AVT Plasma calls in liquidator after China about-face

AVT Plasma (ASX:AVT) has suspended trading in its shares, following a board decision to wind up the company and appoint a provisional liquidator.

The decision follows advice from Neptunus Pharmaceuticals USA that it will not subscribe US$550,000 to AVT Plasma, as agreed in October 2004.

"Even at our AGM in the middle of June [we were] sent a letter which assured the AGM that the money would be paid by the 30 June," AVT Plasma CEO Stuart Nettleton told Australian Biotechnology News. "But two days ago we received a notice from Neptunus USA saying they weren't going to honour the agreement."

As reported in Australian Biotechnology News last week, Neptunus USA is owned by AVT Plasma's majority shareholder Zhang Simin, a person Nettleton described as "a captain of the pharmaceutical industry in China."

Zhang was the driving force for AVT Plasma's plans to purchase the Wei Wu Guangming Biological Product Laboratory, a blood fractionation plant in Shenzhen, China. He had agreed to purchase the plant through his company Neptunus and then sell it to AVT Plasma.

"Our big problem is, of course, that Zhang Simin is the guy putting the whole project together in China, so how do you sue the guy that's responsible for the project?" said Nettleton. "What's actually happened is that in taking us to the wire, we've run down to virtually no money."

In a surprising move, however, Zhang yesterday paid a 50,000 euro (AUD$80,300) deposit for the arbitration currently ongoing in Denmark between AVT Plasma and UpFront, a company that AVT Plasma had engaged to develop blood fractionating technology. The arbitration follows AVT Plasma's decision not to exercise options to license the technology.

"While the payment of the 50,000 euros to the Upfront arbitration court is great, ...it's a little difficult to understand," said Nettleton. "We think it's part of his bigger strategy. But we don't know what that business strategy might be. It's not a loan to the company, nor is it equity in AVT."

Zhang also personally offered to AVT Plasma a smaller amount than the US$550,000 expected but it was not sufficient for Australian solvency requirements, said Nettleton.

Zhang has also made it clear that while he will still be going ahead with the Shenzhen fractionation plant purchase, it will not involve AVT Plasma, said Nettleton.

Nettleton is unsure why Zhang has made these decisions, but said that: "The fact that the Australian share market saw the company as worth far less than what it had even invested on the technology and the project, meant that he's decided to go another way."

AVT Plasma's shares have dropped from $0.08, when Zhang first contracted to put money into the company, to just $0.03 today.

"Unfortunately it's fulfilling that stereotype that we tend to have from Australia. And that's one of the reasons the share price was so low because everyone was justifiably sceptical," said Nettleton.

Since AVT Plasma is registered in Hong Kong, the company must comply with that country's requirements and appoint a provisional liquidator, rather than the slightly more sophisticated Australian administration approach, said Nettleton. "So things aren't nearly as flexible for us as they might be for most Australian companies," he said.

AVT Plasma is currently considering a couple of options for its future, "but if none of those happen, and in a way that guarantees our solvency, then directors have to do what they do with any insolvent company," said Nettleton. "At the moment it doesn't look likely that we will continue in the way we were, which is a fractionation plant in China."