When RxElite Inc. (Bulletin Board: RXEI) of the US acquired FineTech Pharmaceutical Ltd. in early 2008 for $16 million in cash and shares, it seemed like a good result for the Israeli company that had undergone a number of incarnations and upheavals, including a failed takeover at a company value of $109 million and subsequent crash. RxElite promised to keep FineTech independent, and did so. Since the acquisition was mostly in shares, there was still room to dream of better things to come.
They didn’t.
RxElite sank into financial troubles and debt, and its share has fallen 99.7% to just $0.003 reflecting a current market cap of only $347,000. Yesterday, it sold its US subsidiary, RxElite Holdings Inc., a distributor of anesthetics, to India's Piramal Healthcare Ltd. for $4.2 million in cash plus the assumption of $3.2 million in debts to a Piramal affiliate.
As a result of the sale, RxElite has just two businesses: FineTech, which produces active pharmaceutical ingredients (APIs), and a unit that makes prescription drug products for specialty generic markets.
FineTech's investors obtained just $6 million in cash from the sale of the company to RxElite, which means FineTech president Dr. Arie Gutman and other investors have little left from profit after the prior failed sale of the company to Par Pharmaceutical Companies Inc. (NYSE: PRX). All that remains now is to wonder what would have happened to FineTech had it remained a small, independent, and profitable Nesher-based API manufacturer instead of merging with a larger company.
Published by Globes [online], Israel business news - www.globes-online.com - on January 29, 2009
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