Patient Safety Technologies considers selling SurgiCount.

PATIENT Safety Technologies Inc., a struggling Los Angeles-based maker of patient safety products, is considering an unsolicited buyout offer for its potentially most profitable unit.

The holding company, which has faced repeated Amex delisting warnings, said last month it had received an offer from an unnamed party for an undisclosed amount for its SurgiCount Medical Inc. subsidiary. The unit makes a bar-code scanning device designed to keep track of surgical sponges and towels. It's designed to reduce medical errors by reducing the chance that easily overlooked items are left in a patient's body.

Patient Safety had announced in early October that it planned to spin off the unit, which has a growing number of customers around the country, and its board has agreed to evaluate the bid. It plans to hire an outside, unaffiliated investment banking firm to advise it.

The company, formerly known as Franklin Capital Corp., has undergone a tumultuous series of , changes in business strategy and management since Milton "Todd" Ault III, who runs a Los Angeles private investment company, gained a significant stake in the company in early 2004.

Under Ault's leadership as chairman and occasionally chief executive, the company shifted its focus from a radio and telecommunications business. It began selling off assets that were not healthcare focused, acquired SurgiCount Medical in March 2005 and changed its name the following month to reflect the new corporate direction.

Last April, during a period in which Ault was not chairman or chief executive, the board appointed his Ault Glazer Bodnar Securities LCC to explore strategic alternatives. In June, the company said it would take on the name of its SurgiCount subsidiary, but reversed course the following month, saying it had decided to keep SurgiCount as a wholly owned subsidiary.

The company appeared to change course again on Oct. 5 by announcing it would spin off SurgiCount as a public company in connection with a broad-based financial restructuring. The company reported a second quarter net loss of $2.9 million (47 cents a share) on revenue of just under $160,000.

Ault, who had resigned from his most recent stint as CEO effective Sept. 29, was reappointed by the board as chairman and chief executive on Oct. 27 following the unsolicited bid. Company officials have not returned several calls for comment over the last few weeks.

Physican Group Expands

HealthCare Partners LLC, a Torrance-based healthcare management services organization that operates the largest physician network in Southern California, has made its first out-of-state acquisition with last week's purchase of St. Petersburg-based JSA Healthcare Corp.

JSA Healthcare and its Pinnacle Health System subsidiary manage the largest independent physician networks in both Central Florida and Las Vegas, respectively. The deal, whose terms were not disclosed, will boost HealthCare Partners' annual revenues an estimated 25 percent to $1.5 billion, according to Dr. Robert Margolis, chief executive.

More than 500,000 patients, including about 100,000 Medicare HMO members, will now be served by HealthCare Partners, which specializes in senior chronic care management. The acquisition accomplishes several strategic goals for the privately held company, including diversification of its geographic footprint and its payer groups. Healthcare Partners also owns the El Segundo-based Camden Group medical consulting firm.

CytRx Drug Advances

Investors boosted shares of Los Angeles-based CytRx Inc., which jumped 20 percent to $1.57 last Tuesday after it announced that the European version of the U.S. Food and Drug Administration had granted its lead drug candidate--for the treatment of Lou Gehrig's disease--orphan medicinal product status. Orphan drug status is given to drugs that address little-served diseases. The European Commission decision gives arimoclomol reduced regulatory fees, scientific advice and 10 years of marketing exclusivity in Europe should the drug get approved. The FDA granted the same status in May, with seven years of U.S. marketing exclusivity.

Hospital Chief

The search is underway for a new chief executive at Glendale Adventist Medical Center now that Scott Reiner has been promoted to a new job with the hospital's corporate parent. Next year he'll take over as senior vice president of Roseville-based Adventist Health, which operates hospitals and home care services affiliated with the Seventh-day Adventist church. He'll oversee business development, physician strategies, acquisitions and divestitures, and serve as chairman at three of the system's Northern California hospitals. Reiner has been at Glendale Adventist since 1999.

Staff reporter Deborah Crowe can be reached at [phone], ext. 232, or at [e-mail].