Friday, December 15, 2006

BTC - BioTech Capital Limited

If you are interested in the biotechnology sector of the Australian stock market then BioTech Capital Limited (ASX:BTC) might be worth a look.

BioTech Capital Limited is an investment fund which invests in both listed and unlisted Australian biotechnology companies. Read more on the company's website. One advantage of investing in a company like Biotech Capital is that you will be exposed to a broader range of biotechnology companies than might otherwise be the case if you were investing in biotech companies directly. You also have a dedicated manager (hopefully knowledgable in the biotechnology industry) picking the investments for you.

Biotech Capital held the following listed investments as of the end of November 2006.
  • Alchemia (ASX:ACL)
  • Clinical Cell Culture (ASX:CCE)
  • Phylogica (ASX:PYC)
  • Prima Biomed (ASX:PRR)
  • Starpharma (ASX:SPL)
  • Stem Cell Sciences (ASX:STEM)
In addition Biotech Capital held the following unlisted securities.
  • Biocomm
  • Continence Control Systems
  • Pacific Knowledge Systems
  • XRT
As of the end of November 2006, Biotech Capital's listed securities were valued at 19.05 cents per share. The unlisted securities were valued at 16.99 cents per share and net cash on hand was at 8.46 cents per share. After a small allowance for tax, the net tangible assets per share come to 44.64 cents. This compares with a closing price today of $0.40. This is a discount of almost 10%.

While Biotech Capital is not a screaming bargain as a pure asset play, it does appear to be reasonable priced given the assets it has. Also, the Australian Biotechnology sector has been somewhat overlooked in recent times so asset valuations should not be stretched.

There are a couple of risks to be noted with regard to this company (beyond the normal risks involved in investing in biotechs). Liquidity is quite low so establishing a holding or selling out of a position may require patience. Also the company has a very small capitalization ($36M).

One further point to note - Biotech Capital is registered as a Pooled Development Fund (PDF). As such, investors are generally exempt from tax on capital gains, but equally capital losses are not available to be claimed as tax loses.

However, on balance Biotech Capital Limited looks like quite a reasonable situation for those looking for a broad exposure to the Australian stock market biotechnology sector and who have an appetite for higher risk. As with any investment in Australian shares, do your homework and seek professional advice where necessary.

The author does not own any shares in Biotech Technology Limited.