ViaLogy reinvents itself as a biotech company called Premaitha, more pain or gain for long termers?

Back in January I wrote a piece about controversial AIM share ViaLogy, “Vialogy’s NASA technology hasn’t delivered for Shareholders” http://www.financial-spread-betting.com/community/aim/vialogy-nasa-technology.html. The shares at the time were trading at 0.16p.

Following a fund raising at the beginning of 2014 ViaLogy announced a change in corporate strategy with a plan to offload its oil and gas seismic imaging business. This so called QuantumRD system was hived off to ViaLogy Energy Corp. (VEC) with an exclusive, perpetual worldwide licence and the VEC Transfer meant that ViaLogy received new VEC shares representing 75 per cent. of the issued share capital of VEC.

On 15th May the company announced it was suspending its shares pending a major corporate announcement alongside its results for the year ending March 31st 2014 and it became clear on Friday what the company was up to with the shares coming back from suspension and promptly falling 11% to 0.14p.

ViaLogy reported a net loss of £4.9 million for the year to end-March, compared with a £4.6 million loss a year earlier with £3.3 million of impairments relating to VEC. Revenues came in at £62,106, from £257,681, a year ago.

The company is acquiring diagnostics company Premaitha Health PLC for £10.5 million and changing its name to Premaitha. The acquisition is being funded by issuing yet  more new shares and will be accompanied by a 100 for 1 share consolidation. 95.5 million new shares at 11 pence are being issued, with £6.5 million being raised by placing 59.1 million new shares with institutional investors. In addition it has an open offer of up to 6.7 million shares to existing shareholders also at 11p.

Stephen Little from Premaitha will lead the new company with turnaround specialist Adam Reynolds as Chairman.

The company said that “Premaitha offers us an exciting opportunity to acquire a molecular diagnostics company that has developed a non-invasive pre-natal screening test for Down’s Syndrome. The IONA test is based on the analysis of fetal DNA in the maternal bloodstream, an approach that has been used since 2011 by several screening companies, principally in the USA. We believe that the IONA test will be the first regulated CE marked in vitro non-invasive diagnostic pre-natal screening product to market.”

ViaLogy also announced more trouble with its interest in the seismic imaging business saying that, “As far as our oil and gas services business is concerned, I have to report that it is taking longer than anticipated to secure a suitable partner for ViaLogy Energy Company (VEC), where we have a 75% holding. To this end the board has decided to provide against the assets of VEC to reflect the fact that, as at the balance sheet date, no suitable partner had been found. The founder of the company, Dr. Sandeep Gulati, continues to pursue various avenues on our behalf and to enable him to concentrate on our US activities he has agreed to resign from the main Board of the Company.”

So a big transformation in store for ViaLogy, with Premaitha Health looking an interesting prospect given its lead Down’s Syndrome testing product. However, plenty of commercial uncertainty lies ahead despite the opportunities. Many long termers are already  feeling pretty sore after Dr. Gulati and others oversaw a massive destruction in shareholder value through the dream of commercialising QuantumRD. Adam Reynolds seems to have engineered a company with much better prospects than back in early 2014 even though there is still a leap of faith in the investment story. I’ll be keeping an eye on whether the new management team deliver on the new vision and the IONA product is certainly one to watch.

Contrarian Investor UK

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