Former telco ventures into biotech with Burnet deal

Former telecommunications company Select-Tel (ASX: SLT) is the latest to venture into biotech, signing a memorandum of understanding with Melbourne's MacFarlane Burnet Institute for Medical Research and Public Health to commercialise several projects from the Institute.

"We're very excited about it, it's taken a bit of negotiation and hard work, but we think it will work out well," said Burnet Institute director Prof Steve Wesselingh.

The MOU gives Select-Tel right of first review for commercialisation over a range of current and future research at the Institute for at least five years, according to terms of the agreement.

But Wesselingh said that the Institute was not giving up all of its intellectual property, just a selected range, and was also in the process of developing another project with Uniseed.

According to Select-Tel director Peter Marks, the company had been looking for a new venture and has been in discussions with the Burnet Institute for some time. The company, which still retains a residual interest in the telecommunications industry through M2 Connect, has a market capitalisation of around $AUD3.4 million, he said, with cash and shares worth $AUD1.4 million.

The deal has been brokered by Peregrine Corporate, an investment banking group involved in the set-up of several biotechnology companies including Prana Biotechnology, Prima BioMed and Premier Bionics. Marks is also an executive director of Peregrine.

The company would be structured in a similar manner to another Peregrine-backed biotechnology company, Prima BioMed, which has commercialisation rights to research from the Austin Research Institute, said Marks.

He explained that two subsidiary companies would be set up to fund and manage projects from the Institute.

"There are a number of projects ready for commercialisation, including a market-ready diagnostic product for Hepatitis E," he said. The Hepatitis E diagnostic would require minimal time and effort before it was ready to start selling it in the Asian market, he noted.

One of the subsidiaries will focus on hepatitis vaccines and diagnostics, while the other will be in the field of rhinovirus and enterovirus antivirals.

Wesselingh said that the projects were at a variety of stages of development, from almost ready for the market to blue sky, giving the fledgling companies a pipeline of projects to sustain them.

"We're very excited to be a part of their commercialisation plan," said Marks. "The Burnet has some excellent ideas and people."

Under the terms of the agreement, approximately $AUD1 million will be provided by Select-Tel to fund the two subsidiaries for an initial 12-month period, in return for 65 per cent equity in the two companies. The Institute will hold the remaining equity.

Subject to the achievements of the companies, Select-Tel will fund another 12 months of R&D in return for additional equity.

Marks said that the deal was essentially complete, with shareholder approval to be sought at the end of the 60-day documentation period. He noted that the changes to the management and board of directors, as well as the formation of a scientific advisory board, would be announced soon.

In addition, the company would probably pursue a small capital raising through issue of new securities, in compliance with ASX rules.