Boston Business Journal

Acusphere in cash crunch while awaiting FDA action

by Mark Hollmer
May 16, 2008

Acusphere Inc. is in a race against time to ensure that it has enough funding to remain in business, even as it comes tantalizingly close to gaining approval for its first product.

The Watertown company (Nasdaq: ACUS) and its 120 employees reached an important milestone in late April after finally submitting the blood-imaging agent Imagify for U.S. regulatory approval -- its first product to reach that point after millions of dollars of investment and clinical trials involving hundreds of patients. Imagify is intended to help doctors better diagnose coronary artery disease as a cheaper and safer alternative to competing technologies.

The clock is ticking, however. The company has $25 million in cash after burning through over $13 million in the first quarter. At that cash-burn rate, Acusphere could conceivably be out of money in six or seven months if it fails to secure funding elsewhere.

Some investors are already pulling out.

"We have lost confidence that the company can successfully navigate the difficult road ahead," wrote Susquehanna Financial Group analyst Angela Larson, in a May 9 report outlining why her firm recently dropped coverage of the stock.

Larson wrote in her final Acusphere analysis that the company had "confusing" late-stage clinical data. And she faulted the company for not finding a U.S. marketing partnership. "We are redeploying our resources and efforts," she wrote, "to find other specialty pharmaceutical investment areas."

Those comments and the company's status also raise questions over the wisdom of the state's push to invest more money in the biotech sector, as legislators continue to hash out a $1 billion economic stimulus package for the industry.

Acusphere was an early beneficiary of the state's largess, winning a $2 million loan from the MassDevelopment Emerging Technology Fund in 2004 to help build out its 58,000-square-foot manufacturing facility in Tewksbury. The site is undergoing a regulatory review in order to begin operations.

MassDevelopment, a quasi-stage agency, insists the investment was well worth the risk.

"This ... resulted in the re-occupation of an empty building in Tewksbury and the creation of more than 100 jobs," said Janet Hookailo, the agency's executive vice president for communications. "It is worth making an investment in companies that represent the future of manufacturing in Massachusetts."

The company continues to search for a cash-rich corporate partner in the United States, but a deal remained elusive as of this week That search comes after a recent licensing deal that involved a $10 million investment in Acusphere by Pennsylvania's Cephalon Inc.

Skeptical investors have responded by driving the company's already low stock price from around $1.40 per share just last fall to the 70-cents range as of this week, which makes future financing through secondary offerings all the more difficult.

When the company went public in October 2003, its shares closed at $13.10.

Adding to the mix: Acusphere booked a net loss of around $13.5 million during the first quarter, compared to a $12.5 million loss in the yea-ago period.

The company expects to tear through $11 million and $14 million in cash per quarter.

Attempts to reach company CEO Sherri Oberg for this story were unsuccessful. But Oberg, who launched Acusphere from her basement in 1993, has expressed belief in previous interviews that she'd surmount any financing obstacles.

During the company's May 8 earnings announcement, she said the company is "continuing to work diligently on potential financing and strategic partnerships discussions."

Some industry experts say the company has several options, other than to close its doors outright.

Barbara Jones, a life sciences attorney with the law firm McDermott Will & Emery LLP in Boston, said Acusphere's situation isn't unique among development-stage biotechnology companies.

"I have seen companies in this growth mode waiting for their product to receive FDA approval struggle and go through fits and starts to get the funding," she said. "And they find the funding."