Biotechnology pushing the gain in the pain

QRx late yesterday called a halt to trading in its shares in advance of a "significant commercial transaction", and has scheduled a conference call for analysts and investors before the market opens this morning.

Shares in the group had been weakening in recent days, dropping from near $1.50 to $1.19 before yesterday's halt.

Bell Potter Securities, which lead managed a placement mid-year for QRx, nominated it earlier this month as one of five biotechnology companies likely to secure partnering deals in 2012, which puts it a little ahead of plan.

QRx chief John Holaday has previously said that the company has been talking with potential licensing partners for the US and European markets as it gets close to expected approval of MoxDuo in June next year.

The QRx product is a blend of two well-known analgesics, morphine and oxycodone, in a form that aims to produce far fewer side effects than existing preparations.

Bell Potter is taking up the torch for the biotech market, having declared US venture capitalist Robert Swanson (co-founder of industry hero Genentech) its patron saint and taking a market position to back Australian companies in the sector.

There are signs that biotechs are coming of age as investment vehicles, driven by greater professionalism in their business approach which is enabling them to reap the benefits of unique developments rather than just selling a discovery to a pharmaceutical giant and getting pennies for the work.

For example, Simon Marais' Orbis funds group has been mopping up QRx shares on behalf of clients, and was last seen with 8.99 per cent, while property developer and biotech investor Langley Walker's interests increased their stake to 6.5 per cent at the end of November.

Bionomics, another of Bell Potter's nominees for doing a deal in 2012, has acquired venture capitalist John Leaver as a substantial holder on 5.2 per cent as of last week. And last Friday Ausbil Dexia funds group increased its Bionomics exposure to just below 7 per cent with another 4 million shares bought on market. Leaver's CVC is not to be confused with Nine Entertainment's hapless private equity owner CVC Asia Pacific.

Kroger seeks bargain

ANDREW Kroger, the younger, lower-profile brother of political investment banker Michael, knows a bargain when he sees one which most probably explains his "el cheapo" offer for the unlisted Process Wastewater Technologies.

Then again, why would you not try to buy, for $1.2 million, a company to which you owe $1.4 million that also has more than $2 million in the bank and is debt free?

PWT, which was listed until 2007 as CDS Technologies and boasted luminaries such as Jamie Packer and Bob Mansfield as shareholders and directors, has been out of sight since it delisted following a capital return just before the financial crisis.

According to offer documents sent to investors, Andrew Kroger is offering a generous 45? a share to mop up the stock while the independent expert, DMR Corporate, has a valuation range on it of $1.28 to $1.29 a share.

That is nearly three times Kroger's offer and DMR have, oddly enough, called the bid neither fair nor reasonable. Kroger not only owns 27 per cent of PWT already, but sits on the board.

His fellow directors of PWT, spin doctor Mark Kerr and long-time Kroger associate John Walker, have both recommended shareholders reject the bid and said they have no intention of accepting it.

Why is Kroger bothering? Insider suspects that he is banking on the fact that investors, who received an aggregate $2.26 a share in unfranked dividends and capital return when it wound down its activities half a decade ago, might be happy to take a cash offer for stock that they can no longer trade on an open market.

PWT has no operations. It sold the last of its businesses, in the US, to Kroger in 2010 which is why he owes the company $US2 million that fell due this month. He made a downpayment of $US600,000 in June and the balance was due last week.

If enough small investors accede to his offer, he may be able to delay that payment, plus he will have control of PWT's $2.1 million in cash and equivalents, and another $700,000 in shares in the listed White Energy Company.

Realistically, to get control Kroger needs to get the shares of Monaco-based expatriate brokers Rob Pittorino and Kim Oxenham (who respectively own 20.85 per cent and 17.07 per cent of PWT), as well as Melbourne accountant Allan George's 8 per cent.

Alliance up in the air

ALLIANCE Aviation Services' debut saw it close up 5? at $1.65, suggesting that Credit Suisse got the pricing about right in reslicing the float, serving it up with the crusts removed.

The stocks opened at $1.70 a share, and hit a high of $1.72, before settling back. Turnover for the first day, or half day given that the stock listed at midday, was about 1.5 per cent of issued capital but a fair chunk of free float when you consider that more than 60 per cent of the company is in the hands of its five founders and they have agreed not to trade until next June.

Alliance, which shelved and then reactivated its public offering all within the space of a week earlier this month, raised less than its founding investors wanted to ensure that the float, managed by Credit Suisse, could occur.

Alliance occupies a lucrative niche in the Australian aviation arena, supplying fly-in, fly-out crew services for mineral and petroleum producers, as well as charters which means that when its aircraft fly, unlike a regular consumer airline, they only put planes on the tarmac for which they already have passengers.

Alliance's prospectus also sets a refreshingly clear level of disclosure to potential investors with detail about who founded and owns the company, what they get out of the float, their ongoing fees and salaries and their grip on the share register information that many similar documents feel they have to hide in the fine print, if it is published at all.

Biotechs are coming of age as investment vehicles, reaping the benefits of unique developments rather than just selling a discovery on to a pharmaceutical giant and getting pennies.