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Biotech / Medical : Lidak Pharm. [LDAKA] -- Ignore unavailable to you. Want to Upgrade?

To: Henry Volquardsen who wrote (1020)	4/18/1998 1:20:00 PM
From: luis a. garcia	Read Replies (1) \| Respond to of 1115

Thomas Kupper/STAFF WRITER/17-Apr-1998 Friday/David Katz Ousted Lidak Pharmaceuticals chief executive David Katz has sued the Beverly Hills financiers HealthMed, whose unorthodox financing proposal led in part to his firing, for "massive and embarrassing fraud." Katz said in the lawsuit, filed this week in Superior Court in San Diego,that HealthMed President Mitchell J. Stein promised they would be "Siamese twins" and "joined at the hip," only to betray him after taking Katz's stock in the San Diego company. He said he thought he could work with HealthMed after flying back and forth to meet wealthy investors in Los Angeles on a Gulfstream jet Stein described as his private plane. Then, Katz says, he learned that Stein allegedly was "essentially bankrupt"and was never in a position to deliver on a loan of up to $130 million that Katz lobbied the company's board to accept. Now Katz says he was conned. "I know how to eat crow, and I'm eating crow," he said in an interview yesterday. Katz's lawsuit asks the court to void an agreement under which he sold 30 percent of his Lidak stock to HealthMed and gave HealthMed the voting rights to the rest of his 12 percent stake in the company. But he said the suit also aims to warn shareholders who still believe HealthMed will bail out the company. Katz turned to HealthMed in January after Lidak lost a key partnership with Bristol-Myers Squibb. "There are shareholders who still think everything's great and HealthMed's going to come in with $130 million," he said. "That was never going to happen." HealthMed general counsel Rex Beaber said the suit sounded like something "authored by Walt Disney after he took LSD" and that he thought Katz filed it out of fear that Stein would sue him. Beaber said it was Stein who got the bad end of the deal, because he paid about $4 a share for the stock when they were trading at around $2. Lidak closed yesterday at $1.59 3/8 on Nasdaq, up 12 1/2 cents "This is like someone selling their house for double its value, having the value go down, and then the seller complains," Beaber said. He also said Katz had misled Stein by failing to disclose his deteriorating relationship with the board, which Beaber said led to his firing. As for the charge that Stein was broke, he said Stein lives in a 10,000-square-foot house and travels the world by private jet. Katz's suit is the latest twist in a saga that has been strange from the beginning.Within a few weeks of its offer, HealthMed was blasting Lidak's board as "apathetic." Then, after HealthMed withdrew the loan offer, Katz also attacked the board -- and was fired. HealthMed and Katz then launched a proxy fight to take control of the company, but the fight abruptly ended when HealthMed reached a settlement with the board that gave HealthMed a role in selecting new board members. That was the end of the HealthMed-Katz alliance, because the deal also called for him to leave the board when his term ended. Beaber said HealthMed agreed to the deal to protect its investment. In the suit, Katz alleges that HealthMed never meant to deliver on the loan, but instead presented it to the board "in such an arrogant and hostile manner as to defeat any effective negotiations." He charged that Stein was in no position to deliver on any of his promises because he was "essentially bankrupt," facing a tax lien of almost $170,000 and living on $500 a month. But he said Stein had convinced him to part with his stock in part by dangling false promises and arranging meetings with wealthy investors he assumed would be part of the deal. The "culmination" of Stein's presentation, Katz said in an interview, was a daylong trip to Los Angeles in which Katz traveled by private jet and had breakfast with Herb Simon, the co-owner of the Indiana Pacers basketball team. Katz, an avid back yard basketball player, said Stein also suggested a meeting with billionaire investor Marvin Davis that never happened. Katz also says Stein made promises that he would use connections in the entertainment industry to get Katz on public television to promote Lidak's oral herpes drug, Lidakol. Stein allegedly said Katz's research group, the Medical Biology Institute, would be "flooded with donations." Copyright Union-Tribune Publishing Co.

To: Henry Volquardsen who wrote (1020)	4/18/1998 6:09:00 PM
From: John Zwiener	Read Replies (1) \| Respond to of 1115

Personally, I don't know who to believe anymore, but I know I don't believe HealthMed. Well I'll go out on a limb, I believe Katz. There is a ring of truth there. He sounds more like his old self, and maybe a little humble (his eating crow remarks). On the Yahoo board, it is pointed out the Lidak board also seems to have fallen for the HealthMed charm/aggressiveness, and the board can't claim to be any better than Katz. Katz admitted his mistake, is it time for the board to eat crow also? Probably. If Katz is right, then HealthMed is out, finally.