from the age

Heart-pump maker seeking life support

December 12, 2008

LESS than a year after its chief executive was given a $265,000 bonus, heart-pump maker Ventracor is on life support after a last-ditch capital-raising attempt failed to raise enough cash to take the company through to the middle of next year.

The collapse of the company, once considered a star among medical products developers, is a sign of the times given the difficulty smaller companies are having accessing cash, but also follows a period of rewards to senior staff and directors that raised eyebrows among industry watchers.

Shares plunged nearly 50 per cent yesterday as the group abandoned the raising and said it hoped to find another company keen to buy it out or take a strategic stake. The company's key product is its left-ventricular assist device, a blood pump implanted into patients with heart problems.

While sales revenue from the LVAD has been trickling in, hitting $17.8 million last year, up from $1.1 million two years earlier, the company is still some distance off breaking even, and has come close to exhausting its cash supply.

During the year to the end of June, the company recorded a loss of $24.9 million, down from $36.5 million a year earlier. At the end of September, its cash balance was down to $11.8 million.

Chairman John Ward emphasised that the company — or at least its main product — was salvageable. "There are now almost 400 people who have been implanted with the VentrAssist (LVAD), and results to date have been promising," he said. The company was "well positioned to benefit from adoption of LVADs as a long-term solution to heart failure".

Since the start of the year, the share price has fallen from 60.5¢ to yesterday's closing price of 3.8¢, down 3.5¢ for the day. The share price peaked at $3.075 in August 2003.

David Blake, editor of industry newsletter Bioshares, said Ventracor's downfall showed the dangers of a company relying on cash flow from a new product to fund its operations.

"It was a high-risk strategy — the CEO bet the firm and he lost," he said.

Despite the company's heavy losses and dwindling cash supply, the company still offered its five non-executive directors access to a pool of $650,000 in fees. But that money was dwarfed by the $1.42 million in cash and shares — including a $265,000 cash bonus — given to chief executive Peter Crosby last financial year.

A director since 2001, Mr Ward took the chairmanship in April following the retirement of John Massey. The board also includes Babcock & Brown chairwoman Elizabeth Nosworthy.

Last month, the company launched a share-purchase plan at a 40 per cent discount to the price for the previous month in an effort to raise cash from shareholders, but all cash will be returned to investors because the company failed to reach its target.

In its letter to shareholders pleading for help with the equity raising, Mr Ward said the board was "very disappointed that the company's operational progress has not been reflected in its share price".

At the time, Mr Ward announced that the company was slashing its costs in order to stay afloat, postponing research and capital equipment purchases.

Representatives of Ventracor did not respond to requests for comment.

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