BresaGen announces major restructure plans

BresaGen (ASX:BGN) intends to spin off its protein pharmaceuticals business and headquarter it in the US, as part of a major restructure.

The plan, which hinges on shareholder approval and the company's ability to raise US$20 million by 2006, would see BresaGen's protein pharmaceutical division spun out into a separate US-headquartered company.

Device and formulation development, regulatory affairs, management and business development would be based in the US, while drug development, research and manufacturing would be based in Adelaide.

Meanwhile, the company's stem cell business would also be gradually moved to the US. And as the final tenet of the restructure, the company's reproductive biotechnology program, which has been working on development of transgenic and animal cloning technology, will be transferred to the University of Adelaide, with BresaGen retaining an interest in the commercial outcomes of the program through its participation in BresaGen Xenograft Marketing, which holds the intellectual property rights generated by the program.

BresaGen president and CEO Dr John Smeaton said he had had the concept in his mind for "quite a long time".

"As much as anything else, it's tied up with a funding issue," he said.

"We spent a lot of time talking with the US financial sector. We were on the verge of a level 2 Nasdaq listing, but at the end of the day, the answer was it was mission impossible -- we don't have the critical mass.

"But we do have the technology, and we decided the way to do it was to take the [separate arms of the company] back to private equity."

After the restructure, BresaGen Ltd would act as a holding company, with its principal assets being its holdings in the US based protein and stem cell companies.

Smeaton said that while the plan was aggressive, it was also "do-able".

He said he believed the company's shareholders would be convinced that it would be preferable to have a stake in two US-funded companies with a good chance of getting products to market.

He said BresaGen's recently opened production facility in Adelaide, combined with years of experience and a suite of patents related to peptide production, meant the company had a head start in the burgeoning global bio-generic arena.

"We've identified a couple of very prospective opportunities," Smeaton said. "And there are a limited number of prospective entrants [to the bio-generics market] -- it's not an over-populated space.

"There's a feeling worldwide of a shortage of space to make proteins... we feel that the important point is control of access," which BresaGen now had with its new facility, he said.

Smeaton said BresaGen was also looking to acquire drug delivery technology to give its products a competitive advantage.

As to BresaGen's cell therapy division's eventual relocation, Smeaton pointed to the more attractive government funding opportunities for embryonic stem cell therapy in the US. The US National Institutes of Health have already awarded BresaGen major grant funding and other grants are anticipated in the next few months.

Smeaton said it was also possible there could be "merger activity" between compatible stem cell groups. "With a lot of the basic [stem cell research] work, we all need to do that," he said.

However, a previously announced acquisition of stem cell-related IP assets belonging to US firm Plurion was no longer under consideration.

BresaGen's reproductive biology program, Smeaton said, had been "successful technically", but had no immediate commercial future.

Atlanta-based investment banker Caymus Partners has been engaged to complete a fund raising for the new initiative.

Smeaton, who announced earlier this year that he was looking to retire, will stay on as CEO until the restructure has been completed, and then plans to head up the protein company.

In a statement, BresaGen chairman Peter Hart said "Continuity in management is essential at this stage of the company's restructuring and Dr Smeaton's commitment as CEO over this critical period is appreciated." In Q4 results announced in late July, BresaGen revealed a cash balance at June 30 of AUD$5.86 million. Net cash flow for the quarter was $1.097 million, compared to a total of $10.288 million for the whole year, and the reduction compared to previous quarters was primarily attributable to the completion of the new facility and a decrease in R&D payments after completion of the US-based imaging research.

BresaGen's share price was AUD$0.345 at press time, up from $0.325 when the market opened this morning.