Lidak Auditors Say Loses May Close Biotech Firm
Lidak Pharmaceuticals’ auditors say there is “substantial doubt” that the company will be able to remain in business this year after a fiscal 1991 loss of $1.95 million that leaves the La Jolla-based biotechnology firm severely weakened.
With the full-year loss reported Tuesday, Lidak Pharmaceuticals has just $1 million in net worth, a sum that would be wiped out if the company were to suffer a 1992 loss comparable to last year’s. The company disclosed its full year 1991 loss only, declining to break out its fourth quarter performance,
“Conditions exist which raise substantial doubt about the company’s ability to continue as a going concern unless it is able to generate sufficient cash flows to meet its obligations and sustain its operations,” auditing firm Deloitte & Touche said in its qualified opinion of Lidak’s financial statement for the year.
Chief financial officer Michael Lorber said the loss for the fiscal year that ended Sept. 30 was due to the high cost of research that is not yet supported by product revenue. The bulk of Lidak’s research dollars is being spent on its topical herpes treatment called Lidakol, which is still in the developmental stage.
The company was founded in 1988 by chairman and chief executive David Katz, who is also its largest shareholder with 27% of the common stock. The company has raised $5.6 million in capital, most of which was generated by a $4.6 million public stock offering in May, 1990. Losses have eaten all but $1 million of the equity capital, however.
Lidak’s common shares closed Tuesday at $1.875 in over-the-counter trading, Lorber said.
Lorber said the company is trying to raise additional capital to “alleviate the concerns identified by the auditors. We believe that current financing efforts will be successful and will enable the company to continue its progress.”
But the company cautioned in its year-end filing with securities regulators that, although it has retained an investment banking firm to help it raise capital, there is “no assurance the company will be successful in obtaining additional financing.”
Lidak Pharmaceuticals also said it plans to shrink the 25-person staff through attrition. No layoffs are planned, Lorber said.
