Approval Delay for Cancer Drug Cited in Stock's Rapid Decline

WALL STREET WEST

Investors who bought shares earlier this year in American Pharmaceutical Partners Inc., the generic drug maker controlled by Los Angeles doctor Patrick Soon-Shiong, don't have much to feel good about these days.

The stock, which hit a 52-week high of $49.19 on March 31, has plummeted nearly 50 percent since then, and was trading just above $25 last week, not far from its 52-week low of $22.65 on Oct. 31.

Company officials have declined to comment on the share price, but American Pharmaceuticals appears to be suffering from a double whammy: stagnant revenues of its core generic drug business and a realization by the market that its proprietary drug candidate Abraxane won't be a revenue producer this year, as the company had anticipated.

American Pharmaceutical is not the only generic drug maker with problems. Other players in that market, such as Watson Pharmaceuticals Inc., have seen their stock drop as pressure builds on the industry to keep down drug costs, a leading contributor to medical inflation.

But the company's troubles are complicated by Abraxane, the brand name it has given to a unique formulation for the breast cancer drug paclitaxel. The company claims that its formulation allows the drug to be given in higher doses with fewer side effects, and is looking for approval from the Food and Drug Administration sometime in the fourth quarter.

But just a year ago at least one bullish analyst was predicting as much as $150 million in 2004 revenue for the company from Abraxane, which would have been a significant boost for a company whose core generic drug business produced $351 million in revenue last year.

Laurence Darmiento

Debt Restructuring

Primedex Health Systems Inc. has announced reaching another tentative agreement to restructure $160 million in long-term debt and capital leases after its last pact was not finalized.

The Los Angeles-based company, which operates 55 diagnostic imaging centers statewide, has been seeking to restructure the debt since emerging from bankruptcy last year. Meanwhile, it continues to post losses.

The new agreement was reached with a financing unit of General Electric Co. and U.S. Bank. The latter is acting as a trustee for DVI Financial Services Inc., a Primedex lender currently in Chapter 11 bankruptcy proceedings itself.

"It involves a restructuring, which extends the payment out to a manageable number for the company," said Primedex general counsel Jeffrey Linden, who declined to release additional details.

In April, the company announced that it had reached a tentative agreement to restructure its debt with Cerberus Capital Management LP, but that agreement was never consummated. Linden declined to specify the reasons.

Primedex got into financial trouble after ramping up its debt as part of an aggressive acquisition strategy to become one of the biggest operators of diagnostic imaging centers statewide over the last few years.

But revenues were lower than projected after some of the new centers failed to perform as expected. The company also was hit hard when the Federal Deposit Insurance Corp. cut its credit line after taking over Southern Pacific Bank, another one of its lenders. Primedex has not posted an annual profit since 2001.

Laurence Darmiento

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