Circadian boasts $5.8m profit

Circadian Technologies (ASX:CIR) has posted a AUD$5.8 million profit for the 2003-04 financial year, and the prospects of an even better year next year thanks to the recent acquisition of its investee company Axon Instruments by US firm Molecular Devices on July 1.

The biotech investment company -- which, according to non-executive director Graeme Kaufman, prides itself on being the first company to report its annual results -- said its revenues were up 743 per cent to $7.3 million, primarily from the sale of six million shares in investee Metabolic Pharmaceuticals (ASX:MBP) in October 2003 for $6.2 million. Similarly, an increase in Amrad's share price from $0.60 to $0.64 also boosted the bottom line, with a gain of $1.1 million in the book value of Circadian's shareholding in Amrad and the associated decrease in the unrealised provision for diminution of the book value.

Excluding Amrad, the market value of Circadian's holdings in listed companies including Metabolic, Antisense Therapeutics (ASX:ATL), Optiscan Imaging (ASX:OIL) and Axon Instruments was $87.5 million, compared with a book value of $5.3 million.

Circadian's operating costs ran to $2.6 million, and the company had $17.4 million cash to hand at the end of the financial year.

The sell-off of Metabolic shares caused a minor furore at the time, and Circadian subsequently placed its remaining 48 million shares -- representing 21 per cent of issued capital in Metabolic -- under escrow until October this year. But Kaufman said it was unlikely that the company would sell off more of its holding in the near future.

"For us it was a prudent thing to do. We still have a huge exposure to Metabolic, but it was time to take a bit of cash," Kaufman said. "We needed to demonstrate that our investment model actually works, and that we can exit investments as appropriate. We've done this successfully with Metabolic and Axon Instruments."

While Circadian did not declare a dividend to shareholders this year, Kaufman said it was considering what to do with its profit.

Other highlights of Circadian's year include:

• Completion of an on-market share buy-back program driven by a low share price compared to book value of the company. Circadian spent $2 million on the buy back and succeeded in driving its share price up to a more normal level of 28 per cent lower than book value, from its low point of around 50 per cent of book value.
• Investments into neuroscience projects at the Howard Florey Institute worth $400,000 over five years and into oncology projects at the Peter MacCallum Cancer Centre worth $500,000 over two years.
• Patents granted in the company's memory enhancement project, a collaboration with researchers at the University of Sydney.
• Commencement of the pivotal Phase IIb trial on Metabolic's obesity drug, as well as the Phase I trial for Antisense's multiple sclerosis drug.
• Progress in commercialisation of Optiscan's flexible endoscope.

Kaufman said the company was continuing to look at new investment opportunities, particularly in the neuroscience and oncology areas. He said the company's strong balance sheet meant that they could take bigger risks on early stage technology.

As for the next financial year, the sale of Axon, in which Circadian held 15 per cent, on July 1 2004 to Molecular Devices for US$140 million will give the company $26.45 million before tax.