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Unprofitable California biotech under federal inquiry as Halter exits board Thursday, Jun 1, 2006 By Wesley Brown Arkansas News Bureau LITTLE ROCK - Democrat Bill Halter, who has touted his business experience and memberships on the boards of successful biotech firms in his campaign for lieutenant governor, has left the board of a California startup that has burned through nearly $500 million without ever turning a profit. The firm, which is also the target of a Justice Department investigation, is among several struggling companies with which Halter is affiliated and which, according to the candidate, potentially could reap big profits. Halter was named to board of Brisbane, Calif.-based InterMune Inc. in July 2002, to fill an unexpired term. Shareholders elected him to the board in 2003. He stepped down May 24 after his three-year appointment expired, company officials said Wednesday. InterMune has not filed a notice with the federal Securities and Exchange Commission concerning the Arkansas native's resignation, but the company has removed Halter's name its Web site. Wednesday morning, Halter's biography on his campaign Web site still listed the former Clinton administration official as a director for five publicly traded technology- and biotech-related corporations, including InterMune. By Wednesday afternoon, after inquiries from the Arkansas News Bureau, the campaign had updated the Web site to exclude Halter's membership on the InterMune board. Halter said he did not stand for re-election to the board because his new wife, Shanti, is pregnant and because he is campaigning full-time for lieutenant governor. "That is one less thing that I have to do," said Halter, whose current board appointments require travel from coast to coast. "We are right in the middle of a campaign." Halter said that, if elected, he would consider further curbing his corporate responsibilities. He said leaving InterMune had nothing to do with the company's financial and legal problems. Halter was the top vote-getter in a three-candidate race for the Democratic nomination for lieutenant in the May 23 primary. He faces state Sen. Tim Wooldridge in a June 13 runoff, with the winner taking on Republican nominee, state Sen. Jim Holt of Springdale in the November general election. Holt won a three-man GOP primary without a runoff. Wooldridge could not be reached for comment Wednesday and did not immediately return calls seeking comment. Halter's campaign has touted his membership on the boards of successful publicly traded corporations. But federal securities filings show that InterMune has not made a profit since it was founded in 1998 and is struggling financially as federal investigators examine its marketing practices. "We have sustained losses in every year since inception and, as of March 31, 2006, we had an accumulated deficit of $473.7 million," InterMune warned in a May 9 filing with federal securities regulators that painted a highly uncertain future for the company. "We expect to incur substantial additional net losses prior to achieving profitability, if ever." For the period ended March 31, InterMune recorded a net loss of $12.8 million, or 39 cents a share, compared to a net loss of $17.4 million, or 54 cents a share, a year ago. Total revenue for the first quarter was $24.4 million, down 14 percent from last year's revenue of $28.3?million. All of InterMune's first-quarter revenue resulted from the sale of its patented medication Actimmune, which is being marketed as a breakthrough treatment for life-threatening lung and blood diseases. InterMune also has other drugs in the research pipeline, but Actimmune is the only one approved by federal Food and Drug Administration. InterMune's chief financial officer, Norman Halleen, announced his resignation in late April to take a similar job with another company. His departure comes in the midst of a federal Justice Department investigation into the marketing of the company's signature product. Federal securities filings show Justice Department officials have subpoenaed the company's promotions and marketing materials related to Actimmune in the probe that began in November 2004. "Although we cannot predict whether the outcome of this inquiry will have a material adverse effect on our business, it is possible that we will be required to pay a substantial civil fine in connection with the settlement of this matter," InterMune said in a recent SEC filing. Halter declined comment on the investigation. Besides InterMune, Halter sits on the boards of four other technology and biotech-related companies that trade on the Nasdaq Stock Exchange. To date, California-based Threshold Pharmaceutical and Xenogen Corp. are also unprofitable, and WebMethods Inc. of Fairfax, Va., has struggled to stay afloat for several years. Threshold's stock plummeted to a 52-week low early last month after the FDA halted clinical trials on the company's TH-070, a drug to treat problems with enlarged prostate. Since then, Wall Street has downgraded the Threshold's stock, which last traded at $4.10, by 75.9 percent from a 52-week high of $16.98 on April 17. Halter said all of the companies are in the developmental stage, spending capital to develop and research new products that he said could bring large profits in the future. "The losses are expected, but the potential could be huge," said Halter, whose stock holdings topped several million dollars in 2005, according to SEC filings. Currently, Akamai Technologies Inc. is the only company on whose board Halter serves that is beating Wall Street expectations. The East Coast high-tech company, which runs a network of computer services that speed the transfer of information to the Internet, posted first-quarter profits of $11.5 million on sales of $91 million. As of May 25, Halter owned just over 5,000 direct shares of Akamai that were valued at more than $155,000 at Wednesday's market close. Over the last year, Halter has sold more than 53,000 shares of his Akamai stock valued at more than $765,000, SEC filings show. |
