Healthy deal-flow sparks pSivida share surge

A sudden surge in pSivida's share price this month focused attention on the biomaterials company's growing string of promising alliances.

Spurred by the on-market purchase of 1.5 million shares at 10 cents by pSivida managing director Gavin Rezos, the stock spiked more than 100 per cent to 22 cents as buyers waded in.

The demand appears to have been created by existing shareholders and a group of Asian investors who have been looking over the young Perth biotech.

Among other things, it has shown itself adept at striking collaborative deals designed to sweep in revenues from areas adjoining its core business focus.

Its intellectual property is centred on a porous form of silicon, BioSilicon, used as a biodegradable delivery vehicle for slow-release drugs.

While pursuing that central interest, pSivida is constructing ways of mining royalty income from areas adjacent to its patent platform without cannibalising its core market. It has formed a number of collaboration which promise to generate royalty income without cannibalising its core market.

Several are in the orthopaedics market, including one in which orthopaedic implants developed by New Jersey's Implex Corp are being coated with BioSilicon. Another lies in developing biodegradable tissue scaffolds, pins and screws with the UK University of Nottingham's school of biomedical sciences. Three more orthopaedics-oriented collaborations are under discussion with Australian academic institutes.

All of the ventures permit pSivida to licence out its technology without harming its core business interests, says Rezos.

The company currently has some eight collaborations on the go and is sorting through nearly a dozen other potential linkages with the intention of entering three or four more pacts.

A former Hong Kong and Shanghai Bank executive, Rezos is forging a reputation as one of the more astute business leaders in Western Australia's bioindustry sector.

As with most young biotechs, pSivida's resources don't extend to independent exploration of opportunities outside its central business plan.

Rezos' strategy is to work around that limitation by using collaborative ventures which demand minimal investment but generate royalty-driven returns.

"It is better than letting an opportunity fall off the tree because you otherwise won't be able to get around to it for some years to come," he says.

Although the collaborations do not place great strain on pSivida's funds, they do require some support from the company. To help cover support costs, the company raised $840,000 around September with a placement of seven million shares.

In reserve, it still has a $7.5 million equity line of credit signed in September with New York private equity group GEM.

The deal gave the biotech the right to draw on the credits at its discretion over the next three years which will help insure it against market volatility. GEM's implicit vote of confidence delivered via the line of credit may have been a background factor in the recent burst of market confidence shown in pSivida, along with a joint venture signed in early October with Singapore General Hospital to evaluate pSivida's technology.