29/04/2003 - 22:00

Editorial - Pan’s ills compound VRI woes

29/04/2003 - 22:00


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THE bunfight surrounding VRI Biomedical had just gone off the corporate radar over the Easter break when the sudden implosion of national therapeutic drug giant Pan Pharmaceuticals appeared as a large blip on the screen this week.

THE bunfight surrounding VRI Biomedical had just gone off the corporate radar over the Easter break when the sudden implosion of national therapeutic drug giant Pan Pharmaceuticals appeared as a large blip on the screen this week.

Who would have thought that such a seismic shift in fortunes could have occurred with just a month to go until an extraordinary meeting to decide the fate of two key directors?

The Pan disaster’s timing has certainly altered the balance of this nasty argument between most of the existing board and major shareholder, Australian Heritage Group.

In the first instance that is because VRI director Ken Baxter – an AHG target – is now embroiled in the unfolding drama at Pan, where he is also a director.

Secondly, because the resulting turmoil has focused the spotlight back on VRI’s corporate activity and, importantly, its directors’ transactions.

The first is a major issue for the incumbent VRI directors who have staged heavy resistance to AHG’s initial attempts to change the faces around the boardroom table.

They have been quite successful in bloodying the nose of AHG’s main players, Tony Barton and Sally Capp, by employing some tough public relations tactics that probably caught their opponents off guard and left the market wondering about their credentials to dictate terms at VRI.

Suddenly, that has all changed. Not only has a director been sucked into a major corporate scandal – not that there is any suggestion that Mr Baxter knew anything about the alleged goings on at Pan’s operations – but VRI itself has an operational issue.

One of its products, Progastrim, was manufactured on a trial basis by Pan as VRI geared up for a proper launch some time this year.

Again, there is no suggestion that Pan’s production of Progastrim has in any way caused any ill effects to consumers, but among the fallout is likely to be VRI’s ability to keep the rollout of its product on schedule.

The company has confirmed that there was no problems with Prograstrim trials and that it had an alternative manufacturer, which is good management because Pan make an enormous amount of products in Australia and finding another option would have been tough.

It appears the Pan deal happened after the annual report, which explains why there was no related-party disclosure from Mr Baxter.

That brings us to the second element of this fallout – the transactional side of the struggle.

The incumbent VRI board, led by former executive chairman Leon Ivory, apparently used its public relations weaponary to ensure, among other things, the word got around that AHG had been selling VRI shares around June last year.

This was made out to be a big issue, even though AHG says it went through considerable hoops to ensure the sale was appropriately disclosed to the market and authorities. And don’t forget, Mr Ivory was a director of AHG at the time.

So it was a bit surprising that, at such a sensitive time as this, to find Mr Ivory has also been a seller of late.

According to stock exchange announcements, Mr Ivory’s Ivory & Co Pty Ltd has sold $185,000 worth of options in an off-market transaction.

While his beneficial interest in more than 9,000,000 VRI shares remains unchanged, it was interesting to note Mr Ivory’s explanation regarding his decision to sell.

According to a spokesman Mr Ivory’s options were sold to realise a guarantee with Kim Slatyer.

Those that read this column regularly may recall that Mr Slatyer is a former director of VRI who helped found the company with Mr Ivory, his long running business partner.

The falling out between Mr Slatyer and Mr Ivory is part of the colourful tale that surrounds this corporate battle of WA entrepreneurs.

All this, of course, doesn’t help all the other shareholders of VRI.

By all accounts, this is an extremely successful start-up, which has achieved real milestones in just two years.

While the Pan issue is quite likely a surmountable obstacle, it’s still a serious issue that management needs to ensure it is on top of without being distracted by corporate machinations.

No worries

THE demise of Andersen last year, wiped out something of an institution in Perth.

One thing worth noting is that, despite the demise of the firm, Andersen’s former partners still have the legacy of legal actions to deal with.

It seems the collective decision is not to worry about this issue, caused by others miles away.

That, apparently, is the nature of partnerships.


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