Pegasus Biologics is insolvent; Closing their doors

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40 Comments

  1. This is an unbelievable tragedy that NEVER should have happened. There were several very talented people in this organization and some exciting new technologies on the brink of introduction to the market. Unfortunately, there were also many bad hires (particulary at the executive level) & mismanaged opportunities, and eventually the sea of incompetence swallowed the ship.
    "The hard work of many comprimised by the ignorance & arrogance of a few."

  2. Amazing technology and R&D team. I have never heard of this happening in the world of implantable medical device- insolvent?. Who allowed this to happen? This technology was poised to give LifeCell some serious competition. VC money is tough to come by these days, but these guys had sales revenue and finally something new in the world of biologics.
    Wow!

  3. I’m concerned that the company was being used as an ATM by the executives and board of directors. What about the $1.65 million received from angel investors? How do they get their money back? How long did everyone in power know that the company was in trouble? Why would they ask for more money just days before the ‘crash’? I hope and pray there is an investigation.

  4. If Pegasus was “on the brink of introduction to the market” why didn’t ONSET, Three Arch or the other VC investors come to their aid during the final gasp? They knew the company was in a death spiral. And frankly PBs products weren’t that earth shaking. They were simply tweaking current products on the market and making them their own.

  5. Follow the money. Watch for villains to emerge from the shadows. Observe who, if anyone, picks up the pieces. Insiders must recognize this company is viable with proper leadership and acquire it for pennies on the dollar.

  6. Regarding one of the previous posts about the angel investors. If the VC groups didn’t want to kick in with additional funding, why did the company call the angels and expect them to put more money in? The company already knew they were closing. Lining their pockets maybe? In response to how do the angel investors get their money back, read the post above. You don’t!!!! I guess these con artists learned a thing or two from AIG, Enron and Bernie Madoff. Maybe they will suffer the same fate.

  7. Several VC were investors. One VC either would not or could not contribute additional cash. This prompted the remaining VC to offer a punitive term sheet requiring all Preferred to contribute cash or their stock would convert to Common and suffer a reverse 10 to 1 split. The Angel investors (Preferred) were required to contribute 43% of their original investment or suffer the same conversion to Common and 10 to 1 reverse split. Very shortly thereafter the plan blew up and several VC withdrew support and resigned from the BOD along with the Chairman.

  8. Don’t you folks think it was a clue to pending disaster when the LaVoie group was hired in April to woo new investors to the company and to handle negative PR? It would appear the company was already heading south prior to that decision. This collapse didn’t happen overnight.

  9. What a disaster. The company has such a unique product with amazing results. It is a shame that corporate greed ultimately put this company under. I hope their is an investigation of the CEO so we can further understand how millions of investment dollars have been lost or “misplaced” into the private accounts of various people.

  10. If anyone has the contact information for Pegasus Reps in Washington state and Oregon please have them contact me!

    bradford237@yahoo.com

  11. You can’t put this entirely on the CEOs shoulders. You need to know how a corporation works. The members of the board of directors approve or deny any move of the CEO. Maybe they were all in this together. I would start looking into the board minutes to see who knew what and when.

  12. Not completely true re the last post. The CEO has a lot of latitude to run a corporation. The board knows only what is shared at quarterly meetings. PB didn’t tweak anyone’s products. The technology was unique. They had a loyal customer base and a lot of talent. The wrong CEO.

  13. How can you cast blame at anyone other than the CEO? Then who’s fault is it? Is it not the CEO who develops the strategy and executes it? Did he not know how much money they had and execute a prudent fiscal policy? Or did he go direct and raise the burn rate too high for any smart investor to get involved? Will we ever know the truth? Certainly, the BOD has to authorize the strategy, but shouldn’t they trust the CEO to know what to do?

  14. Where are the details Josh?

  15. I am working hard on getting the details. There are a lot of rumors out there and we want to be accurate in what we put on this site. I hope to have more detailed information posted by early next week.

  16. In regard to a couple of posts above, I really hope that PB did NOT know the ship was sinking for some time before this happened!!

    Let’s not forget there are a lot of good, hard working individuals with mouths to feed that left great jobs for an opportunity to sell products that are truly unlike anything else in the world….and what happens to them, they are stuck scrambling for something, for some way to survive.

    If these products are what they appear to be, with new FDA clearance, why wouldn’t VCs want to fund a company like this? I really believe that if this happened because of CEO or BOD greed, it will all come back to them some how, hopefully for the worst!

    Keep your eyes open, in years to come we will see this technology change medicine and a company that has a competant, unselfish leader will succeed tremendously…

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  18. From what has been posted above it appears that some folks are clearly not well informed as to what led to the end of Pegasus Biologics, but they are awfully good at speculating and rumor mongering.

  19. Oh wise one,please enlighten us. Tell us what the “real” inside story is. I’m sure the Angel investors would like to know where all their money went.

  20. Rumor mongering….? Rumors are started only because people don’t know the truth.

    I guess it is easier to lie about what led to the end of Pegasus…that’s what the CEO/BOD did. There wouldn’t be speculation if all the facts were given.

  21. Regarding the above post….’The Angel investors (Preferred) were required to contribute 43% of their original investment or suffer the same conversion to Common and 10 to 1 reverse split…..’
    Did any of the Angel investors contribute more money? Have any of you been contacted about putting even more money in, even at this late date? Are attorneys needed? It appears the Angels should combine their information rather than be at the mercy of company “spokepeople”
    who may have a hidden agenda.

  22. way to go Pegasus BOD/CEO/whoever allowed this to happen!!! Great job wasting money, people’s time, and even more an opportunity to change medicine!!!!

  23. Most companies have a business plan. Included in the plan are basic concepts like accountability, fiscal oversight and checks and balances. From day one every penny should have been accounted for. So what happened?

  24. The report is correct that Angels had to contribute 43% of their initial investment or be converted to common then suffer a 10 to 1 reverse split. But that plan blew up and is now moot.

    The company has been turned over to Gerbsman liquidators to be sold by sealed bid. Bidding closes June 26.

    The BOD/VC presented a new complex pay to play and gave the Angeles only 3 days to commit to a Lender Loan. No pay= revert to common and 10 to 1 reverse split. This is academic because the sale price won’t pay anything to stockholders.

    Why Not, you ask: Because those who put money into a $1,000,000 Lender Loan may, repeat may get up to 4×1 return, based on sale price. The VC have the right to put up $920,0000 of that amount in what appears to some to be a money grab. Most Angels haven’t a clue what is going on as very little info is available.

    The first money from a sale goes to the liquidator. Shockingly, the next money goes to 5 employees as “incentive” to stay on. They are believed to be getting full salary, medical insurance etc. These include the CEO, Marketing guy, VP Ops, CFO and one of the investors. None are likely to find work, so why the “incentive”? These 5 split 5% of the sale price before any investor sees a dime. To receive 4X1 return is a complex formula but it is thought a $14M sale price is needed.

    Certain significant employees are upset over the 4×1 payout and “incentive” payout when employees were laid off with no advance notice or severance pay.

    Certain Angeles are also upset over a number of issues. There is zero possibility for an Angel to get any money except to risk the Lender Loan. Any return would be taxed as straight income. The VC keep changing the game and the rules so who can believe them?

    Anyone interested in bidding can contact Pegasus for an information sheet with details of the company. They are fully cooperating on due diligence.

    What remains to been seen is whether any investors will make legal challenges which might have a chilling effect on a potential bidder.

    Twelve month trailing earnings are about $10M. Some think the co. will sell for one times sales. Some venture 1.5 times sales. But those are simply personal opinions.

    Most agree that someone is going to acquire the co. at a very low price relative to its value.

    A common question both inside and outside the co. is; how could they burn through $32M investors money plus $20M in earning without achieving profitability.

    One Angel reports that Chairman Keegan Harper has been paid $150,000 per year for two years to “mentor” CEO Wills. I have not been able to verify that report. Harper was the previous CEO but was seldom seen around the co. premises. It as been reported that Wills is a first time CEO.

  25. Gerbsman partners just posted the asset list on the shutdown of Pegasus Biologics. Please find the whole list at http://boic.wordpress.com

  26. Finally some answers!!! Thank you so much for helping some of us who are unable to get any info.

  27. This whole thing smells funny. Why a fire sale when the company had revenues, could have cut spending, negotiated with the bank for a few additional months of time, and sold the company through a controlled process.

    I think the angels here are getting shafted. they should band together to gain some insight as to how the BOD decided to hire Gerbsman without a vote or any information. Why not give the investors some time to contact their lawyers to see if bankrupcy may be a better option than this “throw the dog a bone” bridge loan which MAY pay 4x (no one seems to know what valuation will allow the bridge loan to achieve a 4x return).

    Why was the CEO hired if he had no CEO experience. Oh, maybe because the chair of the board could manipulate him and keep himself fat with the 4150K/year as a mentor. Why would Pb want a CEO who neeeds a Mentor?

    I think the 4x bridge is an attempt by Pb to get the angels to sign away their rights while a simple lawsuit or injunction (if possible) would surely spook any potential buyers of this great technology.

    I heard some insiders tried to set up a plan to buy the company to keep it solvent, yet was not discussed. i would like to know who hired gerbsman and what is to achieved by selling this company other than the bank and VC recoup their investments at the cost of the preferred.

    this is a classic money grab and I also heard the Chair made 440 million on a sale of another company (how many companies is this guy head of at the same time???) and would not use his own cash to put anything into PB to keep it moving forward.

    This whole thing smells…

  28. Don’t know a lot about the company from a financial perspective, but from a end user/sales force perspective-this company has been a disaster since the CEO was hired. When France Dixon decided/was forced to cut ties with Pegasus, a huge red flag was flown. Experienced/successful sales management bailed/ forced out. The CEO had no clue how to manage a sales force and treated the sales managers and sales force like disposable assets. Reap what you sow…

  29. one CEO fired, One that should have been fired. What a mess.

  30. Helfer got canned? I thought she was just going on to “more challenging opportunities”.

  31. Everyone should have known that trouble was coming when they announced Will as the new CEO. He is responsible for the failure. Sure the BOD should have known that he was executing the wrong strategy. But, it was his doing that killed the horse. What has he done before that proved he was the best person for the job? Who dug up Will and why did they put their millions behind him? Clueless!

  32. Must have been Keegan harper. he took $150K/year to be Will’s “mentor” and that was supposed to end after 1 year and did not. First, why would PB want a CEO who needs a “mentor” anyway? Also, I heard Harper took 1,000,000 common shares, and the BOD had no rights to get rid of him. From what i understand, harper was rarely if ever involved at all with PB and sat on many other boards at the same time, diverting his attention away from PB ills. That is a breach of is fiduciary responsibility.

    Also, Haper made Million (40) the week before when another company he was with (board member I guess) sold.This whole PB fiasco could have been avoided with a simple $2 Million bridge from Keegan alone. From what i gather, he said he does not invest in coimpanies that he is on the board of??? real ethical guy…

    Do not be surprised to see this predator surface in the company that upltimately get PB for pennies on the dollar.

    Will was also a commuter CEO. is that what a start-up needs? i am sure keegan picked Michael so he could mentor him for a lot of money and show him how to neglectfully run the company. What a mess…

  33. France Dixon Helfer was one of and the main Founder. She was the original CEO and on the board with other Founders. Soon, a B round was needed and Keegan Harper convinced FDH he could bring in the money. He insinuated himself as Chairman and CEO and squeezed out some of the Founders. FDH was bumped down to President. Later she was bumped out of the company, not by her choice. Harper took a large chunk of the company in stock plus cash as CEO, but as others have pointed out, he had little participation on site. He can not be dismissed by the BOD. Who dug up Will? The story I’ve heard is that he was hand picked by Harper, so even if Will has been a failure, the responsibility for that rests with Harper, his sponsor and mentor. The previous post suggests Harper will surface as new owner or part owner, probably behind a facade of VC. I would say that poster has it figured out. All of this seems to me a breach of fiduciary responsibility, but I’m not a lawyer. If you get a chance to hear Harper’s stump speech as why he is so successful, he goes on at length about the need to be ethical. I have been told by people who dealt with Harper that he out and out lied to them on a serious issue.

  34. Comment from medical device industry expert on financial analysis after reviewing a recent financial statement:

    "Key financial takeways:
    Losing dollars with an 80% margin due to Sales & Marketing Expenses running at 125% of revenue is ridiculous.

  35. I don’t know. After Googling Keegan Harper I have to say he has the right creds. He has a track record of bringing home the gold. He far and away has more experience than any of the other execs involved in the company. I don’t see him intentionally sinking the company if in fact it was on the brink of success. Something else is going on here.

  36. This illustrates the naivete of the founders of PB. Didn't they know that when the big money boys come in that they would wrest control of the company away from them?Here is a case where too much money (ironic huh?) came into the company coffers. This is what happens when you don't stick to your original business plan. When the Angel investors were first approached the plan was to get the basic company up and running. This included patents, FDA approvals and CE Marks. The goal was to get the company prepped for either sale or acquisition. Then entrpreneural madness took over. After the intitial Series A funding of $1.75 million in Jan. 2005. Series B funding came in June 2005(here comes Harper and the VC gang). It was a lovefest at first. The rest is history. It appears that for the Angels to have benefited by their investment, the company should have been sold/acquired in early 2006. Correct me if I'm wrong in that this was the original plan.Of course the company wasn't as big as now but it would have MAYBE still been under the control of the founders. Smaller return in 2006 vs. no return 2009. And just a question, where is the CFO in all this mess?

  37. Does anyone know who Pegasus was sold to last week?

  38. Synovis buys Pegasus Biologics
    Bid process resulted in $12.1M sale

  39. Keegan Harper also hired the General Manager/VP of Engineering at Vertiflex Spine who has a MBA from the University Of Pheonix (on-line degree)with no credability.But yet, it will not mention it on the website under "Management Team". I am sure this company will is also go down the tubes.

  40. Keegan Harper also hired Earl Fender as President and CEO when his GM/VP of Engineering (Also the founder of the technology) proved that he wasn't the leader to take them to the next stage.

    Also, I am sure that if he were more proud of the school he earned his MBA from it would be on the website.

    I don't think that your declarations about someone's education can even be considered valid though since you can't spell credibility.

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