an article from biotechnology news

Hi all,

It's good to see that's it's possible for no one to comment on the PLT forum when there is no news. Nothing like having a serial pest temporarily suspended and more sinister elements permanently removed.

Whilst we're all waiting to see what the post-failed-merger era brings (given that the offer expires tonight), here's an article I happened to find. Although it appears to be old (30th June), I couldn't find any copies of it or references to it on the forum, so here it is (I hope there are no weird characters or extra line-feeds ... I'm just copying it 'as-is' ... :

http://www.biotechnologynews.net/storyview.asp?storyid=1003429

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Fermiscan dumps Polartechnics merger
Tuesday, 30 June 2009
Nick Evans

DESPITE initially announcing their support for a proposed merger with Polartechnics, Fermiscan directors have back-tracked at a rate of knots over the last week, recommending shareholders reject the deal in a target statement released yesterday.

Fermiscan managing director David Young

Structured as a Polartechnics takeover of the breast cancer diagnostic Fermiscan, the deal was originally announced in April as a merger of equals, and at the time executives of both companies were spruiking its benefits.

The deal would have seen Polartechnics offer three of its shares for every two ordinary Fermiscan shares, with major Fermiscan shareholder Recain conditionally accepting the deal to sell the first 20% of shares into the offer.

But Fermiscan has since gone cold on the agreement, citing an Independent Expert’s Report commissioned by the company that recommends against the merger.

The report, prepared by Lonergan Edwards, slammed the deal, saying it was not fair and reasonable to shareholders, and questioning whether a merged company could continue as a going concern.

Lonergan’s said, despite several recent small capital raisings, Polartechics would need to raise more cash to fund its operations in the short term and this was likely to end with substantial dilution to Fermiscan holders who sold their shares into the deal.

The report questioned Polartechnics’ sales position, saying it understood that, while Polartechnics was on track to achieve $3 million in sales of its TruScreen products by the end of the financial year, a substantial portion of the sales delivered so far have not yet been paid for.

“… as at March 31, 2009, Polartechnics’ creditors significantly exceeded its cash resources (after adjusting cash to include amounts raised subsequently from share and convertible note issues),” the report said.

“While Polartechnics has debtors and other assets, we understand that the large majority of the debtors at March 31, 2009, remained unpaid as at May 2009.”

The report also queried the company’s patent position, pointing out that Polartechnics had less than five years remaining on the main patents covering TruScreen, and suggesting it may not be able to compete if competitors then began manufacturing clones of its products.

But Polartechnics chief executive Ben Dillon rejected the report’s claims, saying that these were all “known issues” that the company had been declaring to the market for some time.

In particular, he denied that Polartechnics had a problem with bad debts, saying he did not expect the company to have to make provisions for bad debts at the end of the financial year.

“I’m not expecting to go into June 30 having debtors that have to be provided against, because of the terms of trade and the relationship model and business model that we have here.”

He said the Polartechnics business was based on volume sales of consumables for its TruScreen diagnostic screening, and it had always been the company’s business model to expect that payment for the main hardware would be delayed as consumable sales built up.

“In a business where you’ve got sales of hardware, consoles and consumables, when you’re creating a market you will often pass hardware, the payment for which is linked to the provision of consumables,” Dillon said.

“We’ve lifted our production in consumables now to a level where we have commercial operations going on in China, India and eastern Europe. At that level, anyone who has taken hardware before now will probably be coming up to a point where that debt becomes collectible.”

He accused Fermiscan of “selectively quoting” Polartechnics’ market disclosures in rejecting the merger deal.

“Their use of language has been, frankly, self-serving,” he said.

And while Polartechnics had not yet made a decision on where to go from here, Dillon said problems on the Fermiscan side were more likely to be an issue for the merger than Polartechnics’ business.

“We have concerns about how they’ve managed their business during the offer period, particularly the loss of the litigation against Veronica James,” he said.

“The Fermiscan that we sat down with and worked out a mutually agreeable merger with has had the ground changed during the offer period, and the single most significant event that has occurred during the offer period has been the failure of their litigation,” he said.

“It hasn’t been successful, as they indicated it would be at their AGM, and they now have to seek an appeal. So obviously they feel it’s of concern [to their patent position] and that’s obviously of concern to them.”

Interestingly, the ongoing legal case was not mentioned in the Lonergan review of Fermiscan’s risks and disadvantages in the merger, though the likely impact of the court costs rated a mention elsewhere in the report.

Dillon also highlighted Fermiscan’s cash position. Fermiscan declared in its target statement that it had $3.8 million at bank at May 31, indicating the company spent at least $1.8 million in the two months from the end of March, when it declared it had $5.6 million at hand.

The IER said Fermiscan would almost certainly need to raise additional capital by the end of the calendar year, negating in part, according to Dillon, the concerns raised about Polartechnics’ own cash position.

He said the Polartechnics board was still considering its options and would disclose its intentions to the market by July 7.

“Our board’s obviously concerned at the change of position by the board at Fermiscan – that’s obviously sending us a very clear signal. We’re reconsidering where Fermiscan is up to and where it’s moved since we made the offer, and we’ll update the market by July 7, as required.”

BTN attempted to contact Fermiscan cheif executive David Young for comment on this story, but he had not returned out calls by the time this story went to print.

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Cheers.

p.s. it will be interesting to see how long it takes for PLT to provide forward guidance from here, and what it will contain. Do they do a release tomorrow, or wait for more dust to settle first?

p.p.s. whilst the SP is still extremely low, it's good to see that there has been a bit of mopping up the cheapest stuff going on today ... are they just investors speculating on good news tomorrow, or those that have heard something positive and are trying to make a quick buck (or otherwise)?