Ailing Biovest lays off workers; Company faces $93M deficit.

Byline: Lisa Eckelbecker

WORCESTER - Biovest International Inc., a biotechnology company developing a cancer vaccine, has shut down vaccine production and laid off workers while it analyzes results from a key study and raises money, some of it to pay back wages to employees.

Biovest Chief Executive Dr. Steven R. Arikian said yesterday that Biovest cut about 15 jobs in August, leaving eight employees in Worcester to maintain the company's production facility and work on regulatory matters. The company employs about 35 people overall, with workers at facilities in Worcester, Minneapolis and St. Louis, Mo.

Dr. Arikian said the company shut down vaccine production and laid off Worcester workers because it had sufficient results from 230 patients to analyze study results of an experimental vaccine, BiovaxID.

"For that reason, we no longer at this time need to manufacture vaccine," Dr. Arikian said. "That's why we downsized in Worcester."

Regulatory filings and former Biovest employees indicate the company has also faced a financial crunch. Founded in 1981, the company had an accumulated deficit of $93.7 million as of June 30, according to a quarterly financial filing.

During the fiscal third quarter ended June 30, Biovest lost $12 million, or 13 cents per share, on $1.4 million in revenue. At that time, the company had about $308,000 in cash. But financial filings show $200,000 of the cash was earmarked to establish and start up a St. Louis facility producing AutovaxID machinery, cell-culture equipment developed by Biovest.

Two former Biovest employees said they learned in July that the company could not issue paychecks. Filings last month with the Securities and Exchange Commission show the company borrowed $500,000 from directors and an investor while also obtaining extensions on payment requirements for two promissory notes from Pulaski Bank and Trust Co. of St. Louis.

A significant amount of Biovest's past financing has come from its parent company, Accentia Biopharmaceuticals Inc. of Tampa, Fla. At the end of June, Accentia owned 77 percent of Biovest's stock. Dr. Arikian said restrictive covenants binding Accentia and its lenders mean Accentia can no longer extend financing to Biovest.

"Accentia provided over $30 million in financing to Biovest," Dr. Arikian said. "Their obligation was about $20 million, so they exceeded it by $10 million."

Dr. Arikian said Biovest is working on a debt financing that could be completed in the next two to three weeks. He said the company has reported that to the office of state Attorney General Martha Coakley. Former workers said they contacted Ms. Coakley's office after they were not paid.

"We're in the midst of doing a capital raise," Dr. Arikian said. "As we communicated to the attorney general, as soon as that's complete, it's our intention to make employees whole."

Ms. Coakley's office declined to comment on Biovest.

Biovest has developed technology that creates a tailored therapeutic vaccine from the patient's own cancer cells. For several years, the company has been testing a BiovaxID vaccine for patients with follicular non-Hodgkin's lymphoma, a cancer of the body's white blood cells. The vaccine is in the third and final phase of testing.

The Food and Drug Administration granted "fast track" review to BiovaxID last year, a process meant to speed important drugs to market. The FDA declined to comment on the Biovest trial.

Dr. Arikian said the company expects to complete analysis of the data by the end of March 2008. If the company sees sufficient evidence that the treatment worked, it would then seek FDA approval, which might come in 2009 or 2010, Dr. Arikian said.

ART: PHOTO

CUTLINE: Dr. Arikian