By James McNair
The Cincinnati Enquirer

A New York company that had agreed to buy PocketScript, one of Greater Cincinnati's more promising technology startups four years ago, has backed out of the deal.

Medix Resources, a publicly traded software development company, did not say why it terminated the definitive agreement it signed with PocketScript last December. The deal called for Medix to issue preferred stock convertible into 12 million shares of Medix common stock, as well as up to $4 million more of those preferred shares if undisclosed "business enhancement events" occurred within six months.

"My understanding is, from a business perspective, it just wasn't as good a deal as they thought it was," said Robin Schoen, a Medix spokeswoman. She said PocketScript would have to repay a $100,000 loan.

Stephen Burns, CEO of Mason-based PocketScript, said he didn't expect the acquisition to be called off.

"It was kind of last-minute and caught us by surprise," said Burns, a co-founder. "We went five months. We were way past due diligence."

PocketScript's software, used with handheld computers and smart phones, enables doctors to check patient records and prescribe medications remotely. About 750 doctors, including those in College Hill Physicians in Cincinnati and 200 under the Tufts Health Plan in Massachusetts, used the system in 2001. Burns said 600 doctors use it now, with 2,300 more under agreement. PocketScript has 15 employees.

"Our business is moving along and the big (pharmacy benefit management companies) and doctors like our product," he said. "It's just a tough time to do any kind of a deal, and nobody wants to give too big an order to a little company."

PocketScript exhausted its venture capital, laid off most of its workers and had its debt erased in bankruptcy in 2002. The proposed acquisition by Medix was announced last October.

Phil Rothermich, vice president of business development at Express Scripts, a pharmacy benefit management company in St. Louis and former PocketScript creditor, doesn't believe the Medix pullout will be fatal to PocketScript.

"I don't think the termination of that agreement is necessarily a death knell for them," Rothermich said. "They have a number of financial deals on the table that were back-burnered when Medix came along. I understand they've reinvigorated those discussions."

A day before Medix killed the deal, it announced its purchase of PocketScript rival ePhysician from its biggest creditor, Comdisco Ventures, for an undisclosed amount.

Bridget Perry, a spokeswoman for the Tufts Health Plan in Boston, said more than 30 of its doctors use the PocketScript device. Medix signed a technology deal with Tufts in February. Perry did not know if Medix will try to switch the PocketScript users to ePhysician.

"We're in contact with all involved parties to gather as much information as we can to better understand the situation," Perry said. "there'll be no impact on them."

E-mail jmcnair@enquirer.com