Forum Archive Index - May 2003

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Kerry,

> 
> Pan Pharma PPH notwithstanding, most of the legit Oz biotechs have
> already put on 20% since their early March lows: CMQ 26%; BTC 20%; NRT
> 20%; PTD 40% PSX 60%; PSD 12%; SIG 18%; MIA 18%; SDI 12%; SIE 21%.
> 
> There are still a few gems languishing however. ACU -3%; EPT -11%; VRI
> 1%; IAT -10%; SHL 6%;VSL -6% and CCE -10%.
>
>

You obviously study this sector with a watch list like that!   I note all of 
those shares are Australian, which I guess is logical given that you are 
Australian judging by your e-mail address.    However, most of these 
Biotech companies have a global focus and will need to be a global 
success story to justify sustained share price growth.   Do you feel it is 
reasonable to focus mostly on the Australian share market for 
investments in the Biotech sector?

I also note that you seem to be judging these shares against an early 
March baseline.  Any particular reason for that?  For example, do you 
regard share price valuations on that date as some kind of rock bottom 
value indicator?

>
> 
> My own favourite is Biotech Capital BTC, which offers the only listed
> access to Proteome Systems. Biotech is a $40M investment fund with
> half its cash invested in 6 unlisted cutting edge companies.
> 
> Only half invested, it has 24c/share cash - valuing its investments on
> current prices at around 8c/share. Those investments are Alchemia,
> Biocomm, Pacific Knowledge Systems, Xenome, XRT and the jewel in the
> crown, Proteome Systems in which it has $5.37M invested for a 2.57%
> stake in the company.
> 
> On April 14 they flagged the imminent announcement of a seventh
> investment and the heads have risen 20% in the interim. (Too much to
> hope they've doubled their stake in Proteome). Their investment
> analyst is a former Otago University graduate.
>

Traditionally investment companies are valued in accordance with their 
asset backing.  I wonder why BTC are holding so much equity as cash?  
If they are really experts in biotech investment, this is not a good sign!

> 
> There are two drawbacks:
>  - They are part of Packer's Challenger Group and he's no doubt eyeing
>  them off as a great little cashbox once things pickup.
>

Does Packer have a controlling stake?

>
>  - In a fit of irrational exuberance I picked up Sept03 options,
> exerciseable at 50c, which remain well and truly out of the money -
> Though I live in hope.
> 


What are the implications for this company if the Sept03 options remain 
'out of the money'?   And, the alternative question:   How much will the 
options dilute the interests of existing shareholders if they are 
exercised?

And perhaps the most telling question of all.   Do you have an exit 
strategy for any of your biotech investments?  If so, what is it (in general 
terms)?

SNOOPY


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