Ventracor shareholders to hold 'unusual' meetingBroadcast:...

Ventracor shareholders to hold 'unusual' meeting

Broadcast: 24/05/2009

ALAN KOHLER, PRESENTER: Next week the fate of one time big hope in the Australian biotech sector Ventracor will be decided at a creditors meeting. One of the options for the innovative heart pump maker is a highly unusual bid to resurrect the business by a loyal band of small shareholders and its former management. The only other alternative is a sale to a US rival or liquidation.

Kathy Swan reports.

KATHY SWAN, REPORTER: It is a device that has been lauded as a great new Australian invention, an implantable pump that keeps the blood flowing for diseased hearts that can't keep up the pressure on their own. Globally about 400 people have had the Ventrassist successfully whir away inside them.

SCIENTIST: There is only one moving part - a central rotor suspended in a magnetic field.

KATHY SWAN: But for a biotech like Ventracor to develop and monitor its heart pump the company has to be able to pump money.

NICK EVANS, BIOTECHNOLOGYNEWS.NET EDITOR: I think it has been about $190 million over the course of the company's history developing the heart device and for it to wind up in this state is a pretty big loss for the life science sector generally and those investors.

PAUL DONOHUE, VENTRACOR SHAREHOLDERS GROUP: There are a lot of Australian employees have worked on this over the years and they deserve to see their product make to it the market whilst it is still Australian owned. To see it sold overseas at this late stage would be a tragedy.

KATHY SWAN: Ventracor has 17,000 small investors but no big cornerstone backer to rely on battled on despite the potentially grave health problems of that structure.

IAN RAMSAY, CENTRE FOR CORPORATE LAW, MELBOURNE UNIVERSITY: Perhaps the most tragic thing about this company that is it obviously has a very viable piece of intellectual property. It's been successful and it has been hard hit by the global financial crisis because the directors themselves are unable to recapitalise the company.

NICK EVANS: If they managed to get a capital away in early 2008 we wouldn't be having this conversation now.

KATHY SWAN: Nick Evans editor of Biotechnology News says there may also have been missed opportunities.

NICK EVANS: The stories are certainly out there that the management turned down a couple of offers for capital in early mid 2008 because they weren't happy with the share price that the raise was being offered at.

PAUL DONOHUE: The feedback from shareholders is they lost faith in the administration, the lost faith in the board.

KATHY SWAN: Clogged credit pipelines only made things worse and in March Ventracor put itself on life support by going to administrators Ferrier Hodgson.

MICHAEL SPOONER, FORMER CEO, VENTRACOR 2002/3: They threw their hands up and put the company into administration. Sad process, a company that had accomplished and enormous amount in a very short period of time being put into administration so close to the finish line.

KATHY SWAN: Michael Spooner was CEO of Ventracor seven years ago and shareholders like Paul Donohue have asked him to step back into the top job.

MICHAEL SPOONER: There is enough head room for us to take this product into the United States which is its major market and be successful but it needs to be done now and it needs to be financed properly.

STEVE SHERMAN, FERRIER HODGSON PARTNER: If you were to post a worst case scenario it is a bleak assessment but we hopefully won't get near the worst case scenario.

KATHY SWAN: Ventracor shareholders have a radical treatment plan of raising at least $10 million, reviving in the company and renewing its management. Their actions prompted a rare informal briefing from Ferrier Hodgson's Steve Sherman in April.

STEVE SHERMAN: If they have an interest in saving the company or participating in that process to guide them in some way as to how that should be framed.

KATHY SWAN: There are few precedents for shareholders to try saving a company, but to be successful they must first secure a cornerstone investor which would be a first for Ventracor. Then it will be up to the administrators to judge whether their proposal is best for creditors and adding to the degree of difficulty the deadline which is the second creditors meeting has been brought forward to this Friday.

IAN RAMSAY: The voluntary administrators are there acting on behalf of the creditors of the company.

KATHY SWAN: Corporate law expert Professor Ian Ramsay says the administrator's job is to secure the best financial return.

IAN RAMSAY: It could be a proposal by the existing shareholders to in a sense have the company live on but it may well be a recommendation to have the company go into liquidation, in other words be terminated.

KATHY SWAN: The administrators will also have to examine any bids to buy Ventracor. There's already interest in the sector if the sale of rival biotech company Heartware is to US based Thoratech is anything to go by.

NICK EVANS: With Heartware having now the backing of Thoratec and their marketing machine and their clinical trials experience, the Heartware device will have substantial advances for Ventracor going forward.

KATHY SWAN: Ventracor may also have an American suitor.

NICK EVANS: Orcus is the name that keeps coming up but the only people that really know the answer to the question about who's in the mix is the administrators and those people that have been doing the negotiations.

IAN RAMSAY: One of the key tasks of the administrators is to not only investigate the current affairs of the company, to form an opinion as to its financial affairs but to clearly investigate thoroughly any possible purchase of the company because that could result in a better return to the creditors.

SIMON DELLA MARTA, TURNER FREEMAN PARTNER: We have been advised that the administrators are not going to recommend the shareholders proposal.

KATHY SWAN: Simon Della Marta partner at Turner Freeman is acting on behalf of the shareholders group and he says the fight is not over yet.

SIMON DELLA MARTA: There is a long time between now and next Friday. The task of the shareholders too is to ensure that their offer is as good as possible and to convince creditors that it's better for this company to survive than to be sold offshore.

PAUL DONOHUE: We have $10 million either committed or pledged and that's from a mixture of cornerstone investors and the existing shareholders. In numbers - cornerstone investors, four committed now, we're in discussion with a further two.

KATHY SWAN: However, on Friday it'll be nervous creditors rather than optimistic shareholders who will have the final say on Ventracor's fate.


http://www.abc.net.au/insidebusiness/content/2009/s2579228.htm