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Angiotech Pharmaceuticals Inc. has a market cap of $41.82 million; its shares were traded at around $0.491 with and P/S ratio of 0.15. ANPI is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations: As part of the collaboration, we provided Haemacure with a senior secured bridge financing facility (the “loan”) of $2.5 million in multiple draw-downs throughout 2009. The loan was for a two year term, bore an annual interest rate of 10%, compounded quarterly, and was senior to all of Haemacure’s indebtedness, subject to certain exceptions. The loan was secured by substantially all of Haemacure’s assets. As at December 31, 2009, the loan was recognized at its fair value of $1.6 million with the remainder being amortized on account of an arrangement for prepaid services. On January 11, 2010 Haemacure announced it filed a notice of intention to make a proposal to its creditors under the Bankruptcy and Insolvency Act (Canada) and its wholly-owned U.S. subsidiary sought court protection under Chapter 11 of the U.S. Bankruptcy Code. These actions were taken in light of Haemacure’s financial condition and inability to raise additional financing. We subsequently provided an additional $1.0 million of financing to fund Haemacure’s insolvency proceedings and day-to-day operations. The loan and accrued interest was effectively settled in exchange for certain assets acquired from Haemacure. In addition, we paid an additional $0.2 million in cash to settle certain obligations owed by Haemacure.
As at April 5, 2010, the carrying value of the loan owed by Haemacure was $2.5 million compared to the contractual amount of $3.7 million. In accordance with ASC No. 805-10-55-21, we recognized a $1.2 million gain on the effective settlement of the pre-existing debt arrangement, which reflects the difference between the contractual settlement amount of the loan and its carrying value.
As the acquisition qualified as a business combination, transaction-related expenses of $0.3 million and $0.6 million were charged to selling, general and administration costs during the three and six months ended June 30, 2010, respectively. This preliminary assessment is based on initial estimates by management of the fair values of the assets acquired as at April 6, 2010. The final purchase price allocation is subject to the finalization of subsequent valuation procedures. We expect to finalize the purchase price allocation by December 31, 2010. The assets acquired from Haemacure have been included in the consolidated financial statements since the date of acquisition.
As discussed above, in April 2010, we announced the closing of the acquisition of certain product candidates and technology assets of Haemacure. In June 2009, we had previously extended Haemacure a $2.5 million senior secured bridge loan as part of a collaboration that provided us with certain technology and product distribution rights. In January 2010 Haemacure announced that it had filed a notice of intention to make a proposal to its creditors under the Bankruptcy and Insolvency Act (Canada), and that its wholly-owned U.S. subsidiary sought court protection under Chapter 11 of the U.S. Bankruptcy Code. In March 2010, Haemacure announced that it had obtained authorization from the Superior Court of the Province of Québec to sell its assets to us and that the U.S. Bankruptcy Court had authorized the sale to us of the assets of Haemacure’s U.S. subsidiary. Prior to the purchase of these assets, we had funded approximately $1.5 million in expenses, which include the funding of Haemacure’s insolvency proceedings and day-to-day operations and our legal fees and expenses. We expect that modest additional expenditures for research and development may be required during the remainder of 2010, depending upon final decisions as to product development timelines and the operations and personnel of a newly acquired manufacturing facility.
The $2.2 million increase in net loss is due to several factors, including: (i) an improvement in gross profit of $3.8 million; (ii) a $2.0 million reduction in foreign exchange loss; (iii) a $1.2 million gain on settlement of the loan to Haemacure recorded upon completion of our acquisition of certain product candidates and technology assets of Haemacure; and (iv) lower interest expense of $0.6 million primarily related to lower interest incurred on our Senior Floating Rate Notes due 2013 (the “Floating Rate Notes”). These improvements were offset by: (i) a reduction of $8.2 million in royalty revenue derived from BSC’s sales of paclitaxel-eluting coronary stent systems; and (ii) an increase in selling, general and administrative costs of $1.1 million, primarily resulting from the addition of sales and marketing staff to support our Quill SRS product line, offset by a reduction in professional costs primarily as a result of the settlement of a litigation matter with RoundTable Healthcare Partners, LP (“RoundTable”).
For the six months ended June 30, 2010, we recorded a net loss of $20.8 million ($0.24 basic and diluted net loss per common share) compared to net income of $0.6 million ($0.01 basic and diluted net income per common share) for the same period in 2009. The $21.4 million decline in earnings as compared to the prior period is primarily due to: (i) the receipt of a one-time, $25.0 million payment from Baxter International, Inc. (“Baxter”) in the first quarter of 2009; (ii) an $11.8 million reduction in royalty revenue derived from BSC’s sales of paclitaxel-eluting coronary stent systems; and (iii) an increase in selling, general and administrative costs of $3.1 million. These losses were partially offset by: (i) an improvement in gross profit of $7.4 million; (ii) the $1.2 million gain on settlement of the loan with Haemacure discussed above; (iii) the escrow settlement recovery of $4.7 million in regards to the RoundTable litigation matter settled during the first quarter of 2010; (iv) a reduction of income tax expense of $3.1 million; and (v) a reduction in interest expense of $1.8 million. The escrow settlement recovery in regards to the RoundTable litigation resulted from the receipt of $4.7 million in January 2010 in full settlement of an outstanding litigation matter related to a claim we had made against amounts paid into escrow in connection with our March 2006 acquisition of American Medical Instruments Holdings, Inc. that remained in escrow pending resolution of certain representations and warranties in the agreement governing the acquisition.
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