Inex Pharmaceuticals noteholder starts bankruptcy proceedings against company

New York, Sept. 28 - Inex Pharmaceuticals Corp. said that Stark Trading and Shepherd Investments International Ltd. has started bankruptcy proceedings against the company.

Stark, the majority holder of promissory notes due 2007 issued by Inex's subsidiary Inex International Holdings, has filed a petition in the Supreme Court of British Columbia seeking to have the company declared bankrupt. It has requested a hearing on Oct. 11.

At maturity the notes can be repaid in stock or cash at Inex's option.

The Vancouver, B.C.-based biopharmaceutical company said it is opposing the action.

"We categorically deny the allegations brought forward by Stark and will defend against these allegations vigorously," said president and chief operating officer Timothy Ruane in a news release.

Inex had C$15.2 million of working capital at June 30 and said it is committed to ensuring it can pay all its debts in the normal course of business.

"Given our current working capital position and the steps we have taken over the past 10 months to reduce our burn rate, we can meet all of our obligations as they become due," Ruane said. "The promissory notes are not due until April 2007 and can be repaid in cash or in shares, at Inex's option, at that time."

Stark previously delivered a default notice demanding payment of $24.6 million by Sept. 21.

In its demand letter, Stark said it believes the notes are in default because Inex has admitted in writing that it is unable to pay or is generally failing to pay its debts as they mature or become due and because Inex is ceasing to carry on business.

Inex owes $32.7 million on the notes as of June 30. The notes were originally issued to Elan Corp. plc in April 2001 and purchased by institutional investors in April 2004.

The debt is comprised of an exchangeable note and a development note, both with no cash interest. The exchangeable note can be converted into stock at $5.71 while the development note converts at $5.07.

Inex said it has held discussions with Stark since December 2004 on restructuring the notes but has not been able to reach an agreement.

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