Cashed-up Genesis focuses on research

Genesis Research chief executive Stephen Hall. Picture / Amos Chapple

Biotech company Genesis Research - which holds its annual meeting this Friday - has doubled its cash reserves by selling out of Arborgen but it isn't about go on a spending spree.

The sale of the stake in Arborgen - which was pioneering the breeding of genetically modified trees - earned the company nearly $8 million, said chief executive Stephen Hall.

That effectively doubled the company's cash value from about 30c a share to around 60c.

Its was a legal dispute with other Arborgen shareholders that prompted the sale last month but the timing is good for the company, which has seen its cash reserves dwindle from $60 million in 2000 to just $11 million in 2004.

Last year Genesis decided to scale back its plant science research to focus on the health sector to preserve that cash.

The Arborgen money will give its drug research programmes a boost. At present spending levels it is equivalent to three years of cash burn.

"It was always our strategy to sell out at the right price and at the right time," Hall said. "Certainly the legal situation did bring it to a head."

But a 5 per cent stake in a tightly held company is not easily saleable, so the opportunity to get out was not such a bad thing.

Biotech companies can never borrow money and developing products to the point where they raise revenue can take years.

Genesis' ability to raise cash from New Zealand investors has been limited by the boom and bust it went through shortly after listing.

Its shares rose to more than $7 shortly after listing. They were trading as low as 29c last week.

The Arborgen cash would give Genesis more credibility with investors and with potential licensees and partners, Hall said

"The nature of biotech is that you raise a lot of cash and you spend it slowly and wisely in the hope that you will get a pay-off," he said. "We've had three [potential products] that didn't pay off and we've had to be more cautious and more wise."

The decision to move away from plant science was made because of longer timeframes and lower returns in that sector.

The company is still running a programme on cell wall research.

"The most likely application there is in the biofuels industry," Hall said. "People are looking at ways to convert biomaterials to ethanol."

But the primary focus was now on the health programmes and particularly on RNAi therapeutics.

RNAi was a whole new paradigm of technology, Hall said.

RNA are molecules involved in protein synthesis within cells.

The "i" in RNAi stands for interference and refers to the ability of the treatment to block viruses or to switch off cancer-causing genes.

"Just as antibodies revolutionised health therapeutics, we believe RNAi is going to do the same," Hall said. "It allows you to reach targets that are currently considered undrugable."

RNAi was not necessarily a "slam dunk" as there were still technical issues to be resolved.

Genesis will make a full progress report on its RNAi treatments at it AGM on June 17.