Perth company Resonance Health has introduced a major change in strategic direction after concluding that its core technology, developed at the University of Western Australia, would not be able to sustain the business.
The strategic review followed “disappointing sales” of its FerriScan product, which initially was spun-out of UWA through start-up company Inner Vision Biometrics.
Resonance has responded by cutting costs and pursuing the acquisition of pathology businesses in the US.
It is also planning to focus on the development of a new diagnostic test that it believes holds better long-term potential than FerriScan.
The market has reacted harshly to the latest news, slashing the company’s share price to 4.5 cents.
The strategic review was a major setback for FerriScan, which had won technology awards and been regarded as one of the brightest commercial prospects to emerge from UWA.
Resonance acquired 100 per cent of IVB and built its business plan around international sales of FerriScan, which provides a non-invasive test for iron levels in the liver. However the company has now concluded that its original plan was flawed.
“The board does not believe that FerriScan constitutes an adequate standalone business and is reviewing the long-term forecasts and pricing of the FerriScan service,” it said.
Resonance has also decided to “sharply cut the substantial expense associated with direct marketing…to new prospects”.
Recent changes at Resonance, including the resignations of managing director James Williams and non-executive director Tony Fitzgerald, have taken control of the company out of Perth.
Taking charge is new chairman Gary Pace, who divides his time between Boston and Brisbane, and is a director of listed companies ResMed Inc and Peplin Ltd.
Resonance has also won the backing of the Queensland Investment Corporation, which has agreed to invest up to $8 million at a price of 6.3 cents per share.
Marketing director Glenn Smith said QIC was committed to the investment at the agreed price, despite the fall in the share price.
The funds would be used to acquire specialist pathology businesses in the US, which Resonance claims will complement its plans to commercialise FerriScan and other diagnostic tests.
The company also said that “subject to adequate funding” it would pursue the development of its FibroScreen liver fibrosis test, which recently reached the ‘proof of concept’ stage.
