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BOLAR/PHARMAKINETICS CLINICAL DEVELOPMENT CONTRACT TERMINATED

Executive Summary

BOLAR/PHARMAKINETICS CLINICAL DEVELOPMENT CONTRACT TERMINATED for clinical services relating to two Bolar drugs, Baltimore-based PharmaKinetics Labs announced July 10. One of the contracts is believed to be for Bolar's attempt to clear a fully NDAed generic version of Marion Merrell Dow's Cardizem (diltiazem). The termination followed a contract dispute over alleged non-payment by Bolar and alleged breaches of duty by PharmaKinetics. Bolar notified PharmaKinetics on July 9 that it was terminating the contract. According to PharmaKinetics, the contract calls for Bolar to pay approximately $3.5 mil. "for services to be performed over the next six months." PharmaKinetics also said Bolar intends to seek reimbursement "for its costs associated with PharmaKinetics' alleged breaches." Bolar says it has not determined the amount of reimbursement it will seek. PharmaKinetics says it has had problems before with Bolar over contract payments. PharmaKinetics maintains that Bolar is in "material breach" of the contract, "including but not limited to the non-payment of of past due amounts of approximately $1.5 mil." PharmaKinetics, which was the contract lab for Bolar's generic version of Dyazide, came under investigation when Bolar was charged with substituting the namebrand product for its generic version during bioequivalence testing. PharmaKinetics was cleared of any wrongdoing in the matter. Meanwhile, Bolar is charging the contract lab with failure to adequately perform its duties and other multiple breaches of contract, also unspecified. However, the company has not filed any court papers to that effect, a spokesperson said. While neither company would identify the purpose of the two-drug development contract, PharmaKinetics reported last spring that a $10 mil. contract reached in December 1987 was close to being concluded ("The Pink Sheet" May 29, 1989, T&G-14). Although PharmaKinetics did not identify the drug under study, industry speculation is that the contract was for the diltiazem development project. PharmaKinetics is also thought to be working with Bolar on the development of a generic version of Marion Merrell Dow's Carafate (sucralfate). The second contract, a $2.2 mil. deal signed in February 1988, also was in the "final stages" of being wrapped up, President and CEO Steven Woodman told analysts at the same meeting last year. Bolar has been actively pursuing an ANDA for sucralfate. In late 1989, Bolar reportedly agreed to transfer regulatory and manufacturing responsibilities for generic sucralfate to Schein and Rugby-Darby ("The Pink Sheet" March 12, p. 12). Bolar contracts accounted for 37% of PharmaKinetics' revenues in the third quarter (ended March 30), or roughly $3 mil., which was down from 50% of revenues, or about $13 mil., in fiscal 1989 (ended June 30, 1989), according to PharmaKinetics. The contract R&D firm noted that unless it receives the Bolar payments, it may have to seek "an infusion of capital or other financing to satisfy near-term cash flow and working capital requirements." PharmaKinetics said it is reviewing its financing alternatives. As of Dec. 31, PharmaKinetics had cash and equivalents of nearly $6 mil. and a long-term debt of $10 mil. In April, the company completed a $2.5 mil. private placement to support the expansion of its International Bio Research subsidiary in West Germany, which was acquired in the last fiscal year. Bio Research engages in "NDA-type" contracts.
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