Levon Resources Takes on Hepatitis B

After last year’s green rush, which saw numerous junior miners switch focus to medical marijuana, investors are well aware that some companies believe diversification is the key to thriving in today’s tough price environment. 

While the floodgates to the marijuana space have for the most part now closed, this past Friday Levon Resources (TSX:LVN,OTCQX:LVNVF) showed that the health sector as a whole may still be an interesting area for mining-focused investors to turn their attention. The company announced that day that it has entered into an arrangement agreement that will see it acquire SciVac, a private company.

Taking on Hepatitis B

Speaking about the arrangement, CEO Ron Tremblay explained, “[t]he acquisition of SciVac gives Levon ownership of Sci-B-Vac(tm), a commercial stage, potentially best in class hepatitis B vaccine which could address a significant market opportunity.”

For those not in the know, hepatitis B is viral infection that targets the liver. According to the World Health Organization, it can cause both acute and chronic disease. It’s transmitted via contact with the blood or bodily fluids of an infected person, and at the moment about 240 million people are chronically infected with it. Each year about 780,000 people die from hepatitis B infections.

That said, a vaccine against the disease has been available since 1982, and it is 95 percent effective at preventing the development of chronic disease and liver infection due to hepatitis B. While that might sound good, a Baystreet.ca article notes that SciVac’s vaccine has the advantage of having an effectiveness of over 98 percent.

Shareholder benefits

While Levon’s move into the health sector might seem like a strange one — after all, the company’s focus until now has been its Mexico-based Cordero silver-gold–zinc–lead project — Tremblay believes it will lead to benefits for the company, and of course its shareholders. “I believe [the transaction] will generate tremendous value for Levon shareholders,” he said, adding, “[i]n a difficult market for resource issuers, we have chosen to preserve capital while seeking to identify alternatives to create shareholder value.”

SciVac CEO Dr. Curtis Lockshin is similarly optimistic about the transaction, and said it fits with his company’s plan to expand market opportunities for its products. He noted, “Sci-B-Vac has already been approved in several countries, including Israel, where it has been provided to hundreds of thousands of newborn children. We intend to pursue marketing approvals for Sci-B-Vac in the United States and other territories worldwide, initially focused on at-risk populations such as End-Stage Renal Disease and HIV patients.”

By the numbers

In terms of what exactly the acquisition means for Levon shareholders, Friday’s press release states that they will receive one new common share of Levon plus 0.5 of a common share of a new exploration company in return for each Levon share they now hold. When the acquisition closes, Levon shareholders will hold all of the issued and outstanding shares of the new company and 31.6 percent of the issued and outstanding new common shares of Levon; SciVac shareholders will hold the rest of the new common shares of Levon.

Ultimately, the plan is for the exploration company to contain all of Levon’s properties, including Cordero, as well as $22.1 million in working capital. That’s equivalent to about 48 percent of the company’s working capital as of December 31, 2014. Meanwhile, Levon itself will keep $27 million in cash.

Closing time?

For the arrangement to go through, at least two-thirds of Levon’s shareholders and option holders must approve it at a special meeting scheduled for April. It is also of course subject to regulatory approvals.

At close of day Friday, Levon’s share price was sitting at $0.405, down 18.18 percent. Year-to-date it is up an impressive 68.75 percent.

For more insight from Tremblay, watch the video below from this year’s PDAC convention.

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

Editorial Disclosure: Levon Resources is a client of the Investing News Network. This article is not paid-for content.