Simulations Plus said this week that it has submitted a bid to purchase all the assets of biosimulation software developer Entelos, which filed for Chapter 11 bankruptcy protection in July.
The asset auction was scheduled to be held Sept. 21 and a hearing was planned for today to approve the sale of the assets to the winning bidder.
As of press time, it was not known whether Simulations Plus won the bid or whether any other parties had entered the bidding. Simulations Plus did not disclose the amount of its bid.
Both companies declined BioInform's requests for comment on the proceedings.
According to documents that Entelos filed with the US Bankruptcy Court for the District of Delaware, deteriorating market conditions in the pharmaceutical industry and "strategic mistakes" made by previous executives led to "a severe liquidity crisis, which has not lessened."
"With little revenue in a stingy capital market, [Entelos] has been unable to generate adequate liquidity from revenue or financing" to pay its debts, which currently total more than $10 million.
The company's primary creditor, Imperium Master Fund, holds around 6 percent of Entelos Class A common stock and 100 percent of the company's Series A preferred stock.
Entelos disclosed in the bankruptcy filings that it owes Imperium more than $8.4 million in secured debt plus interest and fees. In July, Imperium sent the company a default notice.
Other creditors include the Internal Revenue Service, which is owed $1.3 million in payroll taxes; the company's landlord, which is owed $289,133 and has begun eviction action against Entelos; and the California Tax Board, which is owed $266,760 in payroll taxes.
In 2008, the last year for which the company had audited financial statements, Entelos posted revenue of $18.1 million and operating costs of $30.6 million, resulting in a loss from operations of $12.5 million.
At the end of that year, the company had approximately $2 million in cash, total assets with a book value of $8.3 million, total liabilities of $13.2 million, and a shareholders' deficit of about $87.1 million.
According to unaudited financial statements, for the first half of 2011, the company received $2.6 million in revenue on a cash basis and had $5.7 million in operating expenses.
Ups and Downs
Entelos was founded in 1996 with the aim of developing biosimulation software to help design clinical trials, identify biomarker patterns, and characterize patient sub-populations.
The company's flagship product, the PhysioLab platform, integrates genomic, proteomic, physiologic, environmental, and behavioral data into "virtual human" computer simulations of disease that can be used in simulated experiments and clinical trials to determine patients responses to new therapies.
Through its acquisition of Iconix in 2007 (BI 9/7/2007), Entelos picked up the DrugMatrix toxicogenomics database and a number of other toxicity-assessment tools.
In 2006, Entelos decided to go public through London's Alternative Investment Market, raising $20 million in the process (BI 6/16/2006).
By 2009, however, the company decided to delist from AIM and revert to its status as a privately held firm in the face of mounting losses, declining revenue, and $7 million in outstanding debt that it owed Imperium (BI 06/16/2011).
At the time, the company hired investment bank Seven Hills Partners to help it evaluate "various financing and capital raising alternatives," including the sale of the company.
According to the bankruptcy filings, however, "Seven Hills' efforts did not result in any transaction."
Simulations Plus could offer a good home for the Entelos PhysioLab platform. The company also offers modeling and simulation software and its customers include many of the same pharmaceutical and biotechnology companies that Entelos was targeting with its platform.
Simulations Plus recently reported preliminary revenues for its 2011 fiscal year, which ended Aug. 31. According to the preliminary results, revenues for pharmaceutical software and services increased 14 percent to $8.7 million from $7.6 million in 2010.
Simulations Plus recently announced that it had used its tool suite to create 12 drug-like molecules that are possible therapies for malaria (BI 9/16/2011).
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