trading halt, page-18

Source: The Age

Strange strategy

IT WAS supposedly a landmark event.
Pitched behind the scenes by the company's spin doctor as a David versus Goliath-type victory, Genetic Technologies announced on Monday that it had finally settled its court case with US giant Applera Corporation.

But with the commercial and financial terms of the arrangement subject to a hush-hush agreement, it was impossible for investors to conclude whether this was good or bad news — hence the stock slid almost 5 per cent.

While the spinner told us the dollar value was "not actually the important aspect" of the settlement, the Australian Stock Exchange surprisingly took a different view.

Genetic Technologies, chaired by former corporate governance advocate Henry Bosch, was forced into a trading halt yesterday.

It is believed the exchange was concerned the brief announcement provided investors with insufficient guidance. It was a fair call.

The company has been pursuing Applera through the US District Court since 2003 over Applera's refusal to take a licence for research using Genetic Technologies' patented non-coding DNA.

A peek at Genetic Technologies' financial accounts shows it paid $5.7 million in legal and patent-related fees over the past two years.

And what did it reap from that investment?

About $6.3 million in licensing fees. It has about 25 licensing agreements.

Given the company is continually in the red — it reported a $10.2 million loss for the year ended June 30 — investors might rightly wonder whether this business strategy is worth it?

Genetic Technologies has asked for two days to work out what further details it can disclose while still meeting its obligations under the settlement agreement.


COMMENT

Re: paid $5.7 million in legal and patent-related fees over the past two years... And what did it reap from that investment?...reported a $10.2 million loss for the year ended June 30 — investors might rightly wonder whether this business strategy is worth it?

One company - Genzyme paid $5 million in cash, $2.25M in "in kind" property, a $1m a year annuity for the life of the patent and assistance for gtg in developing its gene testing services (source: page 12 of the annual report).

Re: ...investors might rightly wonder whether this business strategy is worth it?

A silly comment. It is like after the first few loads of ore from a 10 year-life mine and someone says "we spent all this money on a plant and mine and have not made any money yet".

Merv has been very aggressive in protecting gtg's patent value. For all the time and money spent dealing with Applera, Applera in the end settled and took a licence and paid for it. This has set a standard that others will now be forced to follow.

There are over 400 identified to date that need a licence. I would expect some major sign ups over the next 4 months.

G