DOV Pharmaceutical says capital needs threaten going concern status

By Caroline Salls

Pittsburgh, Nov. 7 - DOV Pharmaceutical, Inc.'s capital needs threaten its ability to continue as a going concern, according to a 10-Q filed Wednesday with the Securities and Exchange Commission.

According to the filing, although the company has enough capital to fund its operations through May 31, 2008, it will continue to have capital needs.

DOV said if efforts to seek additional funding for 2007 and 2008 fail, it will be forced to cut back or eliminate one or more product development programs at least temporarily.

The company said its future capital uses and requirements depend on its ability to sublease space or otherwise reduce the overall costs arising from its Somerset, N.J., headquarters; its progress with research and development; its ability to maintain and establish collaborations that finance the research and development of its clinical candidates; the progress and success of clinical trials and preclinical studies of its product candidates; the costs and timing of obtaining, enforcing and defending its patent and intellectual rights; and the costs and timing of regulatory approvals.

As previously reported, DOV completed an exchange offer in March under which $67.5 million in principal amount of the company's outstanding convertible subordinated debentures were exchanged for 439,784 shares of series C and 100,000 shares of series D convertible preferred stock and $14.3 million in cash.

In addition, the $2.5 million in principal amount of debentures that remained outstanding after the exchange offer was completed was repaid for $2.6 million, including interest.

As of Sept. 30, DOV had $10.6 million in cash and cash equivalents and marketable securities, compared with $42.3 million at Dec. 31, 2006.

The company said the decrease in cash balances resulted primarily from $17.8 million of cash used to complete the exchange offer and to redeem the remaining debentures and $13.9 million in cash used in operations.

DOV also said that its workforce dropped to 28 employees at Oct. 31 from 74 employees on May 19, 2006.

With the uncertainty of its business situation, the company said it expects further workforce declines, which could also result in increased costs associated with hiring outside consultants.

DOV is a biopharmaceutical company based in Somerset, N.J.

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