The company wants to retain enough funding to remain attractive to potential investors
POSTED: 01:30 a.m. HST, Jun 10, 2010
Hawaii Biotech Inc., a local vaccine technology company operating under bankruptcy protection, is seeking court approval to sell the company before it runs out of funding as projected by the end of July.
A sale would give the Aiea-based firm the certainty of ownership it needs to attract new investors as it moves forward with clinical trials for West Nile virus and dengue fever vaccines, said Elliot Parks, the company's chief executive officer.
Through the end of May, Hawaii Biotech had used or earmarked $1.37 million of the $2.03 million line of credit it secured after filing for Chapter 11 bankruptcy reorganization on Dec. 11.
Parks said he expects the company would sell for more than the $2.03 million credit line given the fact that it is an ongoing concern involved in the potentially lucrative vaccine business.
Hawaii Biotech is exhausting its funding despite taking a number of cost-cutting measures, including reducing the hours of its staff, Parks said.
"But the current budget indicates that the current cash on hand is insufficient to cover the continuing costs past July 30, 2010, even if additional funds are forthcoming from the current lenders from the Dec. 31, 2009 authorized draw," Parks said in a document filed with U.S. Bankruptcy Court in Honolulu.
In a monthly operating report filed with the Bankruptcy Court for April, Hawaii Biotech showed a cash balance of $174,755.
Given the time and funding constraints facing Hawaii Biotech, company officials decided it was better to move ahead with a sale rather than wait for the Chapter 11 process to play out, Parks said.
"Assuming the court approves it, the sale will allow us to achieve reorganization by the end of July rather than have to wait months," he said. A hearing on the request is scheduled for Monday before Judge Robert Faris.
Hawaii Biotech, established in 1982 by a group of University of Hawaii scientists and business professors, had raised more than $50 million from federal grants and several million dollars in private equity investments since its inception.
The company benefited from controversial state tax credits created in an effort to attract technology investment to Hawaii. The tax credits have been under attack in the Legislature recently as lawmakers look for ways to plug the state's budget gap.
Lt. Gov. James "Duke" Aiona vetoed a bill yesterday that would have prevented investors from claiming high-technology tax credits for three years. The bill would have saved the state an estimated $93 million next fiscal year and millions more the following two years.