Sarbanes-Oxley is forcing pharma company Provalis to delist from Nasdaq just as its US business starts to take off. As Husnara Begum finds, the move is keeping its sole lawyer busy

Medical diagnostics and pharmaceuticals group Provalis is planning to terminate its American depositary receipt (ADR) programme and delist from Nasdaq. The moves will allow the company to suspend its registration and reporting obligations to the US Securities and Exchange Commission (SEC).

The radical move follows an extensive review of the merits of Provalis’s secondary listing by its company secretary Lee Greenbury and finance director Peter Bream. “The review concluded that the costs and management time necessary to comply with the additional obligations introduced in the US by the Sarbanes-Oxley Act far outweighed the benefits of the secondary listing,” explains Greenbury.

Provalis is hoping to terminate the ADR programme and deregistration by the end of July. These moves, though, are subject to the company being able to reduce the number of US residents holding the number of Provalis securities (either ADRs on Nasdaq or ordinary shares on the London Stock Exchange) to less than 300. If the number of US investors does not fall below 300, Provalis will make changes to its articles of association to limit the number of US residents on the company’s share register to 299.

To make way for these changes, Greenbury says Provalis intends to propose resolutions at its next annual general meeting (AGM) to permit the company to amend its articles of association.

The Nasdaq delisting is further evidence of Greenbury’s ever-expanding workload. Since joining Provalis in July 1998 following a spell at high street chemist and retailer Boots, Greenbury’s role has extended to cover HR, investor relations, IP and, more recently, facilities management and security. He is also a member of Provalis’s four-strong executive management team.

Greenbury appears to relish his multiple roles and handles each one with great enthusiasm. And incredibly, despite being Provalis’s sole in-house lawyer, he handles a significant amount of the company’s legal work in-house.

“I try to handle company [and] commercial work such as contracts with manufacturers, distribution and licensing agreements myself because that’s my area of expertise. But if it gets too much, I’ll get help from outside,” explains Greenbury.

Richards Butler is Provalis’s first port of call for corporate and finance work. “[Richards Butler] were used before my time, but I get on very well with the relationship partner David Boutcher, so we’ve carried on using them,” he adds.

Last September the City firm advised Provalis on a small placing to raise £2.5m. The company needed the money to set up its US business, which was launched to distribute a second-generation test for diagnosing diabetes. Provalis did not need shareholder approval for the placing as it was able to use the authority obtained at its last AGM.

After Provalis had obtained clearance to sell the new diabetes diagnostics test, called in2it A1C, in the US last August, the company used this as an opportunity to review its US business model. In the past the company sold the first-generation diabetes test, called Glycosal, through two global distributors, Bio-Rad and Cholestech, which then sold the product on to sub-distributors under their own brand names; they in turn sold them to clinics and doctors’ surgeries.

“We looked at the business model and concluded that we could do a similar role to Bio-Rad and Cholestech. So what we’ve done with in2it in the US is to set up a four-man sales management team whose job is to sell the product to the sub-distributors and then provide technical support to the end user,” explains Greenbury. “All this ties in with the placing, because the demand for in2it in the US has been in excess of what we thought it would be. So we were left in the happy position of going to the market and saying we needed money to get our business in a shape to deal with the excessive demand.”

Provalis instructed Boston-based law firm Foley Hoag to help with the launch of the US business, including drafting a new US distribution agreement. The firm won the work after participating in a mini beauty parade involving around nine firms. Since then Foley has also been advising the company on its delisting from Nasdaq.

“We went to Foley Hoag for a variety of reasons, but mainly because the firm was recommended to me by some US contacts and its expertise in life sciences,” says Greenbury.

Other legal work is passed around between different firms. For instance, regional giant Shoosmiths and Birmingham-based Gateley Wareing have historically handled some employment work for the company.

“I’d only go to firms that have a reasonable reputation, and then after that it’s a balance between personal relationships, trust and lost. If we were a company that farmed out a lot of work then we’d have to put in place something that was a bit more structured. But at the moment that’s not necessary,” says Greenbury.

Since Greenbury joined the company, Provalis has gone through a number of changes. But as Greenbury puts it, it is ironic that the company is planning to delist from Nasdaq just at the time when its diagnostics business is becoming so US-centric.

Lee Greenbury
Company secretary

Organisation Provalis
Sector Pharmaceuticals and medical diagnostics
Turnover £13.5m
Annual legal spend £100,000 (excluding major projects)
Employees 120
Legal capability One
Company secretary Lee Greenbury
Reporting to Chief executive Phil Gould
Main law firms Richards Butler