KEY POINTS:
ICP Biotechnology is trying to sell itself to farmers as a place to invest surplus cash in a high-tech, downstream venture.
"You are getting a better return out of this than you would out of buying a dairy farm or a sheep and beef farm," chief executive Earl Stevens said in a time-out from a national roadshow.
The company, which backdoor-listed via Australasian Property Holdings in May last year, has offered each of its 4500 shareholders the chance to buy between $500 and $5000 worth of shares.
Dr Stevens hopes this will raise $3 million to $4 million.
The offer was made to give small shareholders a chance to participate in the company's expansion, which has seen 40 million new shares placed to wealthy investors.
There are now 148 million shares on issue and at the present share price of 21c, the company has a market capitalisation of $31 million.
Whether this was Plan B, after ICP failed to attract institutional investors who shy away from the high-risk, accident-prone biotech sector, is not clear.
In August, Brent King's investment company, Viking Capital, took a 16 per cent stake, and he and colleague Grant Baker joined the board.
This month, the 23-year-old ICP, which produces proteins, serum and plasma from animal blood for pharmaceutical and biotech companies, moved into a $25 million new factory in Henderson.
Also this month, it raised its 2006/7 revenue forecast to $25.7 million and earnings before interest, tax, depreciation and amortisation to $6.1 million for the June year.
It expected to break even in the current financial year and be in profit next year.
Dr Stevens, who owns 30 per cent of the company, saw ICP as a leading global manufacturer of quality biological products that could make it a hundred-million-dollar-plus company in a short time.
The roadshow often hit paydirt from unlikely places and people. In Tauranga, a group of 16 farmers invested more than $500,000.
He said ICP was adding value to the meat industry - up to $200 per carcass.
"We are taking bulk raw materials and processing them to pull the proteins out of those products."
ICP pays meat companies $3000 a tonne for plasma.
"If we can pull up to $200,000 of proteins per tonne out, then it's a good proposition for us too".
"It does have strong rural appeal. The more we have gone outside Auckland, the more people understand what we are talking about," he said.
The beauty of ICP's proposition, said Dr Stevens, was that it was one step back from the risks taken by pharmaceutical companies developing drugs.
"As a country we can't afford US$800 million [$1.2 billion] for a new drug. We can't afford that failure."
He said some New Zealand biotech companies had spent hundreds of millions of dollars and got nothing.
Although ICP made specialised products such as albumin and thrombin, "we are not taking that front-line discovery risk".
"This is more practical. We are making things and selling things and getting cashflow."
ICP planned to gradually move up the value chain by producing more and more high-value molecules, but it would still sell to pharmaceutical and biotech companies.
It used New Zealand's biosecurity status as a key competitive advantage. New Zealand is one of just four countries free of all List A animal diseases such as BSE (mad cow diseases) and foot-and-mouth.
The downside of that was ICP was locked into country risk if something went wrong.
Dr Stevens said ICP had taken steps to mitigate that risk, including working with large corporate farmers who have sophisticated DNA track-and-tracing systems.
The more plasma proteins are processed the more likely small viral parts get left behind, he said.
Next year, ICP will look to buy a manufacturing base in Australia, which is another of the four countries free of List A diseases.
However, Dr Stevens acknowledged any disease outbreak would be problematic.
"Mud sticks obviously. It's also costly."
ICP has the capacity to make recombinant proteins by genetically engineering plants, something unlikely to find favour with parts of the Green lobby that oppose transgenic "pharming" of species also grown for food.
"At the moment we are very much working on making natural products from existing raw material sources.
"But with the separation technology they have built up, it's a simple matter to move into recombinant technologies."
He said the anti-GE lobby was less worried about modified products going into medicine and pharmaceuticals than into the food chain.
"We have that capability now; it's just we are focusing on what we are doing."
However, he said, "If we don't do it, someone else will.
"We are building up big international markets for these molecules.
"We don't want to hand it on a plate to someone else."
ICP had the flexibility and strategies in place so that if someone competed with recombinant products ICP could, "if need be, shift focus and replace our animal source proteins with these recombinant molecules".
At present, the economics don't stack up.
The new 2230 sq m facility will be one of the largest of its type in the world. It will make ICP the third-largest producer of bovine albumin.
Its ability to process plasma has been tripled, to six tonnes a week.
Sophisticated freeze-dry facilities would be installed early next year.
A deal that fell over last month to sell ICP's non-core veterinary products for around $3 million could have a silver lining, Dr Stevens said.
Indications are the prospective buyer would have got a bargain, and one of the six buyers PricewaterhouseCoopers was negotiating with was expected to pay around $4 million.
The veterinary arm made animal fertility hormones, but ICP was getting out of that market, which it said was only around US$15 million compared with a US$2 billion market for serum and plasma protein products.
ICP shares, which hit around 48c in April, when still trading as Australian Property Holdings, have fallen as a result of share dilution through the placements.
- NZPA
