Pharmaceutical company Advance Healthcare Group is hoping a $10 million funding deal with Sydney firm Hawkesbridge Private Equity marks the start of its revival after a difficult three years.
Pharmaceutical company Advance Healthcare Group is hoping a $10 million funding deal with Sydney firm Hawkesbridge Private Equity marks the start of its revival after a difficult three years.
Under newly appointed chief executive Ken Atkinson, the Balcatta-based company is belatedly finalising its accounts for the year to December 2005, which are expected to show another loss.
The year was marked by several failed deals as the group sought to diversify and expand its e-commerce activities.
Despite these difficulties, Hawkesbridge has thrown Advance a lifeline by agreeing to provide up to $10 million in fresh capital via a convertible note issue.
Hawkesbridge is already a 9 per cent shareholder and will be able to significantly increase its stake by converting its $10 million note facility to shares, at two cents per share or 90 per cent of the average trading price prior to conversion.
The funding deal will be put to shareholders next month for approval but there is little likelihood of the deal changing, since Advance has already drawn down $7.5 million of funding.
Advance’s core business is Cottman Australia, a pharmaceuticals, medical consumables and medical equipment wholesaler with a new purpose-built facility in Balcatta.
It generated sales of $105 million in the year to June 2005, providing most of Advance’s total income.
Advance is looking to boost Cottman’s turnover by folding in the business of Medical Products Group Pty Ltd, which has annual revenue of about $5 million.
Advance agreed to acquire MPG last year for $600,000 but just a few months later MPG was placed into administration as a result of “inherited structural issues”.
It regained control of MPG after putting a deed of company arrangement to creditors.
Advance believes it does not have to pay anything for the MPG business but has been unable to reach agreement with the vendor, listed Leederville company Pharmanet, which has reserved the right to take legal action.
The MPG acquisition was one of four deals announced by Advance that has since caused problems.
Advance planned to acquire Active Mobility & Rehabilitation Pty Ltd in South Australia but the deal has not proceeded and Active was recently placed into administration.
Another failure was the planned collaboration between Advance’s Sydney-based medication management subsidiary Pharmeasy and listed e-health company IBA, which planned to provide up to $2 million in convertible note funding.
Pharmeasy was unable to satisfy its side of the deal and therefore had to repay all of the money advanced by IBA.
Pharmeasy also planned to establish an e-commerce joint venture with the ePharmacy/My Chemist group, but the parties were unable to reach agreement.
As a result of the restructuring activities, Advance has delayed completion of its 2005 accounts.
Its most recent results, for the year to December 2004, showed an operating loss of $4.9 million and a net loss, including significant items, of $10.3 million.
The company plans to seek re-quotation of its shares on the Australian Stock Exchange after releasing its 2005 results.
Its operational difficulties have been accompanied by executive changes.
Mr Atkinson, who was formerly a senior manager of Australian Pharmaceutical Industries Limited, replaced interim chief executive and corporate adviser Adrian Loader, who is expected to continue as a director.
Mr Loader, in turn, replaced Sam Di-Giacomo, who resigned as chief executive and a director in September.
To accompany its new chief executive, the company is planning to seek approval for a change of name at the upcoming shareholder meeting.
This would be its fourth name, after listing as Melbourne Australia Investments in 1983, becoming Inovax in 1994 and adopting its current name in 2003.
