Ellenoff
Grossman & Schole LLP
370
Lexington Avenue - 19th
Floor
New
York, New York 10017
Tel.
No.: 212-370-1300
Fax
No.: 212-370-7889
July
12,
2007
VIA
EDGAR
Mr.
John
Pappajohn, Chairman of the Board
Healthcare
Acquisition Corp
2116
Financial Center
666
Walnut Street
Des
Moines, Iowa 50309
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Re:
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Healthcare
Acquisition Corp
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Preliminary
Proxy Statement Amendment No. 3
Filed
on June 29, 2007
File
No. 1-32587
Ladies
and Gentlemen:
On
behalf
of Healthcare Acquisition Corp. (the “Company”
or
“HAQ”)
we are
submitting our response to the Staff’s comments in a letter from John Reynolds,
Assistant Director, dated July 11, 2007 addressed to John Pappajohn, Chairman
of
the Board of the Company. Set forth below is the actual Staff comment and
our response.
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. We must provide at least 10 days notice
to stockholders of the meeting, and given the time necessary to print the
proxy statement and mail, we must clear the review process by mid-morning on
Friday in order to hold our meeting date on July 27th. We have also attached
the
actual pages which have changed in accordance with our responses below to assist
you in your review.
General
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1.
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We
note your response to comments seven and eight of our letter dated
June
26, 2007 and the additional disclosure on pages 66 and 68. The additional
disclosure states that your management believes that the revenue
projections provided by PharmAthene were prepared using similar criteria
and methods considered by research analyst. Please revise to clarify
the
basis and confirm if the companies with drugs not yet marketable
also rely
on estimates of possible sales to SNS.
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We
have
revised the disclosure as requested. Specifically, we have added language
at page 66 of the Proxy Statement to include the following
statements:
Management
of HAQ reviewed several publicly available research reports prepared by third
party analysts regarding the peer group companies and compared the criteria
utilized in these reports to the criteria utilized by PharmAthene in its
projections. At least two of the reports included discussions of estimates
related to potential revenues of the peer group companies for product
undertakings in the bio defense arena for their products to U.S. government
agencies, including the United States Strategic National Stockpile. The analyst
reports contained summaries of the businesses of the peer group
companies, and their significant products under development,
projections for existing and future products, potential grants and research
contracts, pending research and development projects, potential financial
milestones and related materials. HAQ’s management determined that the criteria
utilized by PharmAthene in preparing its projections were similar to those
considered by third party industry analysts for publicly traded companies within
the peer group.
As
supplemental information in response to the Staff’s comment, we advise the Staff
HAQ’s management reviewed the following research reports:
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·
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a
research report on SIGA Technologies, Inc. dated November 22, 2006
prepared by Advent Financial;
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·
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a
research report on Avi BioPharma, Inc. dated November 16, 2006
prepared by
Rodmen & Renshaw;
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·
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two
research reports on BioCryst Pharmaceuticals dated February 17,
2006 and
August 10, 2006, respectively, prepared by C. E. Unterberg, Towbin
and
Rodman and Renshaw, respectively;
and
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·
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a
research report on AVI BioPharma, Inc. dated August 9, 2006, prepared
by
Rodman and Renshaw.
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2.
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In
connection with the preceding comment, please revise to clarify if
you
received any direct indication from SNS that they would purchase
your
products.
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We
have
revised the disclosure as requested. Specifically, we have added additional
language at page 70 of the Proxy Statement to include the following
statement:
Although
management of PharmAthene has engaged in discussions with the Department of
Homeland Security and the Department of Health and Human Services regarding
its
products and their potential efficacy in addressing national bioterrorism
concerns, PharmAthene has not received any definitive indications or statements
or commitments from the SNS that it will make purchases from PharmAthene.
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3.
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We
note the additional disclosure on page 69 in response to comment
12 of our
letter dated June 26, 2007. Please revise to clarify how you “tempered
such consideration” because of the different rights and abilities of the
private investors versus common stock holders. In that regard, reconcile
the “tempering” with the fact that the target based the share price on the
price of the preferred securities.
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We
have revised the disclosure as requested. Specifically, we have added additional
language at pages 71 to 72 to include the following
statements:
HAQ’s
management
recognized that although holders of preferred stock may allocate a greater
value
to preferred shares than common shares because of certain of their control
provisions, they also recognized that such advantages generally are more
important in allocating relative value among equity holders rather than as
a
factor in adjusting total valuation for a company. In addition, at the time
of
the Series C financing, the holders of Preferred Stock held more than 86% of
the
total as converted capitalization of PharmAthene, so that the relative
preferential value that might ordinarily be ascribed to preferred stock is
not
as relevant in PharmAthene’s case. Therefore, HAQ’s Board believed that the
valuation of PharmAthene established by the preferred stockholders provided
a
fair basis for evaluating valuation.
We
have
also removed the word “tempering” and replaced it with “balancing”.
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4.
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We
note the proposed disclosure concerning your relationship with Medarex.
What you have disclosed does not appear to discuss the principal
and
material terms of the agreement. Please revise to disclose
all
material terms of your agreement with Medarex. Specifically address
how
profits will be shared with Medarex or provide us with an analysis
why
this information is not material to an investor. Please revise
accordingly.
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In
response to Staff's comment we have added to the discussion at pages 122 to
123
of the Proxy Statement disclosure of the material terms of the agreement with
Medarex.
PharmAthene
entered into a collaboration agreement with Medarex in November 2004 to
co-develop Valortim(tm) as a therapeutic for individuals infected with anthrax
as well as for prophylactic treatment of individuals exposed to anthrax.
In
2004, under the terms of the collaboration agreement, Medarex received an
initial payment of two million dollars ($2,000,000) from PharmAthene to fund
planned development activities. Under the collaboration agreement, PharmAthene
is responsible for funding all research and development and commercialization
activities that exceed current and future government funding. The collaboration
agreement provides that Medarex and PharmAthene will share operating profits
according to a formula such that PharmAthene’s share of the operating profits
could increase from an initial level of 20% to as high as 60% generally as
follows: (i) upon execution of the collaboration agreement and the $2 million
initial payment, PharmAthene’s profit share was 20%; (ii) in order to maintain
its 20% profit share PharmAthene is required to contribute funding in an
amount
equivalent to the funding provided by the U.S. Government to Medarex via
grants
awarded to fund Valortim(tm) development work (approximately $7.2 million);
(iii) PharmAthene’s share of operating profits will increase to 50% if a
contract for the procurement of Valortim(tm) is entered into with the U.S.
Government and PharmAthene has satisfied its obligation under (ii) above;
and
(iv) PharmAthene’s share of the operating profits can increase by 10% for every
$5 million of funding provided by PharmAthene over and above the initial
payment
of $2 million and the amount that it provides as funding in excess of the
matching by PharmAthene of funds provided to Medarex under (ii) above.
PharmAthene’s aggregate share of the operating profits is capped at 50% if the
condition under (iii) is not satisfied and 60% if it is satisfied. Should
the
parties enter into a contract for the procurement of Valortim(tm) with the
U.S.
Government prior to PharmAthene satisfying its obligation under (ii) above,
PharmAthene is required to make a milestone payment to Medarex in order to
achieve a 50% profit share in the program. Prior to distribution of operating
profits, each party is entitled to reimbursement of research and development
expenses incurred that were not otherwise covered by government
funding
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5.
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Also
in connection with your proposed revisions, clarify how you will
obtain
the funds to further the development of Valortim. On page 108 you
disclose
that you expect grants to fund the remaining development of Valortim™.
Will those grants be received by you or Medarex? It would appear
that
grants received by Medarex would not aid in your ability to receive
revenues from the sale of Valortim™.
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We
have
modified the language appearing at page 108 of the Proxy Statement in response
to the Staff’s comment.
It
appears that a word was missing and together
with the inserted language now appearing at page 108 we have clarified that
PharmAthene, not Medarex, will be the recipient of all grant funds and together
with its credit facility, possible sales of securities and the HAQ trust funds,
it will have substantial and sufficient funds to develop its
products.
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.
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Very
truly yours,
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ELLENOFF
GROSSMAN & SCHOLE LLP.
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By:
Brian
C. Daughney
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Brian C. Daughney
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cc:
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Mr.
Matthew P. Kinley
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Jeffrey
Baumel, Esq.
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