Hyal Pharmaceutical Wound Up

Winding-up proceedings for Hyal Pharmaceutical Corporation (Hyal) have recently been completed. Failure to reach critical marketing agreements with respect to its key Solarase product (a topical skin formula) and an earlier clinical failure of another healthcare product led to a Court-appointed receivership on 16 August, 1999.

The Receiver appointed by the Ontario Superior Court of Justice was a team from PricewaterhouseCoopers Inc. being led by Robert M.C. Holmes and with assistance from Dr. Natasha Sharpe. Counsel to the Receiver was a team from the Toronto law firm of Osler, Hoskin & Harcourt LLP being led by Steven Golick with assistance from Robin Schwill. The Receiver had identified early on that the two main assets of Hyal were its intellectual property rights and the potential value inherent in significant tax loss and income tax credit carry forwards. The Receiver also identified that extensive negotiation and discussion would be required to permit the tax benefits to be harvested and the marketing process of the assets of Hyal were designed in such a way to permit parties to bid not only for the intellectual property assets but also to structure transactions which would involve the ability to utilize the tax benefits on a go forward basis.

The marketing process generated expressions of interest from SkyePharma PLC (Skye), Cangene Corporation (Cangene) and Bioglan Pharma PLC (Bioglan). Prior to the receivership, Skye had lent Hyal approximately $1.5 million on a secured basis in relation to acquisition discussions. Hence, at the time of the receivership, Skye was the largest secured creditor of Hyal. Cangene also appeared to have lent approximately $150,000 to Hyal on a secured basis prior to the receivership. Bioglan managed to purchase some unsecured debt during the course of the receivership to gain status within the proceedings.

In the end, substantially all of the assets of Hyal, but excluding the tax benefits, were sold to Skye for the purchase price of $14 million. Bioglan appealed the order approving the sale. The Receiver brought a motion to quash the appeal for failure to seek leave on the basis that the sale approval order was interlocutory and Bioglan, as a disappointed bidder, had no standing. Joseph Steiner of Osler, Hoskin & Harcourt LLP represented the Receiver at the appeal level. The Court of Appeal granted the Receiver’s motion resulting in the first Ontario Appeal Court decision dealing with disappointed bidders’ lack of standing on receivership sales.

The Receiver continues to be in negotiations with a number of other parties with respect to making an investment in Hyal for the purposes of being able to utilize the tax loss carry forwards.

Counsel for Skye consists of a team led by Berl Nadler of Davies, Ward & Beck. Counsel for Cangene is being provided by Torkin, Manes, Cohen & Arbus with Jeffrey Cohen and Fay Sulley in charge of the file. Robert Chadwick of Goodman, Phillips & Vineberg is counsel for Bioglan.