Deep Pockets Can't Save Blech's Biotech Empire
When D. Blech & Co. closed its doors on Sept. 23, the event ended a costly, two-year struggle by financier David Blech to shore up his vast biotechnology holdings. Blech had laid out massive amounts of his own money. But the stock prices in his startup ventures kept falling, and ultimately, his company couldn't meet capital requirements.
Since early 1993, according to government documents, Blech paid out $55 million to prop up prices of "Blech companies," many of which he had helped form. Unfortunately, Wall Street perceived the payoff of these fledgling outfits to be too far distant. Take Microprobe, into which he poured almost $3 million, starting in April, 1993. It dropped from $5.56 per share then to 37 cents on Sept. 28. Says Samuel Waksal, CEO of biotech company ImClone Systems: "Putting his finger in the dike didn't work."
One reason for the rescue attempt: Some of his stock was evidently used as collateral for loans. When the value of collateral drops, a lender often calls a loan. That happened last spring, when Blech had to sell stock to pay a Citibank loan said to be about $40 million. Blech and the bank wouldn't comment.