Inability to meet demand takes Asterand to the brink
Asterand today revealed the extent of its financial problems: crippled by its inability to meet customer demand for its human tissue services, the Cambridge biotech needs to raise new financing if it is to avoid defaulting on its debts and continue as a going concern.
On a day that Asterand CFO, John Stchur followed the lead of former CEO Martyn Coombs and stepped down, the company's interim results said that a combination of poor trading and repayment of the debt used to acquire BioSeek will result in a breach of banking covenants.
In words that sent a chill through investors and precipitated a huge sell off of stock, taking the share price down by over 54 per cent, Asterand's interim statement said there was: "a material uncertainty that casts significant doubt upon the Group's ability to continue as a going concern."
BioSeek, the provider of human disease models purchased by Asterand at the beginning of 2010 for a valuation that is now at $9.5m, has single-handed grown revenues for the group which actually saw revenues climb 36 per cent to $11.9m (H1 2010: $8.7m) in H1 2011.
However, its acquisition has also led Asterand to take on $9.3m in debt. Meanwhile, the rest of the business - the human tissue based solutions - has been flat, bringing expectations down below previous forecasts.
Chairman and interim-CEO, Jack Davis says demand for these products and services remains high, however meeting these needs has been challenging, resulting in a retraction in the non-BioSeek revenues, including the anticipated revenues under the $24.3m NCI contract.
Davis, said that following discussions with potential investors there was a reasonable expectation that sufficient funds will be raised within an appropriate time-frame to continue operating as a going concern and provide enough working capital headroom to fund improved tissue sourcing strategies, however, there is no guarantee of shareholder approval for a deal.
The board is also reviewing its listing on the premium section of the London Stock Exchange, the costs of which may now be too high.
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