Researcher faces a testing future

By LIAM DANN

New Zealand's largest listed biotech company, Genesis Research, has enough cash to survive just two more years unless it can significantly reduce costs or boost revenue.

The company has reported a loss of $12.7 million for the full year to December 31.

It now has just $23 million in the bank.

Revenue was $9.9 million, falling from $15.5 million the year before.

The result is the company's first since its flagship product - the psoriasis drug PVAC - failed to get approval for sale from the United States Federal Drug Administration.

The numbers will do little to cheer investors - particularly those who paid up to $7.80 for shares during the post-float euphoria of 2000. The shares last traded at 85c.

Chief executive Jim Watson said the results were in line with budget and presented no cause for alarm.

"We are quite comfortable with it," he said.

"A company like Genesis, that develops products from nothing, must spend cash."

The decline in revenue was due to a reduction in licence fees as a number of research programmes were completed.

Watson said he was confident that revenue would grow again.

Last year Genesis separated its plant science division from its health division.

That was a major step and would make it easier for the company to form new alliances, he said.

The plant company - called AgriGenesis - is to become a separate listed entity with ABN Amro leading the capital raising. AgriGenesis will have its own chief executive, Dr Peter Lee, reporting directly to the Genesis board. The company has long-term goals to develop a bioethanol industry in New Zealand but already has several revenue streams. These include designing software to analyse plant DNA and biological controls for plant diseases like botrytis.

The $23 million in cash reserves will then be available solely for the health science company.

The failure of PVAC was disappointing, Watson said.

Genesis has a related drug called AVAC - for the treatment of eczema - in trials.

The company also has 42 patents pending in the US alone.