Receiver seeks $3M loan to help liquidate company
Health sciences firm may be worth ‘hundreds of millions,’ CEO says
The consulting firm responsible for liquidating a prominent Saskatoon health sciences company that went into receivership earlier this year is seeking court approval for its sale plan.
FTI Consulting applied this week to increase the amount it is permitted to borrow to pay for the sale to $3 million from $400,000, court documents show.
The money will be used to sell the assets of Phenomenome Discoveries Inc. (PDI), which went into receivership on Feb. 25 after a corporate governance crisis led Golden Opportunities Fund Inc. (GOFI) to call in a $1.1 million loan.
According to its first report as receiver, FTI plans to hire public relations firms to promote the sale, take PDI’s assets on a “marketing road show” with stops in North America, Europe and Asia, and make confidential business information available to prospective buyers who sign a nondisclosure agreement. FTI’s report says it expects the transaction to be closed by Sept. 2.
Founded in 2001, PDI researches, develops and manufactures diagnostic tools and drugs intended to identify and treat diseases such as colorectal cancer and Alzheimer’s.
In March, PDI’s president and CEO Dayan Goodenowe told the Saskatoon StarPhoenix the company’s assets could save lives and be worth “hundreds of millions” of dollars.
GOFI began investing in PDI in 2002 and currently owns about 9.6 per cent of it. The venture capital fund believes PDI’s assets have “significant value,” which is why it and other investors are paying to keep it operating without layoffs until a buyer can be found, said Wanda Hunchak, vice president of Westcap Management, GOFI’s fund manager.
At a hearing held Friday morning in Saskatoon Court of Queen’s Bench, a judge asked FTI to produce evidence of PDI’s value before approving the “rather significant jump” in the amount it’s permitted to borrow. Until that information — likely in the form of sworn affidavits — is supplied to the court, PDI’s value remains a “matter of opinion,” Justice Brian Scherman said.
The court needs “basic evidence” to make sure the company is worth more than what it costs to sell, Scherman added.
While PDI’s intellectual property has already attracted attention from potential buyers which could “flush out” its value, FTI Consulting will develop additional evidence supporting its case for borrowing additional funds, Ryan Zahara, the lawyer acting for FTI, told court.
GOFI, which as primary secured creditor has “skin in the game,” supports FTI’s sale plan, GOFI’s lawyer, Jeff Lee, told the hearing. It is “fair to say” the fund would advance cash up to the proposed $3 million threshold to pay for the sale of PDI provided the payments were justifiable, Lee added before the hearing adjourned.