Genesis R&D to spin off plant division

New Zealand's largest biotechnology company, Genesis Research and Development (NZSE/ASX: GEN), is spinning out its plant division into a separate, fully owned company to maximise the value of its assets, according to CEO Dr Jim Watson.

"Genesis is seen as a health company and analysts look at the company through its health products in development, valuing the company on those products. They don't look at the plant pipeline or give any value to it," said Watson.

"We hope to encourage investors to treat both the health and plant companies separately."

The strategy, which was announced at the company's annual general meeting last week, will see Genesis R&D retaining the health portfolio, which includes a pipeline of immunotherapeutic products spanning pre-clinical to Phase II clinical trials, as well as genomics, and a unique preservation technology platform for storage of cells and tissues.

The new company, to be known initially as The Plant Company, will take a sizeable portfolio of intellectual property, as well as a number of licenses and collaborations in the plant side of the business. The transferred assets include a substantial set of plant EST databases, and a growing selection of genes and promoters for plant metabolic pathways that will continue to be licensed, and a "plant biologics" platform of hormone-like molecules with applications in flowering and disease.

The Plant Company will also take Genesis R&D's equity position in joint venture company ArborGen, which is developing elite transgenic trees for forestry.

Both companies will continue with Genesis R&D's business model, which is based on licensing technology and collaboration with partners. At the beginning of the year, the company had $NZ36 million in cash, which would be appropriately allocated to the two companies, Watson said.

In addition, scientific staff and the corporate services team will also be divided between the two companies. But for the time being, a single board of directors will remain at the helm.

"It will be kept under one board until the time comes that The Plant Company will seek new capital for itself, which will be dependent on market conditions," he said. "But we think that in Australia and New Zealand, there are good opportunities to raise capital in the plant area."

The split has been well received by shareholders, who were not required to vote on the creation of the subsidiary company, according to Watson. He noted that shareholder approval was likely to be required for any capital raising in the future though.

"It's an opportunity to grow and I think this is the right time to do it," Watson said.