There are takeover bids by private equity outfits, preliminary soundings from private equity outfits and vague fishing expeditions from private equity outfits. Somehow the rabbit produced at yesterday’s Peptech annual general meeting looks more like the last one.

The suggestion of takeover interest – interest so vague that Peptech hasn’t appointed an advisor yet – did the trick, boosting the share price just when the company was under attack from the Australian Shareholders Association.

In a release ahead of the meeting the ASA slammed management for not delivering:

For many years Peptech has talked up its animal health products that utilise proprietary technology to control animal reproduction. This culminated in recently appointed CEO, Dr John Chiplin, proclaiming at last year’s AGM that Suprelorin® had “massive” growth potential. Following worldwide sales of $1.3m in 2005, sales fell to $1.0m in 2006 with significant losses recorded in both years.

ASA will be asking the chairman, Mr Mel Bridges, why a product with such great potential that has been on the market for over three years hasn’t yet taken off?

More interestingly, the ASA also takes Peptech to task for its executive performance share plan:

“This is a plan linked entirely to the company’s share price and because it is a biotech, awards appear to be more the outcome of market sentiment than employee performance” said Stephen Matthews, Chairman of ASA. “There is no link to any other financial metric and because the only hurdle is relative total shareholder return (TSR) we are left with the distinct possibility that executives will receive their equity awards while shareholder value has gone backwards.”

So what’s Peptech’s reaction? By the looks of the Oz report, the chairman blames investors:

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.

Peter Fray

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