned that while the board has retained J.P. Morgan and Canaccord Adams to assist Epix in this process, there is no assurance that this process will result in any specific transactions or outcomes.

"We remain highly focused on improving the financial health of Epix and believe that the successful completion of our exchange offer where nearly 97 percent of our $100 million aggregate principal amount of convertible senior notes was tendered has meaningfully strengthened our long-term financial position," said Kim Drapkin, chief financial officer. "Together with our financial consultants, we are exploring a variety of strategic alternatives to allow Epix to continue its operations beyond August."

The Lexington, Mass.-based company said its net loss for the first quarter, which ended March 31, was $9.7 million compared with $13.7 million for the year-ago first quarter. Its total revenues for the first quarter were $3.7 million, compared with $2.4 million for the first quarter of 2008. Epix said its revenue during the first quarter of primarily reflected the reimbursed costs and milestones earned in association with its GlaxoSmithKline and Cystic Fibrosis Foundation Therapeutics collaborations.

The company reduced its research and development (R &D) expenses for the first quarter, compared with the same period of 2008. For the first quarter, R &D expenses totaled $7.5 million compared with $12.7 million in the first quarter of 2008. The decrease in R &D expenses for the three-month period was primarily due to a combination of decreased clinical trial costs associated with the discontinuation of PRX-00023, previously being developed for depression, the decrease in costs associated with the company's October 2008 and March 2009 reductions in force, and its narrowed clinical and preclinical development focus.

The company incurred a $1.8 million restructuring charge during the first quarter, which includes $500,000 for severance and related benefits as well as a $1.3 million non-cash asset impairment charge for leasehold improvements that are no longer in use due to the March reduction in force.

"Although our focus remains on sustaining our operations beyond August 2009, we are also continuing to pursue our clinical and commercial goals," said Elkan Gamzu, PhD, president and CEO of Epix.