BresaGen, Plurion deal back on the drawing board

BresaGen's negotiations to acquire the rights to US company Plurion's embryonic stem cell technology have hit a stumbling block, sending the two companies back to the table to restructure the deal.

According to BresaGen CFO Linton Burns, the deal originally stalled during the due diligence phase when one of Plurion's shareholders became aware of certain tax implications which would arise from owning more than 5 per cent of BresaGen stock.

But the continued weakness of the biotech sector and an uncertainty in global markets generally has made it much harder to justify the high price of the original deal, which entailed issuing Plurion and its shareholders 18,682,398 shares and 5,686,947 options at an exercise price of $AUD0.41 each, in effect giving them 30 per cent of the company.

"We started to think, was the original deal the best for our shareholders?" said Burns "What's right in today's capital market isn't the same as it was six months ago, therefore we don't want to be paying the same terms."

But Burns stressed that the two companies were still negotiating over the agreement, with the hope that it can be completed in the near future.

"The important take-home message is that we are still in discussions with Plurion, and they understand the situation. We need to do the right thing by our shareholders," he said.

At stake is a set of key patents originating from Vanderbilt University, which cover methods for isolating pluripotent stem cells. The patents would provide BresaGen with a clear path to commercialising products arising from human embryonic stem cell lines, as well as opportunities to on-license the technology to other parties.

"It's reasonably important for BresaGen to acquire this technology, hence the size of the shares and options package in the original deal," said Burns. "It's the key to commercialising the technology in the US. But at what price does it become too expensive?"