Provalis goes into liquidation after running out of cash

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The healthcare group Provalis placed itself into voluntary liquidation yesterday after suffering problems with its new diabetes testing kit and running out of cash. It offering investors 0.4p a share after selling off the remaining part of its business, the medical diagnostics division. Its shares plummeted 56 per cent, or 0.43p, to 0.32p yesterday.

Provalis has experienced seven years of product delays and disappointing results. Peter Woodford, who was appointed as interim chief executive a year ago, the non-executive chairman Alan Aikman and the company secretary, Lee Greenbury, will resign from their roles following a special shareholder meeting on 14 September.

Provalis said it had agreed to sell the diagnostics business in Chester to Bio-Metrics, a subsidiary of Bio-Rad Laboratories, for £1.6m. It intends to return £1.4m to shareholders and cancel its share listing after going into voluntary liquidation. Major shareholders include Erik Penser, a private Swedish investor, as well as Schroders and Barclays.

The company's in2it diabetes test, a first-generation blood testing kit for use in doctors' surgeries, has been beset with technical problems, which forced Provalis to make changes to the design and postpone the roll-out of the product. While some of the problems have been ironed out, the company lacks the cash to resolve the remaining issues and re-launch the product.

Under Mr Woodford, Provalis has been winding itself down since announcing a review of the business in October. It sold off its pharmaceuticals division to Kogen for £10.5m in February, with the loss of 46 sales jobs. Mr Woodford, an industry veteran with 15 years at the Swiss medical products giant Roche, came in last summer to replace Phil Gould as chief executive after a series of profit warnings. At Roche Mr Woodfood was head of global strategy for the diabetes care division.

Mr Aikman said yesterday: "We believe that the disposal represents the best option to obtain value for the medical diagnostics business and to secure the best result for shareholders as well as employment for the majority of the group's employees." Of 40 staff, 33 will transfer to Bio-Metrics, as will its offices in Chester to save the group further lease and closure costs.

The company has a long history of setbacks. Its foray into biotechnology failed to yield the promised range of vaccines, and sales of a steroid drug which had been generating cash for the loss-making company plunged because of increased competition.