June 23, 2009 / 2:48 PM / 10 years ago

UPDATE 2-Creditors seek bankruptcy for H1N1 vaccine maker

(Adds comment from Protein Sciences CEO and Emergent’s lawyer)

NEW YORK, June 23 (Reuters) - Creditors of Protein Sciences Corp filed court papers to put the maker of a vaccine for the H1N1 flu into bankruptcy, and the company’s CEO warned that the “gloves were off” in a battle against “bad people.”

A week after Protein Sciences ramped up production of its vaccine, three creditors with total claims of $11.7 million filed an involuntary Chapter 7 petition in Delaware late on Monday, asking the bankruptcy court to appoint a trustee to replace management.

The bankruptcy filing listed a subsidiary of Emergent BioSolutions (EBS.N) as the largest creditor in the Chapter 7 filing, with a claim of $11.5 million.

In May 2008, Protein Sciences reached an agreement to sell the company to Emergent for as much as $78 million in cash, convertible securities and future payments, but the deal soon fell apart.

Meriden, Connecticut-based Protein Sciences said last week it began producing up to 100,000 doses per week of a vaccine that protects humans against the H1N1 flu, which the World Health Organization has declared a pandemic.

The company has said it was told by the U.S. government that it had been awarded a $150 million five-year contract to develop its flu vaccine, although the contract has not yet been signed.

Protein Sciences’ chief executive, Dan Adams, called the bankruptcy filing a “strategic move” and said it would not succeed.

“They’ve tried every trick in the book,” said Adams, a co-founder of biotech company Biogen Idec Inc. “I’m tired of being abused by these people. They’re bad people and they will pay for that.”

Emergent of Rockville, Maryland, said earlier this month that it had filed suit to take possession of Protein Sciences’ assets, which collateralized a $10 million loan that it made to Protein Sciences in connection with acquisition agreement.

“Protein Sciences walked away from that transaction a year ago after defrauding us. They committed fraud by encouraging us to lend them $10 million without ever intending to proceed with the asset purchase agreement,” said Denise Esposito, Emergent’s senior counsel. “This is not a scheme to purchase the company for less than fair value. There’s no way to protect the collateral except with court oversight.”

Shares of Emergent BioSolutions were down 0.4 percent at $13.99 at mid-day.

The case is In re: Protein Sciences Corp, U.S. Bankruptcy Court, District of Delaware, No. 09-12151. (Reporting by Tom Hals and Santosh Nadgir; Editing by Lisa Von Ahn and Steve Orlofsky)

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