With $100 Million Influx, MiddleBrook CEO Is Out

Edward M. Rudnic, MiddleBrook Pharmaceuticals's chief executive, plans to leave the company he founded in exchange for an outside investment of $100 million.

MiddleBrook has been openly searching for a buyer over the past year. In the meantime, it agreed to the investment from Equity Group Investments, founded by Chicago billionaire Sam Zell, in an attempt to save its once-daily amoxicillin treatment for strep throat called Moxatag.

The Germantown biotech had previously considered a sale to another company, hoping for one that had a large sales force targeting primary-care physicians so that it could widely market the recently approved Moxatag.

The news sent the Germantown biotech's stock plummeting 51 percent, to close at $1.52, as the company deviated from investor's buyout expectations.

"This is a classic case of investor disappointment," said John T. McCamant, editor of the Medical Technology Stock Letter.

MiddleBrook announced late Tuesday that Equity Group Investments would install a new commercially focused senior management team when the deal closes in late August or early September. In addition to Rudnic, Chief Financial Officer Robert C. Low will leave.

Rudnic is the second executive to announce his departure from a local biotech in a week, following David M. Mott's decision to leave MedImmune, based in Gaithersburg, at the end of the month. Mott presided over the sale of Maryland's most successful biotech to British drug giant AstraZeneca.

Rudnic, who has weathered several ups and downs at MiddleBrook, has been the face and voice of the region's biotech industry. If there's a biotech meeting, Rudnic is usually speaking. If there's a task force or council, he is on the board.

"He is absolutely a pillar of this community," said Julie Coons, chief executive of the Tech Council of Maryland. "He is a leader in the biotech industry. Not only emerging, but accomplished executives look to him as a model of how to grow a company."

Three of MiddleBrook's largest stockholders -- HealthCare Ventures, Rho Ventures and Deerfield -- have agreed to vote in favor of the $100 million investment. "This is the alternative we thought would be best for the company going forward," MiddleBrook spokesman Robert Bannon said.

MiddleBrook began actively investigating its next move after winning Food and Drug Administration approval in January for Moxatag, which delivers the drug in time-released bursts, instead of requiring patients to swallow several doses a day.

Within 24 hours of the approval, the company announced that it would raise $21 million in a private placement of stock. In February, it brought on Morgan Stanley to help it explore strategic alternatives, which included selling MiddleBrook. Instead, the deal was made for the investment.