Environmental Diagnostics Cuts Its Stake in Disease Detection

Environmental Diagnostics Inc. is learning to let go.

Four years ago, the North Carolina-based manufacturer of medical test kits gave birth to Disease Detection International in Irvine.

Begun as one of Environmental Diagnostics’ divisions, Disease Detection went public in 1987. Former Secretary of the Interior James G. Watt left his position as chairman at Environmental Diagnostics to run the new company.

Ever since then, the two firms have fought over various technology rights. Environmental Diagnostics last year even launched an unsuccessful proxy battle to gain control of Disease Detection, which also makes test kits.

But Environmental Diagnostic has apparently given up and has begun to systematically sell its huge stake in Disease Detection.

This week, the company disclosed in a filing with the Securities and Exchange Commission that it has sold nearly 1.9 million shares of Disease Detection for about $300,000.

“We still feel as strong as we did when we embarked on a proxy battle to replace their board directors that we are not satisfied with the management of DDI,” said Peter Heath, Environmental Diagnostics’ controller. “That situation has not changed.”

For its part, Disease Detection claims not to care that Environmental Diagnostics is unloading its shares. “That’s fine with us,” said H. Thad Morris, Disease Detection’s president.

Since September, Environmental Diagnostics has sold 6.5 million of its 32.1 million shares of Disease Detection. The sales--coupled with a stock offering by Disease Detection--has reduced Environmental Diagnostic’s stake in the company from 27.2% to 17.2%

Heath said his company would sell even more of its shares of Disease Detection but SEC rules say a corporate investor cannot sell more than 1% of any company in a 90-day period.

“We think there is no value to us holding on to it,” Heath said.

Disease Detection, which has 28 employees, reported sales for the first quarter ended March 31 of $88,104 and it lost nearly four times that--$323,983. The company’s stock is worth a quarter a share.

Environmental Diagnostics is still on the critical list too. The company had sales during the first quarter of $788,000 but lost $773,000. Its stock closed Friday at $1.09.

Helionetics Inc. in Irvine said its common stock began trading on NASDAQ Friday under the symbol HLXC. The electrical equipment manufacturer’s common stock also trades on the Pacific Stock Exchange under the symbol HLX.P.