Spinning off subsidiaries left and right, Endovasc Ltd. Inc. this week attributed the moves to a new business model.

The Montgomery, Texas-based firm Thursday established as a subsidiary Liprostin Development Corp. for its anti-inflammatory cardiovascular drug, Liprostin. Two days earlier, Endovasc established as a subsidiary Angiogenix Development Corp. for its nicotinic acetylcholine receptor agonist drug, Angiogenix.

"We're putting each of the technologies into a separate entity that will be owned by either the shareholders or the company," Chief Financial Officer Dwight Cantrell said. "By doing this, we have an entity out there that just has [a single technology] in it. That makes the deal structuring much easier."

Both Angiogenix and Liprostin have received FDA approval to enter Phase III trials. Cantrell said future spin-offs would result from products deeper in Endovasc's pipeline.

"Endovasc is the pipeline," he said. "Endovasc will be the one that generates the ideas, but the other companies will be the ones that other technologies eventually move into."

Any funding received by the Angiogenix and Liprostin would not dilute Endovasc stock, nor would it create debt for the parent company. In the future, Endovasc shareholders would receive a distribution of stock, subject to the customary regulatory approvals and the filing of the necessary registration statement.

Two months ago Endovasc tightened the number of its outstanding shares through a 1-for-40 reverse split, converting about 80 million shares into about 2 million. The same day, Endovasc began trading on the OTC Bulletin Board under the symbol ENVC.

"Right now these [subsidiaries] will be 100 percent owned by Endovasc," Cantrell said. "Depending on how we would attract [future] financing, there is a whole pyramid of scenarios. If they're looking to be a joint venture partner in this, then we may have to structure [ownership] one way. If we have an opportunity if the market changes and we do an [initial public offering], in that case we would give our own shareholders a dividend in the stock in the IPO. The avenues are just unlimited - it depends on what we run into as we go forward."

Angiogenix is a nicotine-based drug designed to grow new blood vessels and promote angiogenesis and subsequent renewal of heart function. In recent studies, test animals actually grew new blood vessels in their heart after blood flow was constricted to produce a condition modeling chronic myocardial ischemia.

Cantrell said the Phase III process is under way for both drugs - the company has begun patient recruitment, selected its sites and ordered the drug. He added that Endovasc expects to have drug orders completed by the end of the fourth quarter.

"In that case we can go right into the enrollment," Cantrell said. "[The trials] are going to be carried out over three years - the mandated time of study - but our treatment is not a three-year treatment. The results usually occur in [the Angiogenix] product in four to six weeks, and the other is maybe a little longer than that. We would expect to have data three to six months later."

Liprostin is a liposomal prostaglandin-based treatment designed to provide significant relief for people suffering from poor circulation due to arterial blockages and lack of blood to muscle tissues, and to heal intractable wounds. It improves diabetic conditions by increasing the pancreatic activity and reducing the need for insulin. The active agent in Liprostin (PGE-1) also improves liver and kidney function by stabilizing the cell membranes and protecting against free radical-related damage to cells, and is as effective as dobutamine as a bridge to transplant, the company said.

The FDA has approved two Liprostin Phase III trials, one for critical limb ischemia to prevent amputation and the other for severe leg muscle pain due to poor circulation. Though Endovasc nearly a year and a half ago said it intended to bypass Phase II trials and move directly into Phase III for the critical limb ischemic indication, Cantrell said the trial has been delayed while waiting to develop the additional arm to the study protocol.

Also this week, Endovasc hired noted trial lawyer John O'Quinn to seek damages resulting from what the company called a manipulation of its stock. The case targets investors Endovasc alleges sought to drive down stock prices through short selling in order to receive a much greater amount of shares when converting from preferred stock, debenture or other convertible provisions in financing deals.

Its shares, which traded as high as $9.60 in the past year, fell to a low of 31 cents during a 52-week range. Endovasc shares climbed 12 cents Thursday, or 14.5 percent, to close at 95 cents.

But also Thursday, CEO David Summers was named as a defendant in a lawsuit filed in the Las Vegas District Court by Hedge Fund LLC. The plaintiff alleges default on a $110,000 loan, which it said has not been repaid despite promises on the part of Summers and the company. The Honor Hedge Fund said Summers took the loan and advanced it to the company and was issued Endovasc stock as part of the transaction.

"The one has to do with market manipulation, and the other one is just the result of that," Cantrell said. "We expected things to come back our way - once you file suit, you always expect someone to countersue."