Chemeq: Back from the dead
Under a new plan, hatched with the support of the company's receivers, Chemeq's anti-microbial intellectual property has been spun off into a new company, Chemeq Technologies, which will seek partnering opportunities to develop the products.
The company will be initially funded by a $3.5 million investment from Stark Investments and Harmony Capital Partners, the bondholders that ordered in the receivers last year.
The new company will be headed by former Chemeq general manager Bill McHenry, along with former Chemeq chief research chemist Robert Dunlop and the company's former finance manager Brian Mangano.
McHenry told BTN that Chemeq Technologies would pursue an aggressive licensing strategy for the anti-microbial compounds in a broad group of applications.
"We have a very strong monopoly position in polyaldehydes,” he says.
"Because our product has such a broad activity – it's anti-bacterial, anti-fungal, anti-viral, anti-protozoal – it can be taken into a wide number of uses within commercial arenas.
"So our interest now is to find suitable partners across the landscape to license it for commercialisation.”
McHenry says the company is confident it will quickly be able to find partners to take Chemeq's products to market.
"Our expectations are that we will see some kind of royalty stream coming through from these products within 18 months to 24 months, and we expect to be executing and finalising deals within the next 100 days – we've actually got one lined up already,” he says.
While McHenry would not name any of the likely partners, he said Chemeq had always attracted partnering interest for its compounds, but had decided to instead go it alone. Some of these original potential partners had retained their interest in the company's products, according to McHenry.
Curiously, he says the Chemeq Technologies strategy bears more than a passing resemblance to some of the early intentions of Chemeq.
"Ironically, when Brian [Mangano] and I were looking at what would make sense as a recovery plan, we put the basics of this together and I was doing background research,” says McHenry.
"I was given an old copy of a '99 prospectus and I had a look there and I couldn't believe it – in fact what we've presented the bondholders is remarkably similar to what the company proposed at the beginning.
"So we've gone full circle – that's what the genesis of the company was, to be effectively an R&D company, contracting out various tasks to other companies and sticking to its key competencies.”
While the new company's only full-time staff are McHenry, Mangano and Dunlop, he said that Chemeq Technologies had retained a number of former contractors, and some of the old staff would continue to contribute to the new company on a contract basis.
But the company will never again be in the business of manufacturing and distributing its own products, according to both McHenry and Chemeq's receiver, Martin Jones from Ferrier Hodgson.
Jones told BTN that Chemeq's assets were still on the market. He said the receivers were still looking to sell the company's hard assets – the land, buildings and plant and property.
"That's the easy part of it. You can get within a couple of dollars of what those things are worth, and they'll find a buyer for them. There's nothing special about those assets,” he says.
Jones says that, although it is probably some way away, there is even a chance that shareholders may eventually see some return on their investment, after the $60 million owed to the company's bondholders has been repaid.
"I guess the big hurdle is to find $60 million from this – if we do that it's outstanding, but that's the first target,” he says.
Jones says the company may even return to trading on the Australian Securities Exchange, at some point.
"We've left that option open. It's not an immediate plan, but we want to make sure we keep all options open to provide flexibility for realisation, or exiting, or adding value, and that might be one of them,” he says.
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