Dietary supplements company Promisia Integrative is warning investors that if they participate in its $1.67 million capital raising they run a high risk of losing their money.
The company has been operating with the financial support of its largest shareholder, director Tom Brankin’s family trust, and now owes him $1.6 million since MedSafe issued a warning in February that its Arthrem supplement intended to promote joint health may cause liver damage.
That warning was repeated last month when MedSafe said that 25 cases of liver toxicity have been reported to the Centre for Adverse Reaction Monitoring by Sept. 30.
A rival product, Go Arthri-Remedy 1-A-Day, was withdrawn from sale after the February alert but Promisia’s product is still sold in about 1,000 New Zealand pharmacies and about 900 pharmacies in Australia.
The company reported a 64 percent drop in sales for the six months ended June and a net loss of $1.2 million, up from a loss of $349,000 in the previous first half.
Chief executive Rene de Wit told a special meeting that approved underwriting of the rights issue to at least $1.05 million and possibly up to $1.3 million by Brankin that as many as 80 percent adverse impact reports “are questionable.”
De Wit offered a number of reasons for the adverse reactions unattributable to Promisia’s product, including that people were taking other supplements and drugs or were taking rival products, such as the Go Arthri-Remedy product that contained twice the dosage of Promisia’s product.
“It is clear that the introduction of competing products in February 2017 had an immediate impact in the form of both a reduction in the sales of Arthrem and the increase in the number of adverse reactions,” de Wit said
“It follows that the number of reported adverse reactions cannot be attributed solely to Arthrem as claimed by MedSafe,” he said.
A number of people who switched to taking other companies’ products had thought they were simply taking a higher dose of Arthrem at a cheaper price than Promisia’s product, he said.
“MedSafe continues to claim Arthrem has breached the Medicines Act as it is being advertised and sold for therapeutic purpose. This is disputed by Promisia.”
The capital raising is a three-for-one rights issue priced at 0.1 cents. Promisia shares are trading unchanged at 0.5 cents, valuing it at $2.8 million. The shares have fallen from as much as 0.9 cents on Feb. 14 before MedSafe issued its first warning.
If Promisia succeeds in raising all the money it is seeking, it will repay $800,000 to Brankin’s trust and will continue to owe the trust the remaining $800,000.
If the capital raising isn’t successful, Brankin will swap $800,000 of what is owed the trust for equity and the remaining $250,000 will be used to keep Promisia going. The trust also has the option of taking up a further $250,000 worth of shares in which case Promisia would have $500,000 of working capital.