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(Kevin Van Paassen/Kevin Van Passen/The Globe and Mail)
(Kevin Van Paassen/Kevin Van Passen/The Globe and Mail)

Paladin fires back at Afexa Add to ...

The hostile bid for Afexa Life Sciences Inc. , maker of Cold-FX, is getting more and more hostile.

Shareholders of Afexa can't depend on the company to deliver on its promises, the head of hostile bidder Paladin Labs argues.

Afexa last week said that Paladin's 55-cents-a-share bid undervalues the company's growth opportunities. But Mark Beaudet, Paladin's co-founder and acting head, says that the target hasn't proved that it can turn those promises into revenue.

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"If you look at their record across those assumptions, it's not very good," Mr. Beaudet said, while pointing out that Afexa's shares have been slumping for five years, while Paladin's have been soaring.

Afexa's revenues have been flat, it has been promising to get into markets outside Canada but "other than a failed launch of Cold-FX in the United States in 2006-2007, Afexa's only reported progress has been the sale of 'small amounts' of Cold-FX in Hong Kong," Paladin said Monday. And while the company has brought on new products, "six years later these products do not contribute significantly to the company's revenues," Paladin said.

So, if the Afexa is so stagnant, why bother buying it?

Mr. Beaudet said Paladin wants it because it would quickly ramp up the growth of its over-the-counter treatment business, which currently has $20-million in sales. Afexa would add about $40-million with a brand that, while mature, "has a great following in Canada."

Afexa said last week that it has a list of potential white knights that could top Paladin's bid.

Mr. Beaudet said that he sees factors that will limit the list of rival bidders, and they include the fact that Cold-FX is largely sold in Canada alone, that it's an over-the-counter product and because there's not much growth in Cold-FX at the moment.

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