Techniclone Defaults on Key Loan, Faces Delisting

Financially struggling Techniclone Corp. said Friday that it has defaulted on a major loan, its stock could be removed soon from Nasdaq trading and its chairman, elected only a month ago, has resigned.

Techniclone, which is developing experimental cancer treatments, said in a press release that it has suspended severance and compensation payments to former officers and directors.

Executives at its Tustin headquarters were not available for comment Friday after issuing the press release.

William C. Shepherd, who was a director before being named chairman a month ago, resigned, the company stated. His predecessor, Thomas Testman, had resigned along with the company’s chief financial officer and its corporate secretary.

Techniclone said Nasdaq has served notice that the company’s stock would be delisted in January if the price does not rise above $1 a share for a sustained period.

On Friday, its stock dropped 13 cents to close at 38 cents a share as more than 2.9 million shares traded hands--nearly four times the average daily trades over the past three months.

A delisting would render the company “chronically in financial difficulty,” said David G. Anast, publisher of Biomedical Market Newsletter Inc. in Costa Mesa.

“Hopefully, other emerging sources of capital will feel motivated to step in and help get them through the coming year,” he said.

In the meantime, the company hired the law firm of Luce, Forward, Hamilton & Scripps in San Diego as its general counsel.

It also is negotiating to defer interest payments on its $3.3-million loan from Biotechnology Development Ltd. in Las Vegas.

Techniclone recently borrowed $305,000 on its line of credit from two institutional investors, enabling it to operate at reduced levels through the end of the year.

The company has lost $64.5 million over the past three years and recently cut 50% of its work force, or at least 20 employees. The company didn’t provide current employment figures but had 40 employees last spring.

Techniclone said recently it would “substantially reduce” all business other than clinical trials and related functions to save money.

It is conducting clinical trials of treatments for brain cancer at five sites nationwide and for pancreatic, prostate and liver cancer at an undisclosed number of sites in Mexico.

The company said it is also in talks with several pharmaceutical companies about licensing one of its products.

“The reality of developing cutting-edge, new drug therapy in today’s regulatory environment is highly difficult under the best of circumstances,” Anast said. “Under the circumstances that Techniclone now finds itself in, it is going to be a tremendous challenge.”

A year ago, the company sold two office buildings that housed its headquarters for $6.1 million and agreed to lease back the same space.