|Radient’s CEO believes company should qualify to continue trading on the AMEX|
|By Staff and Wire Reports|
|Thursday, 27 January 2011 07:40|
By the time Radient Pharmaceuticals (NYSE Amex: RPC) goes to their requested hearing with Amex officials, will they have met enough requirements to qualify and stay on the big board exchange? Douglas MacLellan, the CEO who has led Radient’s turn-around during the past two years is not allowed to guarantee it publicly, but he does feel that given the opportunity to present his company’s latest balance sheets his company should have no problem dismissing any negative compliance issues.
In an exclusive interview with BioMedReports, MacLellan explains that an analysis by the Exchange which prompted a notification for delisting was based on pre debt-to-equity balance sheets filed during the third quarter of 2010.
Douglas MacLellan, CEO, Radient Pharmaceuticals: The salient issues around our compliance with American Stock Exchange standards are really focused on the fact that they were only looking at our most recent (Q3 2010) quarterly filings as a moment in time to see if we were compliant; which (given the past debt to equity ratio) we were not. Of course, since that time we began converting a significant amount of debt to equity. To date we have converted $16 million in debt, interest and penalties and anticipate converting or exchanging approximately another $8 million in debt during the first quarter of this year. After these conversion exchanges, the company will have approximately $21 million in shareholder equity. Significantly more than the Exchange requires; since Amex listed companies only need $4 million in equity.
Additionally, as of today, we have approximately 88 million shares outstanding, so one of the other things for everyone to know is that the outstanding share counts in many of the financial web sites are inaccurate. Our market cap is much higher than is indicated on those services, so we have been making an effort to get out and get those corrected.
[Note: financial advisors to the company anticipate a total of 95 million shares to be converted by the time the process is complete. That number is close to half of the 180 million shares that had been anticipated by observers and analysts].
It’s really an issue of perceived on-going solvency and of course, at the third quarter, (because of all the charges the company took for the note offering they did in the spring) we had a negative equity position. The official at the Amex is using that snapshot- that point in time- as their primary tool to determine whether we were in compliance or not. Since that time, they have requested and we have begun to provide them with detailed forecasts and information about the conversion of debt which has not yet been utilized in their analysis. Specifically in their letter to the company, the Exchange indicates that they have not looked at that data and analysis. They have an arbitrary ability to determine what they want to look at to make a determination.
Q: When the Exchange approved you for this massive debt to equity swap, did they not look at all these factors to determine whether or not the terms and conditions were going to affect your listing status?
Douglas MacLellan, CEO, Radient Pharmaceuticals: For whatever reason, the Amex decided to be inflexible in their procedures to determine whether we were in compliance or working valiantly towards it. At this point, we will seek a hearing. We’re not the first company to go through a hearing. There have been many, many companies who have been successful in these hearings and maintained their listings. We believe that we will be in a position to meet all of their requirements by the time we have a meeting with them. As I understand it, I am told the process will take somewhere between six and ten weeks to set up the hearing, and submit the materials. We can submit materials along the way- or we can have an in-person meeting. We’re planning for the in-person meeting.
Q: The company has previously announced that it will spin-off two of its non-core businesses into their own publicly traded vehicles while maintaining a strong ownership position in those businesses. Those are catalysts that can add real value to shareholder equity. Are you allowed to speak about about that and how the execution might work?
Douglas MacLellan, CEO, Radient Pharmaceuticals: It adds to the value of the company. When those companies become listed we’re going to be able to better estimate the relative value of RPC’s holding in those businesses. As they trade on a quarterly basis and we can determine- adjusting either up or down- what the value of those assets are. That will be based on their publicly traded status rather than us trying to do a private valuation or something. It’s going to be much easier on an accounting basis to be able to determine what the value of those things are, and of course, NuVax in particular is not valued on our balance sheet currently at more than $250,000.
[Note: Some analysts feel RPC’s whollyowned subsidiary NuVax Therapeutics has the potential to become a significant player in the immunotherapy space on its own merits. Radient has publicly said that it plans leverage their own experience in product development, regulatory approvals, and manufacturing to fully commercialize NuVax therapies as rapidly as possible.]
Q: So theoretically, the moment NuVax starts trading on its own, it gets re-valued at whatever the market perception is of the company?
Douglas MacLellan, CEO, Radient Pharmaceuticals: Right. For instance, let’s say that by the time we finance and complete the reverse merger of NuVax that we’re down to 50% ownership and its worth $50 million. At that point, we would get $25 million in additional value on our books. What we have right now is $250,000. That’s what’s on our books.
[Note: Radient’s China-based subsidiary Jade Pharmaceuticals (JPI) produced approximately $27 million in revenue last year and has projected $35 million in revenue with approximately $10 million of that expected as earnings this year. The company has disclosed that it would like to spin-off that asset as well]
Q: What is the status of the JPI spin-off?
Douglas MacLellan, CEO, Radient Pharmaceuticals: We have been working the process. There are some things that have not yet been disclosed at they relate to that, but it is proceeding as planned and we feel very excited about it.
Q: Are you still bullish about the value it can bring on its own to RPC as well?
Douglas MacLellan, CEO, Radient Pharmaceuticals: I think it’s going to increase. I think our relative ownership value in JPI could easily increase by at least 30-50 percent. Remember that the shareholders do have to approve this because of the size of the asset. It’s on our books at $17 million, but we think that by the time they get listed, it could be easily worth $30 to $35 million dollars to RPC during 2011. That would double the value of that asset on our books.
So if you look at that and the value of Nuvax it’s at least $50 to $60 million in additional assets on to our books during 2011. Forget for a moment about the sales of Onko-Sure, these are just on the two spin-offs.
Q: Is there anything else you might want shareholders to know going forward?
Douglas MacLellan, CEO, Radient Pharmaceuticals: Here is something to consider. After we convert the debt, we’ll have approximately $21 million in net worth. With the re-valuation of the two assets we’ve discussed it will take us up to somewhere near $75 million in shareholder equity alone. That is just about equal to where our market cap is today. That’s trading at 1X net worth without accounting for our sales and core business products. That should help put things into perspective.
[Note: Radient has signed an agreement to acquire the privately held Provista Diagnostics. Provista is the exclusive provider of several breakthrough early-cancer diagnostics tests and has partnered with Radient to introduce a new lung cancer detection test called LC Sentinel to the market.]
Q: What can you say about the pending acquisition of Provista?
Douglas MacLellan, CEO, Radient Pharmaceuticals: That’s obviously out there. One, we have a business relationship with Provista that looks very promising whether we buy them or not. So we have advanced the better part of the economic equation with cooperative agreements- with them- to develop the lung cancer test kit and they expect to be marketing that widely, at places like Costco and other retailers by the second quarter. That can be an enormously profitable business for us.
We have, right now, a cooperative agreement in place to do that without ever acquiring them. At the end of the day, would it be more interesting to have them as one of our subsidiaries? Yeah, we’ve thought so but we haven’t been in a financial position to complete that transaction. We may be in a financial position to do that in 2011. We need to determine whether we need a shareholder meeting, relative values, etc. But remember, even if we never do that we’ve got a great business relationship that can be enormously profitable.