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Peptech primes itself for trade sale
Scott Murdoch
February 09, 2007

AN ownership shake-up of drugs developer Peptech has been forecast to occur by the middle of the year as the firm primes itself for a potential trade sale.
Peptech admitted yesterday that it had become disillusioned by the lack of interest shown in the sector by Australian investors and had been approached by several US private equity firms.
Peptech chairman Mel Bridges said a lack of dedicated biotech analysts working in Australia meant the company had been persistently undervalued in the market.

It announced yesterday that its No1 development project, the PN0621, an anti-inflammatory product, would enter clinical trials in the next few months.

The potential drug treatment has been built on the antibody that was owned by Domantis, the firm one-third owned by Peptech and sold to drugs giant GlaxoSmithKline last year.

Peptech used its own proprietary technology to develop the PN0621 and is billing it as an effective low-cost treatment, particularly for rheumatoid arthritis. Mr Bridges said he thought Peptech had become a prime target for private equity funds which specialised in "life science" investments.

The board and management of Peptech have not ruled out becoming involved in a buyout, with private equity, if the opportunity arose.

Mr Bridges said: "We have had several inquiries already.

"What we have seen is that Peptech has started to get international attention but unfortunately that has not happened in Australia.

"Certainly, by the end of the Australian financial year I expect we would be in a very strong position to tell where the company is at and where the discussions are at," Mr Bridges said.

Peptech had retained $170 million in cash and its accounts were due to be bolstered by another $150 million shortly.

Mr Bridges said he thought the market's valuations of the company did not take the cash holdings into account.

Analysts' valuations range between $1.90 and $3.

Corporate activity has escalated in the US biotech market recently, with a funding agreement between Metabasis and Kingsbridge Capital.

Mr Bridges said it was difficult to encourage Australian investment in local biotechs.

"Institutions prefer to take a major stake in biotech companies through either market listings or through capital raising events such as share placements at a discount," he said.

"Given Peptech's strong cash position we are not in a position to provide those opportunities to institutional investors."

Shares in Peptech, following the clinical trials and private equity news, rose 15.4 per cent to $1.76.