Market in dark over problems at Anagen

MD kept quiet about difficulties with blood analysis system
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The Independent Online
The managing director of quoted healthcare company Anagen confirmed yesterday that he had decided not to tell the Stock Exchange last year that it was having "serious problems" developing its core product.

Managing director Mervyn Sennett also said he also decided not to correct press reports that the product, Auraflex, was "selling well" when no sales have yet been completed.

Anagen's shares have had a roller-coaster ride since flotation in 1993. They soared last summer on hopes for AuraFlex, a system which hospitals would use to analyse blood samples. They then crashed in October when Organon Teknika - part of Dutch chemicals giant Akzo Nobel - pulled out of a deal to act as worldwide distributor.

Anagen has still not sold an AuraFlex system, nor - in results brought forward to 25 April - did it inform investors it was in dispute with former partner Integrated Technologies Ltd. ITL has issued a writ, alleging misrepresentation and bad faith in terminating their joint venture last December.

Anagen shares closed at 69p on Friday - valuing the company at pounds 32m - after a recent rally prompted by comments in the results.

The company's accounts last year said that "the system was launched in February 1995". But documents obtained by the Independent on Sunday show that up until it pulled out, Organon had, in fact, put the launch on hold.

On 29 August last year project experts met Organon executive Ton Stap and ITL representatives to discuss serious problems.

In a letter to ITL dated 27 September, Stap stated: "We are attempting in these evaluations to prove the reliability of the instrument. All that has been proven is that the instrument is unreliable. We simply cannot launch a product as unreliable as AuraFlex currently is."

Two days after the date of that letter, Auraflex was reported to be "selling well". After five days Anagen technical director Dr Gordon Forrest sold 150,000 shares at for personal reasons at 95p. And nine days after the letter Organon pulled out and the shares dropped.

Mr Sennett said there was a "technical argument" about what the word "launch" actually meant. He also said press comments that AuraFlex was "selling well" were justifiable.

"Sales were pleased with the prospects and the interest they were getting. It's down to the definition of selling. If you give me an order I have sold it."

But he admitted: "By and large you have got to take the view that if there are misleading statements that lead to a substantial rise or fall in the share price you have got to do something about it. If it is definitely wrong and is causing a movement then you are legally bound to do something about it."

He said that problems discovered in the AuraFlex trial conducted last summer were "unacceptable" and "did cause concern at our end, to put it mildly". But at the time the board was confident that the problems were temporary.

The Stock Exchange investigated Dr Forrest's share sale and wrote to Anagen on 6 March saying it would not be taking action.

Mr Sennett said there were still "minor software irritations" with AuraFlex and that Anagen is looking to correct them. He said the firm was in "detailed discussions with a number of companies to act as distributors".