June
8,
2007
VIA
FEDERAL EXPRESS AND EDGAR
United
States Securities and Exchange Commission
Office
of
Emerging Growth Companies
100
F
Street, NE - Mail Stop 3561
Washington,
D.C. 20549
Attn: Mr.
Duc
Dang
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Re:
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Healthcare
Acquisition Corp. Preliminary Proxy Statement on Schedule
14A
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Filed
on February 9, 2007 as subsequently amended by
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Amendment
No.1 to Preliminary Proxy Statement on Schedule 14A
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Filed
April 20, 2007
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File
No. 001-32587
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Ladies
and Gentlemen:
On
behalf
of Healthcare Acquisition Corp. (the “Company”
or
“HAQ”),
we
are electronically transmitting hereunder Amendment No. 2 (“Amendment
No. 2”)
to the
Preliminary Proxy Statement (the “Proxy
Statement”)
filed
with the Securities and Exchange Commission (the “Commission”)
on
February 9, 2007 and subsequently amended by filing of Amendment No. 1 filed
on
April 20, 2007 (“Amendment
No. 1”)
together with this letter which responds to the Staff’s comments to Amendment
No. 1 set forth in a letter from John Reynolds, Assistant Director, dated June
1, 2007 addressed to John Pappajohn, Chairman of the Board of the Company.
Marked courtesy copies of this filing are being sent via overnight courier
to
Messrs. John Reynolds, Duc Dang, David Link and David Walz.
We
are
authorized by the Company to provide the responses contained in this letter
on
behalf of the Company. In this letter, we have recited the comments from the
Staff in bold and have followed each comment with the Company’s response. Please
note that the entire filing has been modified and updated to reflect the
inclusion of unaudited financial statements for each of HAQ and PharmAthene,
Inc. at March 31, 2007, as well as the corresponding management’s discussion and
analysis.
As
we
have indicated in our telephone conversations with the Staff, we appreciate
any
assistance that the Staff can provide to complete this review. As we have
previously advised, HAQ must complete the acquisition before August 3, 2007
or
it will be required to liquidate. As a result, HAQ needs to be in a position
to
mail the Proxy Statement no later than June 22nd
to allow
sufficient time for solicitation. As a consequence, in accordance with Rule
14a-6(d) of the Securities Exchange Act of 1934, as amended, we have indicated,
and hereby advise the Staff, that the Company intends to mail on June 22,
2007.
General
Response
As
an
overall response to the Staff’s comment letter, we note that a substantial
number of the Staff’s comments relate to the issue of the valuation analysis
undertaken by the HAQ Board of Directors and its determination of fairness
of
the transaction from a financial point of view. We appreciate that the amount
of
the merger consideration actually being paid may not always be reflective of
the
value of the target. We further acknowledge that disclosures in the prior
filings of the Proxy Statement may have been insufficient disclosure regarding
the valuation analysis that was undertaken. As we briefly discussed in our
telephone conference with the Staff on Tuesday June 5th,
there
appears to have been lack of clarity in the prior filings regarding the value
determination process and the factors analyzed by the HAQ Board of Directors
in
determining that the 80% net asset value requirement had been satisfied. We
have, therefore, revised the disclosure in the discussion of the valuation
process undertaken by the Board of Directors in several sections throughout
the
Proxy Statement to clarify that, while a specific dollar value was not ascribed
to PharmAthene, a value range was determined.
However,
as previously noted, the HAQ Board of Directors neither sought nor obtained
any
third party valuation analysis or fairness opinion, nor undertook the type
of
valuation analyses which might have otherwise been included in a third party
fairness opinion. We have expanded disclosure in this regard and highlighted
this fact in a number of sections of Amendment No. 2 to the Proxy Statement
to
fully apprise stockholders and investors of the limitations of the review and
analyses undertaken by the HAQ Board.
For
example, we have included the following disclosure (or variations thereof)
in
the Notice of Meeting and letter to stockholders and Summary section, as well
as
in a Risk Factor:
“No
fairness opinion or valuation analysis from an independent third party was
obtained with respect to the Merger Proposal or the value of PharmAthene. The
Board of Directors of HAQ has determined that the fair market value of
PharmAthene exceeds 80% of HAQ’s net assets and that the terms of the Merger are
in the best interest of and fair to the stockholders. Such determination with
respect to the proposed Merger and the consideration being paid for PharmAthene
was based upon various factors as described in the enclosed proxy statement
including the Board’s internal analyses of PharmAthene’s business, technology
and future prospects, PharmAthene’s management and historical investments by
third parties into PharmAthene.”
We
have
also included disclosure in the Question and Answer section and similar
disclosure in the discussions under the headings “Background of the Merger” at
pages 57 to 66 and “HAQ’s Reasons for the Merger and Recommendation of the
HAQ Board” at pages 66 to 70.
General
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1.
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We
note your response to comment one of our letters dated March 20,
2007
concerning the disclosure that your board did not determine a specific
value for the target. Please revise the letter and notice to your
stockholders and summary section to highlight the fact that you did
not
determine the value of the target when you decided to enter into
the
business combination agreement. Please note that a determination
of value
and the purchase price are different issues.
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The
letter to stockholders and Notice of Meeting and Summary of the Terms at
page 2
and the Summary section at page 18 have been revised to clarify the extent
to
which, rather than determining a specific value for the target prior to
execution of the letter of intent, HAQ undertook analyses to establish a
value
range. Conforming disclosure has been included under the sections entitled
“Background of the Merger” at pages 57 through 66 and “HAQ’s Reasons for the
Merger and Recommendation of the HAQ Board” at pages 66 through
70.
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2.
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We
note your response to comment 41 of our letter dated March 20, 2007
that
you determined that the price negotiated by the parties reflected
the
value of the target. Based on your previous disclosure, you did not
determine the value of the target prior to entering into the merger
agreement. If so, please revise the appropriate section to clarify
that
you determined the consideration to offer the sellers without first
determining the value of the target. Also, please clearly explain
how you
negotiated the consideration without first determining a value for
the
target.
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We
have
included two new paragraphs at the bottom of page 61 in order to clarify
that a value, within a range, was established by the HAQ Board prior to the
submission of the initial letter of intent even though no specific value
was
assigned to PharmAthene. We have further expanded upon the negotiation process
throughout the "Background of the Merger" section at pages 57 to 66.
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3.
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Please
revise to include management compensation disclosure in the document
for
the target’s management during the past year. The CD&A disclosure
needs to include appropriate disclosure regarding the plan going
forward
after the merger to include any employment agreements or other
compensation arrangements entered into or amended as a result of
the
merger. Please refer to Item 402 of Regulation S-K. Additionally,
revise
to include Item 404 of Regulation S-K disclosure for PharmAthene.
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We
have
provided compensation disclosure regarding PharmAthene’s last fiscal year as
well as CD&A disclosure for PharmAthene commencing at page 124 of the
Proxy Statement. Additionally, CD&A relating to compensation plans for the
combined company going forward after the merger is included at page 146 of
the Proxy Statement.
Notice
of Special Meeting
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4.
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We
note your statement that “[i]f the Merger Proposal is not approved,
it
is likely that HAQ will have insufficient time and resources to seek
another suitable business combination
and will have to commence the winding up, dissolution and liquidation
of
HAQ ...” (emphasis added). We also note your statements in the Form S-1
that “If we enter into either a letter of intent, an agreement in
principle or a definitive agreement to complete a business combination
prior to the expiration of 18 months after the consummation of this
offering, but are unable to complete the business combination within
the
18-month period, then we will have an additional six months in which
to
complete the business combination contemplated by the letter of intent,
agreement in principle or definitive agreement. If we are unable
to do so
by the expiration of the 24-month period from the consummation of
this
offering, we will then liquidate.” Please revise to clarify throughout the
proxy that if the merger proposal is not approved then HAQ will have
to
commence the winding up, dissolution and liquidation of
HAQ.
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We
have
revised the disclosure throughout the Proxy Statement to clarify that if
the
Merger Proposal is not approved, HAQ will have to commence the winding up,
dissolution and liquidation of HAQ; please see, in particular, the Notice
to
Stockholders and pages 4, 8, 9, 15, 72 and 135.
Summary
of the Material Terms of the Merger, page 1
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5.
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Here
and where you discuss the basis for the consideration being offered
to
PharmAthene, please revise to quantify, to the extent practicable,
the
value of such
consideration.
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We
have
revised the disclosure throughout the Proxy Statement to include reference
to
the potential aggregate value of the merger consideration; please see in
particular, the letter to stockholders, Notice of Meeting holders and pages
2,
7, and 18, and 57.
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6.
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Please
revise to clarify in the penultimate bullet point on page two that
the
board also did not make a determination as to the value of the target.
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As
noted
in the general response above, we have provided revised disclosure on this
issue
in various sections of the Proxy Statement including in the penultimate bullet
point on page 2 to indicate that the Board reviewed information relating to
a
value range for PharmAthene.
What
happens if the Merger is not consummated, page 9
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7.
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We
note your response to comment 17 of our letter dated March 20, 2007.
We
reissue the comment. Please revise to quantify your current outstanding
liability and disclose the amount covered by waivers.
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We
have
modified the disclosure at pages 9 and 132 to provide more extensive disclosure
in response to the Staff’s comment to detail the exact amounts of any
outstanding liabilities and the amount of liabilities covered by waivers.
Summary
of the Proxy Statement, page 11
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8.
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We
note your response to comment 18. Please revise to clarify that the
combination must be with a target business or for assets
whose
fair market value
is at least equal to 80% of the net assets of HAQ at the time of
such
acquisition.
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We
have
provided revised disclosure at page 11 in accordance with the Staff’s comment to
address the 80% requirement.
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9.
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We
note the disclosure on page 12 that “stockholders holding an aggregate of
up to 2,328,835 shares of common stock could convert such shares
and the
merger may still be consummated.” It is not clear how you arrived at that
figures since it appears to be greater than 20% of the shares issued
in
your initial public offering. Your disclosure on page 16 indicates
that if
1,880,000 or more shares exercise conversion the merger will not
be
consummated. Please revise to clarify.
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We
note
the Staff’s comment and advise the Staff that the reference to 2,328,835 shares
was a typographical error; this has been corrected at page 15 of the Proxy
Statement.
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10.
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We
note the additional disclosure on page 16 concerning the open market
purchases by your officers and directors. In the appropriate sections,
please revise to discuss the parameters of these purchase plans.
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We
have
added footnote disclosure to detail the stock purchase plans adopted by certain
members of the HAQ Board and management team. The disclosure is repeated
on
pages 17, 55, 56, 149 and 152 of the Proxy Statement.
Risk
Factors
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11.
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We
note your revisions to risk factor 2. Please reinsert your discussion
addressing your first product Dominate Negative Inhibitor and that
the
program was subsequently
terminated.
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In
response to the Staff’s comment, we have revised the second risk factor, now
found on page 35 of the Proxy Statement, to reinsert the discussion
relating to PharmAthene’s first product, Dominate Negative Inhibitor, and the
fact that the program was terminated.
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12.
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We
note the revision in the first risk factor on page 39 removing the
language that your board “did not determine a specific valuation of
PharmAthene at the time it entered into the merger agreement.” Please
advise why the noted disclosure has been removed. Also, please revise
to
clarify that you determined the price to be fair without first determining
the value of the target, if true.
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We
refer
the Staff to our general response above. We have provided revised disclosure
in
the first risk factor on page 32 to address the Staff’s concern by
indicating that although HAQ determined a value range for PharmAthene it
did not
establish a specific value for the target at the time it entered into the
Merger
Agreement. See also our response 13 below.
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13.
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We
note your response to comment 39. We continue to believe that you
should
more prominently disclose the risk factors “There was no independent
valuation of PharmAthene undertaken by HAQ ...” and “A stockholder may
make a claim against HAQ for taking actions inconsistent with the
IPO
prospectus ....”
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In
light
of the Staff’s position, we have relocated all of the risk factors relating to
the merger to the beginning of the Risk Factor discussion and have given
prominence in order to the risk factor relating to the absence of an independent
valuation of PharmAthene. Please see page 32. As stated above in our general
response, we have, in order to make it absolutely clear to stockholders that
the
Board of Directors of HAQ did not obtain any independent valuation of
PharmAthene or a fairness opinion, we have modified the first risk factor
as
follows:
“The
Board of Directors of HAQ did not obtain any fairness opinion or independent
valuation analysis of the value of PharmAthene, or that the Merger consideration
being paid for PharmAthene was fair to the stockholders of HAQ and no assurance
can be given that the determination by HAQ’s Board of Directors represents the
actual value of PharmAthene or that you will receive the value of your
investment.
The
Board
of Directors of HAQ has not obtained an independent opinion regarding the
valuation of PharmAthene or that the terms of the Merger, including the
consideration to be paid, are fair to the stockholders of HAQ. Although the
Board of Directors of HAQ undertook an analysis of the business and financial
conditions and prospects of PharmAthene in making its determination as to the
value of PharmAthene and the fairness of the terms of the Merger, there can
be
no assurance that an independent analyses would arrive at the same conclusion.
Current HAQ stockholders and prospective investors must rely on their own
business and investment background, and their own investigation of PharmAthene,
and the proposed business of the combined company in determining whether to
vote
in favor of the Merger Proposal or invest in HAQ. The HAQ Board of Directors
did
not undertake or complete a valuation analysis which might have been undertaken
by an independent financial advisor in a review of the proposed Merger for
a
determination of fairness from a financial point of view. The Board of Directors
and management of HAQ relied upon their own business experience and the
expertise of its individual members in the areas of mergers and acquisitions
and
finance in determining the range of value of PharmAthene in which PharmAthene
should be considered and whether the terms of the Merger are fair to
stockholders. Although we have knowledge of PharmAthene’s business and the
industry, it is possible that the actual value of PharmAthene’s business is
lower than HAQ could realize upon a sale of the combined company or its assets.
No assurances can be given that you will receive the value of your investment
upon disposition thereof.”
Conversion
Rights, page 48
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14.
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We
note your response to comment six of our letter dated March 20, 2007
and
the revised disclosure on page 48. Please revise to specifically
disclose
the deadline which shareholders have to tender their shares in order
to
receive a pro-rata portion of the trust account if they exercise
conversion.
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We
have
modified the disclosure, now appearing at pages 8, 15 and 54 of the Proxy
Statement to state that investors have until the third business day following
consummation of the Merger, assuming it is approved, and assuming they have
voted against the Merger and stated their intention to convert their shares,
to
tender their share certificates to participate in the
conversion.
Background
of the Merger, page 51
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15.
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We
note your response to comment 52 of our letter dated March 20, 2007
that
you have revised page 52 to highlight the 18 month deadline you were
required to locate a target. We are not able to locate your response
on
page 52 of the proxy. It appears you instead disclosed the 24 month
deadline. When discussing your negotiations with the target, please
revise
to highlight the proximity of the 18 month deadline by which you
were
required to at least locate a
target.
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We
note
the Staff’s comment and advise the Staff that we had previously deleted the
disclosure because the 18-month timeframe no longer seemed relevant to the
stockholder approval process, since HAQ had satisfied that condition. However,
we note that the Staff views the entire timeline as relevant and, accordingly,
we have modified the disclosure to include reference to the 18-month deadline
and to also state that the letter of intent executed with PharmAthene was
executed 53 days prior to the 18-month deadline. Please see page 58 of the
Proxy
Statement.
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16.
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We
note the additional disclosure on page 54 that the consideration
value for
the target offered by SIGA would have increased to $414.5 million
following SIGA’s announcement of news about one of its products. It is not
clear how the increase in the SIGA consideration to $414.5 million
is
relevant given that announcement occurred after the termination of
the
merger agreement. Please clarify.
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We
note
the Staff’s comment and advise the Staff that the language regarding the
proposed SIGA merger, as originally drafted, was intended to respond to Comments
48 and 49 from the Staff’s comment letter dated March 20, 2007. We have deleted
the reference to the increase in the SIGA consideration since it appears to
have
caused confusion.
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17.
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We
note that you deleted your prior disclosure indicating that “there were no
pre-existing relationships between any of our initial stockholders
and any
insiders of PharmAthene.” Revise to include that disclosure or clarify the
pre-existing
relationships.
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We
had
modified the disclosure in Amendment No. 1 to respond to prior comments and
believed we had covered this concept. In response to the Staff’s comment, we
have re-inserted the previously deleted statement. Please see page 60 of
the
Proxy Statement.
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18.
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We
note that on October 12, 2006 PharmAthene provided Mr. Kinley and
Dr.
Schaffer certain financial information which included projections
and cash
flow analyses. Advise us who prepared the projections. Supplementally,
provide us with these projections. In addition, please provide us
with a
detailed analysis for any conclusion that the non-public information
is
not material and therefore need not be disclosed. We may have further
comment.
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We
have
expanded the disclosure contained on pages 61 to 70 of the Proxy Statement
to,
among other things, set forth in the projections utilized by HAQ in its analyses
and to indicate the source of such projections. We specifically refer you
to the
final two paragraphs on page 61 and the discussion beginning on page
66.
We
have provided the projections, which were included in
presentation materials, in hard copy form and not attached to the EDGAR
filing of this correspondence letter.
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19.
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We
note the revised disclosure on page 55 that on October 24, 2006,
Mr.
Kinley spoke with Messrs. Berger, Schellhammer, Pappajohn and Dr.
Schaffer
to review “the proposed valuation.” Please revise to identify the party
that performed the
valuation.
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We
refer
the Staff to our general response above and note, in particular, that revised
disclosure reflecting the management determined range of value has been provided
at page 61 of the Proxy Statement.
We
have
also modified the sentence to which the Staff refers to read as follows (changes
shown in italics):
“On
October 24, 2006, Mr. Kinley spoke on the telephone with Messrs. Berger,
Schellhammer and Pappajohn and Dr. Schaffer to review the terms of the draft
letter of intent, the valuation
range for PharmAthene that HAQ’s management had been considering and how it
resulted in the proposed merger consideration
for
PharmAthene and to respond to questions from them regarding the business plan
and other relevant information with respect to the business of
PharmAthene.”
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20.
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We
note your response to comment 55 that The Maxim Group prepared no
reports
or presentations to the board members prior to the board’s determination
on January 16, 2007 to approve the merger. We cannot locate your
disclosure that there were no presentations or reports prepared by
The
Maxim Group prior to the board's determination on January 16, 2007
to
approve the merger. Additionally, address whether any presentations
or
reports were prepared by the company's management concerning PharmAthene's
valuation that were presented to board
members.
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We
have
included several references in the Proxy Statement, including at pages 61,
62 and 149, to indicate that The Maxim Group did not provide any formal
analyses to HAQ regarding PharmAthene.
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21.
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We
note your response to comment 53. Revise to indicate that The Maxim
Group
did not provide any written or formal analysis in determining the
consideration to be paid to the PharmAthene security holders.
Additionally, we note that The Maxim Group was consulted on numerous
occasions with regard to the valuation of PharmAthene. Discuss in
detail
the services provided by The Maxim Group in connection with the valuation
of PharmAthene.
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We
have
added the following disclosure at page 62 of the Proxy Statement in
response to the Staff’s comment:
“Following
conversations with representatives of PharmAthene, Mr. Kinley had further
discussions with representatives of The Maxim Group as well as with Messrs.
Pappajohn and Berger and Dr. Schaffer with respect to merger consideration
and
PharmAthene’s value. Management of HAQ did not request or receive any formal
valuation analysis or reports from The Maxim Group related to the value of
PharmAthene. Representatives of The Maxim Group were utilized by HAQ management
to consult with regarding certain terms of the negotiations related to the
merger consideration and the components parts of the consideration. Further,
since The Maxim Group had acted as the underwriter in HAQ’s IPO, and was
involved in several other “SPAC” merger transactions, HAQ management consulted
with The Maxim Group with a view towards assessing whether the investment
community would be receptive to the terms of the proposed Merger with
PharmAthene.”
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22.
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We
note your response to comment 53. Revise to indicate the valuation
analyses performed by the Board of Directors prior to or during the
merger
negotiations until the Board approved the merger on January 16, 2007.
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Additional
disclosure has been provided at pages 61 through 62 and 66 through
70 to furnish greater detail regarding the valuation analyses undertaken by
the HAQ Board.
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23.
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Please
revise to clarify if the “draft letter of intent” included the
consideration you would pay for the target. If the draft letter included
the consideration, please revise to discuss how the consideration
changed,
if any, as the draft letter was revised.
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We
have
revised the disclosures contained on pages 61 through 64 of the
“Background of the Merger” section of the Proxy Statement to clarify that the
consideration to be paid was modified a number of times subsequent to the
initial draft letter of intent as a consequence of the negotiation
process.
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24.
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On
page 56, we note the revised disclosure that you discussed the valuation
with “Messrs. Wright and Richman.” If the valuation was internal, please
revise to discuss the reasons you would discuss such valuation with
the
target.
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We
have
modified the disclosure on page 62 of the Proxy Statement to indicate that,
during the meeting on November 7, 2006, the parties discussed specific issues
relating to the valuation range, the merger consideration to be paid by HAQ
to
PharmAthene and other issues relating to the capitalization of PharmAthene,
including its stock option plan and its preferred stock structure. The
discussion regarding valuation was instigated by PharmAthene and its
representatives to negotiate for increased merger consideration. As previously
advised, the entire discussion on pages 61 to 64 has been
enhanced.
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25.
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Please
revise to indicate the subjects discussed at the December 12, 2006
meeting.
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We
have
revised the disclosure at page 64 of the Proxy Statement to indicate the
subjects discussed at the December 12, 2006 meeting.
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26.
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Please
revise to briefly indicate the services provided by Mr. Kaufman.
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We
have
provided the requested disclosure at page 64 of the Proxy
Statement.
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27.
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We
note the additional disclosure that BDR Research Group (BDR) provided
you
with a written report. Please revise to discuss the material content
of
the report.
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We
have
revised the disclosure with respect to the BDR Research report at page 64
of the
Proxy Statement to summarize the material content of such
report.
HAQ’s
Reasons for the Merger and Recommendation of the HAQ Board, page 59
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28.
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We
note your statement that “Management of HAQ undertook a financial analysis
of PharmAthene in order to determine that the value of the consideration
to be issued by HAQ in connection with the Merger is fair and reasonable.”
Please revise to indicate, in this section, that the board of directors
of
HAQ determined that the consideration to be issued was fair from
a
financial point of view.
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We
have
modified the discussion beginning at page 66 of the Proxy Statement in
accordance with the Staff’s request to indicate that the Board of Directors of
HAQ made a determination that the consideration to be issued was fair from
a
financial point of view.
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29.
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We
note your prior statement that the HAQ Board of Directors determined
that
the consideration to be paid by HAQ is fair from a financial point
of
view. We also note your revisions in this section in response to
comment
41. Please revise this section to specifically address how the Board
of
Directors of HAQ determined that the consideration was fair from
a
financial point of view. Address in detail the specific valuations
of
PharmAthene performed which lead to the conclusion that the merger
consideration to be paid by HAQ is fair from a financial point of
view. We
may have further comment.
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We
have
modified the discussion in accordance with the Staff’s request to address
specifically how the Board of HAQ came to its determination.
Please
note the enhanced discussion at pages 66 through 71 of the Proxy Statement
under
the sections entitled “Background of the Merger” and “HAQ’s Reasons for the
Merger and Recommendation of the HAQ Board.”
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30.
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We
note the revised disclosure on page 60 that you undertook a financial
analysis of the target. Please revise to provide more detail regarding
that financial analysis performed. In doing so, disclose the method(s)
of
analysis and the figures used in such analysis. If projections or
estimates were used, please provide the basis for such numbers. Also
clarify when the financial analysis took place.
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We
have
enhanced the discussion in accordance with the Staff’s comment. Please see the
discussions at pages 66 through 71 of the Proxy Statement. We have included,
among other disclosure, a table of the comparative analysis undertaken by
HAQ’s
management.
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31.
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We
note the additional disclosure on page 60 that management also considered
the value of the “intellectual property position.” Please revise to
discuss how management valued the “intellectual property position.” In
that regard, also clarify the meaning of the noted phrase. Clarify
how it
is different than the value of the intellectual property
itself.
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We
note
the Staff’s comment and advise the Staff that, because management’s
consideration of the intellectual property was on a qualitative rather than
a
quantitative basis which did not ascribe “value” per se, we have deleted the
statement in order to avoid any confusion.
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32.
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On
page 60, we note that you disclose that you “recognized” historical
valuations of “MPM Capital, HealthCare Ventures and Bear Stearns Health
Innoventures.” As management considered those valuations material to its
determination of consideration, please revise to elaborate on those
here.
Also, please revise to clarify if it is a generally accepted by the
financial community to base a company’s value by its private
placements.
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We
have
changed the title of this paragraph at page 69 to “Historical Investments
by Recognized Venture Capital Investors.” We believe this new title better
explains the factors considered by HAQ’s management. We have also included the
following new disclosure in the paragraph:
“HAQ’s
management believes that the historical investments of the venture capital
market in PharmAthene were a valid factor to consider in determining the
valuation of PharmAthene and are recognized by the investment community as
legitimate indices of valuation. Further, HAQ management believes that the
willingness of these venture capital investors to continue to be stockholders
in
the post merger company reflected their belief in PharmAthene’s business and
prospects. As with the other factors considered and discussed in the proxy
statement, the historical level and types of investment were just one of the
factors considered.”
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33.
|
It
is not clear how the “significant advances” by PharmAthene executives was
considered as part of your valuation of the equity interest in
PharmAthene. Please revise to clarify. Also, please clarify your
use of
the term "significant" in the noted
disclosure.
|
We
have
revised the disclosure at page 69 of the Proxy Statement to remove the term
“significant” and to specify what advances were considered.
|
34.
|
We
note the additional disclosure that “in each instance, HAQ management
determined that the valuation for PharmAthene was, in fact equal
or
greater than the value of the consideration ascribed for PharmAthene.” We
also note disclosure in your initial proxy that you did not determine
a
value for the target. Please revise to clarify when you made the
determination in the noted disclosure on page 60.
|
We
have
modified the discussion referred to on page 60 of the Proxy Statement in
accordance with the Staff’s comment. Please note the enhanced discussions at
pages 57 to 71 under the sections entitled “Background of the Merger” and
“HAQ’s Reasons for the Merger and Recommendation of the HAQ Board” are intended
to address the Staff’s concerns.
|
35.
|
We
note the additional disclosure concerning the industry recognition
you
enjoy on page 60. Please revise to disclose if you quantified this
factor
in determining the value of the target.
|
We
have
modified the discussion at pages 57 to 71 under the sections entitled
“Background of the Merger” and “HAQ’s Reasons for the Merger and Recommendation
of the HAQ Board” in accordance with the Staff’s comment to indicate the
difficulties associated with quantifying such industry recognition.
|
36.
|
Revise
your disclosure under Industry Presence to clarify that the contract
with
the Department of Defense for Protexia is for $35 million.
|
We
have
revised the disclosure on page 69 of the Proxy Statement to more clearly
indicate that PharmAthene’s basic contract with the Department of Defense is for
$35 million and that it is only with options and extensions that the contract
could amount to up to $213 million in revenues
|
37.
|
We
note the disclosure concerning the valuation of comparable companies
on
page 61. Please revise to fully discuss this analysis. Identify the
six
companies deemed comparable and disclose their revenues, profits
and
market capitalization so that investors understand management’s
considerations.
|
We
have
provided additional disclosure on page 68 of the Proxy Statement to include
a comparative analysis chart with respect to five companies which was reviewed
and considered by management. Information with respect to revenues, profits
and
market capitalization has been included.
|
38.
|
We
note the disclosure of the government awarded contracts on page 61
as a
reason for recommending the merger. Please revise to clarify if those
are
funded or non-funded contracts.
|
We
have
revised the disclosure at page 70 of the Proxy Statement to clarify that
the government contracts are funded.
|
39.
|
We
note the reference to the involvement of the target’s security holders on
page 61 as a positive for this transaction. Please revise to identify
those security holders and discuss their involvement.
|
We
have
revised the disclosure at page 70 of the Proxy Statement to identify the
target’s security holders and to discuss their involvement with PharmAthene and
the post-merger entity.
|
40.
|
We
note your response to comment 66. We cannot locate the discussion
regarding PharmAthene’s business strategy in determining to recommend the
merger. Please advise or revise.
|
We
refer
you to the second bullet point on page 69 of the Proxy Statement entitled
“Quality of and Strategy for Revenue Growth for PharmAthene’s Two Leading
Products”, which includes a discussion regarding HAQ’s analysis of PharmAthene’s
business strategy.
|
41.
|
We
note your response to comment 65 of our letter dated March 20, 2007
that
you have discussed the aspect of the target's financial results that
the
company considered on pages 60 and 61. We are not able to locate
such
disclosure. Please advise.
|
Please
note the enhanced disclosure at pages 59 to 71 under the sections
entitled “Background of the Merger” and “HAQ’s Reasons for the Merger and
Recommendation of the HAQ Board.” Specifically, at pages 66 to 70 a
detailed discussion of the analyses undertaken by HAQ’s Board based upon the
financial information provided by PharmAthene has been
included.
Satisfaction
of 80% requirement, page 61
|
42.
|
Please
revise to discuss in detail the analysis performed by the board of
directors in determining that the fair market value of assets being
purchased was at least equal to $110 million. Also indicate the valuation
used for the SIGA Technologies transaction in establishing the value
of
the assets being acquired. We may have further
comment.
|
We
have
modified this discussion in accordance with the Staff’s request and in
conformity with our general response. Please note the enhanced disclosure at
pages 57 to 71 under the sections entitled “Background of the Merger” and “HAQ’s
Reasons for the Merger and Recommendation of the HAQ Board” to more fully
describe the analyses performed by the HAQ Board.
Consequences
if Merger Proposal is Not Approved, page 62
|
43.
|
We
note your statement that “in such an event its likely that management of
HAQ will not have the time ... to find a suitable business combination
partner ....” (emphasis added). We note your Form S-1 indicates that “we
will dissolve and promptly distribute only to our public stockholders
the
amount in our trust fund ... if we do not effect a business combination
within 18 months after consummation of this offering (or within 24
months
from the consummation of this offering if a letter of intent, agreement
in
principle or definitive agreement has been executed within 18 months
after
consummation of this offering and the business combination has not
yet
been consummated within such 18 month period).” It does not appear that
the company may find a subsequently proposed combination at this
time.
Please revise you disclosure throughout the
document.
|
We
have
revised the disclosure throughout the Proxy Statement and, in particular,
at
pages 45, 47, 48, 58, 65, and 72, to clarify that if this business combination
is not consummated, management will be required to liquidate.
Recommendation,
page 63
|
44.
|
Considering
this subsection shortly follows the disclosure on pages 60-61, it
is not
clear how the summary positive factors enhance your disclosure. It
appears
repetitious. Please revise as appropriate.
|
We
have
deleted the repetitious disclosure.
|
45.
|
We
note the negative factors disclose on page 64 in a highlighted summary
format following the summary positive factors. To present balanced
disclosure, please revise to relocate the noted disclosure to the
subsection where you discuss the reasons for the merger on pages
60 and
61.
|
The
negative factors have been re-located to the section entitled “HAQ’s Reasons for
the Merger and Recommendation of the HAQ Board.” Please see page 70 to 71 of the
Proxy Statement.
Recent
Events, page 95
|
46.
|
We
note the additional disclosure that on March 30, 2007 the target
borrowed
$10 from Valley Bank and Oxford Finance Corporation and secured
such loan
with its assets. Please revise to discuss your intentions, if any,
to
repay the loan with the proceeds of the
trust.
|
We
have
provided additional disclosure at page 102 of the Proxy Statement to
indicate that the loan from Silicon Valley Bank and Oxford Finance Corporation
may not be repaid prior to October, 2007. Although the facility
may
be
repaid after such date to the extent there are funds available that could
be used for such repayment, Management has not made any determination to
prepay
the line.
Information
About PharmAthene, page 106
|
47.
|
Please
revise the overview section to indicate the actual amount of the
contract
with DoD for the advanced development of Protexia.
|
We
have
revised the disclosure on page 69, 70, 101, 103, 111, 118 of the Proxy Statement
to more clearly indicate that PharmAthene’s basic contract with the Department
of Defense is for approximately $35 million and that it is only with options
and
extensions that the contract could amount to up to $213 million in
revenues.
|
48.
|
We
note your response to comment 76. Supplementally provide us the articles
or studies that support the belief that Protexia could be used to
treat
cocaine and heroin addiction.
|
We
note
the Staff’s comment and have provided supplementally the following articles
supporting the belief that Protexia® may
have
utility for the treatment of cocaine and heroin addiction:
“Intravenous
butyrylcholinesterase administration and plasma and brain levels of cocaine
and
metabolites in rats” written by Gilberto N. Carmona, Charles W. Schindler, Nigel
H. Greig, Harold W. Holloway, Rebecca A. Jufer, Edward J. Cone and David A.
Gorelick, published in the European Journal of Pharmacology, 517
(2005).
“Agents
in Development for the Management of Cocaine Abuse” written by David A.
Gorelick, Eliot L. Gardner and Zheng-Xiong Xi, published in Drugs 64
(2004).
“Butyrylcholinesterase
Accelerates Cocaine Metabolism: In Vitro and In Vivo Effects in Nonhuman
Primates and Humans” written by Gilberto N. Cremona, Rebecca A. Jufer, Steven R.
Goldberg, David A Gorelick, Nigel H. Grieg, Qian-Sheng Yu, Edward J. Cone and
Charles W. Schindler, published in Drug Metabolism and Disposition
(1999).
“Enhancing
cocaine metabolism with butyrylcholinesterase as treatment strategy” written by
David A. Gorelick, published in Drug and Alcohol Dependence 48
(1997).
“Human
erythrocyte but not brain acetylcholinesterase hydrolyses heroin in morphine,”
written by A.Y. Salmon, Z. Goren, Y. Avissar and H. Soreq, published in Clinical
and Experimental Pharmacology and Physiology (August 26, 1999).
“Hydrolysis
and diacetylmorphine (heroin) by human serum cholinesterase, “ written by O.
Lockridge, N. Mottershaw-Jackson, H.W. Eckerson and B. N. La Du, published
in
the Journal of Pharmacology and Experimental Therapy (October
1980).
|
49.
|
We
note disclosure that you are developing Valortim with Medarex, Inc.
(Medarex) and that proceeds from sales, if any, will be divided between
you two depending on your contributions. Please revise to elaborate
on
this and clarify approximately what percentage is allocated to you.
|
We
note
the Staff’s comment and advise the Staff supplementally that PharmAthene’s
contract with Medarex, Inc. contains a confidentiality provision which includes
the requirement to maintain in confidence the terms of the agreement. As a
consequence, we have not provided greater detail concerning the allocation
of
sales proceeds under the agreement.
|
50.
|
We
also note disclosure on page 113 that the government has awarded
Medarex
funds to develop Valortim. Please revise to clarify if you receive
any of
those funds.
|
We
have
provided additional disclosure at page 118 of the Proxy Statement to
clarify that PharmAthene does not receive any of the funds which were awarded
to
Medarex by the U.S. government to develop Valortim™.
|
51.
|
Please
revise to identify your patents and applications by disclosing the
patent
and application numbers and their duration. Also, clarify the owner
of the
patent to the technology that yielded
Valortim.
|
We
have
provided additional disclosure at page 119 of the Proxy Statement to identify
our patents and provide greater clarity regarding ownership of the Valortim™
technology.
Certain
Relationships and Related Party Transactions, page 136
|
52.
|
We
note your response to comment 82 that you have disclosed the amount
of
reimbursable expenses that remain outstanding on page 136. We are
not able
to locate such disclosure on page 136. Please advise.
|
Please
note the following disclosure which was set forth on page 136 of Amendment
No. 1
and is now set forth page 149 of Amendment No 2:
In
connection with our IPO, Mr. Pappajohn, Dr. Schaffer
and Mr. Kinley loaned HAQ a total of $250,000 which was used to pay a portion
of
the expenses of our IPO, such as SEC registration fees, NASD registration
fees,
AMEX listing fees and legal and accounting fees and expenses. These loans
were
repaid out of the net proceeds of our IPO not placed in
trust.
Financial
Statements
Index
to Financial Statements, page FS-1
|
53.
|
Revise
the index to your financial statements to properly reflect the
consolidated financial statement periods included for PharmAthene,
Inc.
|
We
have
revised the index to the financial statements at the page between 160 and
FS-1 of the Proxy Statement to properly reflect the periods covered for the
consolidated financial statements of PharmAthene.
Report
of Independent Auditors, page FS-16
|
54.
|
We
note your response to prior comment 88. Please revise PharmAthene’s audit
report to comply with Article 2-02 of Regulation S- X. Your current
report
is not signed by your auditor. In addition, the report fails to indicate
the city and state where the report was issued.
|
We
have
revised PharmAthene’s audit report at page FS-15 of the Proxy Statement to
comply with Article 2-02 of Regulation S-X.
|
55.
|
Note
3 to PharmAthene’s financial statements indicates the Consolidated
Financial Statements have been prepared on a basis which assumed
the
company will continue as a going concern, given PharmAthene’s cumulative
net losses and limited capital resources. Revise your Report of
Independent Auditors accordingly to make reference to this disclosure,
or
tell us why you believe such disclosure is not
necessary.
|
We
have
provided revised disclosure in Note 3 beginning on page F-22 to PharmAthene’s
financial statements of the Proxy Statement to correct the prior
disclosure.
If
you
have any questions, please contact the undersigned at 212-370-1300, or Matthew
P. Kinley, the Company’s President, at 515-244-5746.
| Very truly yours, | ||
| ELLENOFF GROSSMAN & SCHOLE LLP. | ||
| |
|
|
| By: | /s/ Brian C. Daughney | |
|
Brian C. Daughney |
||
|
cc:
|
Duc
Dang
|
|
|
David
Link
|
||
|
John
Pappajohn
|
||
|
Matthew
P. Kinley
|
||
|
Jeffrey
Baumel, Esq.
|