Liponex considers $10M merger with ImaSight

Published in the Ottawa Business Journal newspaper and website.
Feb. 11, 2008 (Feb. 13 on

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ImaSight CEO John Brooks.
ImaSight CEO John Brooks.
Photo by DARREN BROWN for the Ottawa Business Journal

Local life sciences firms Liponex Inc. and ImaSight Inc. are mulling over a $10-million merger, at the same time as Liponex is facing delisting from the Toronto Stock Exchange.

The two companies, both of which were among the OBJ‘s 2007 Startups to Watch, have entered into a non-binding letter of intent for a business combination that would see current ImaSight shareholders own about 65 per cent of the combined company.

“We’ve been looking at strategic options for a number of months now,” Liponex CEO Bill Dickie told the OBJ. “We felt we needed to widen the scope of the company so we weren’t entirely dependent on one product line, and what attracted us about ImaSight was that it’s a revenue-stage company which is quite stable going forward.”

The deal would see Liponex acquiring all of the issued and outstanding shares of ImaSight through some kind of share purchase arrangement, with the value of the merger “in the range of $10 million,” according to ImaSight CEO John Brooks.

Both companies have said they remain committed to Liponex’s drug development program, although Mr. Dickie said there may be fewer people working on that side of the business.

In preparation for the changes at the company, Liponex has taken steps to downsize and has laid off seven people to date, leaving five full-time staff on payroll, Mr. Dickie added.

As well, the company is looking to promote Liponex as a natural health product instead of a drug, since it will then be cheaper and faster to get to market.

Mr. Brooks said he has had a “long history” with Liponex, having been one of the company’s founding directors and serving as chairman of its board at one point.

“We approached them with the concept that I felt there was still good value in the company and we would like to work to continue to develop the technology,” said Mr. Brooks. “I felt Liponex was sitting there with a lot of assets, and the market had beaten down its price to the point that we thought it was a good opportunity for picking up those assets.”

Mr. Brooks, who said he is a “believer in (Liponex’s) technology,” noted that the merger would also hopefully move ImaSight more quickly into the public markets, as the combined company would aim to maintain its public listing on the TSX.

However, the TSX is reviewing Liponex because its trading price and volumes have fallen below minimum listing requirements. The TSX has given Liponex until May 29 to regain compliance.

The stock exchange said a review had indicated that the price of Liponex’s securities had been “so reduced as not to warrant continued listing,” and the market value of its listed shares had been less than $3 million for 30 consecutive trading days. The TSX review also said Liponex had seen a “substantial change” to its business which would disqualify the company’s listing.

Mr. Brooks declined to comment on the Liponex’s possible delisting, saying that it “wouldn’t be appropriate” at this time. However, he said the companies would be “working through things” with the TSX.

Liponex’s shares plunged by more than 80 per cent from a $3.10 high in March after it announced that it had received disappointing test results from its lead drug candidate CRD5, which aims to treat heart disease by increasing high-density lipoprotein (HDL) or “good cholesterol” in the body, and the stock has not recovered.

The company was also recently forced to discontinue its animal trials using “mini-pigs” for a new coated formula of CRD5 after they did not produce statistically significant results.

ImaSight, on the other hand, has been far more fortunate. The six-year-old company is commercializing a digital X-ray technology designed to replace traditional film-based X-rays and targeted at smaller medical operations and the veterinary market that normally cannot afford full-blown digital systems. The company’s product has received rave reviews from the medical community, and orders are coming in faster than the company can produce the X-ray products, Mr. Brooks told the OBJ in November.

The proposed combination of the two companies remains subject to due diligence and the necessary shareholder and regulatory approvals. A successful completion could come as early as April. If the two companies do merge, Mr. Brooks would become CEO.

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