True bliss for investors in biotechnology shares

By GEOFF SENESCALL

Investors hitching a ride with Howard Paterson's latest biotech baby have not been disappointed.

Shares in Blis Technologies, which claims to have found a cure for the sore throat, jumped more than 16-fold yesterday in their debut on the stock exchange's unlisted board.

This is one of several technology companies that have chosen to list on the less-stringent second board because they do not qualify for a main-board listing.

The less-regulated second board has attracted significant interest among professional investors.

In the case of Blis, someone who invested $1000 now has a holding with a paper value of $17,500.

Some 816,000 shares changed hands in Blis as it leaped from its issue price of 10c to 220c, before settling at 175c.

Blis is the second biotech company that Mr Paterson, who is said to be the richest man in the South Island, has taken public in the past four months. The other one is the A2 Corporation, which suggests that there is a link between milk protein in cows and the incidence of diabetes and heart disease.

Like Blis, its shares were issued at 10c. They are now trading at 350c.

Blis was set up to commercialise the discovery by Otago University scientists of the anti-bacterial protein called Salivaricin B, which they claim can prevent or control streptococcal throat infections.

Thirty million 10c shares have been issued, raising $3 million to buy rights to the technology.

There are now 40 million shares on issue, with 25 per cent held by a company called Menston. Behind it are interests associated with Mr Paterson and the listed investment company Southern Capital.

Southern Capital owns four million shares. Menston also has options to buy two million shares at 30c each.

Mr Paterson is understood to have at least one other biotech venture up his sleeve.

This biotech phenomenon follows the success of Genesis Research and Development, which, after six years in gestation, is set to make its debut on the main market on September 14.

Its shares have seen a similar meteoric rise, with the latest tranche of shares being issued at 600c. Even before they list they are trading on the grey market at 850c.

The unlisted board sports 45 companies, including the likes of Wilson Neill, Bridge Corp and Wellington Drive.

However, like any other market, hype is not always followed through with performance.

Take the e-commerce company E-starOnline, which was five times oversubscribed.

Its share price initially raced ahead but is now trading at around issue price.

Stock exchange managing director Bill Foster warns that it is "buyer beware" on the unlisted market.

"The benefits of the unlisted market are not for the investors.

"The only protection they get out of trading in that market is they can have the comfort of dealing with a member firm."