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Biosignal (BOS) 13.5c

FANCY a licensing deal involving a wealthy individual stumping up a $US1.5 million up-front payment and half of all ongoing revenues, while at the same time assuming 100 per cent of all future expenditure?

Any junior biotech with half a brain would rush at such an offer, given royalty arrangements in the sector usually involve a 5-15 per cent cut and some modest milestone payments.

But those new-age, tofu-munching Californian entrepreneurs take the big-picture view, which is why the high-profile Paul Hawken has agreed to buy a slab of Biosignal's technology on such unusual terms.

At the outset, Criterion is unsettled by the market's complete lack of interest in the deal yesterday, with the shares barely moving. It's a case of investors not "getting" the deal, which has a headline value of 1 1/2 times Biosignal's market cap, or a case of your columnist missing some crucial fine print.

The two deals involve Hawken taking the worldwide rights to Biosignal's anti-bacterial technology for industrial, wound and hospital hygiene applications. "We kind of like it," says Biosignal chief Peter Steinberg. "It's simple, clean and there's upside."

Biosignal's game is about mimicking the natural anti-bacterial agents found in seaweed. The most promising industrial measures are anti-corrosive measures for oil and gas pipelines and air conditioner coatings.

Steinberg estimates that the deals cover only 25 per cent of the potential applications for the bioslime. Others, such as coatings to protect contact lenses and wider health applications, remain Biosignal's intellectual property.

A rider to the deal - we knew there was at least one - is that the spin-off holding companies to be formed by Hawken must raise a collective minimum of $US6 million within six months. Ah ha! Other investors have to fund the dream as well.

Steinberg says Hawken - who made his first fortune in garden products and a second fortune on the speaking circuit - has an enviable fundraising record.

Even if the deal goes belly-up, the $US1.5 million of upfront licensing payments are not refundable.

Yesterday's news is a promising step for a company with a market cap of a mere $14 million. Biosignal is a speculative buy for the few investors still receptive to a biotech yarn.

www.theaustralian.news.com.au/story/0,25197,23359278-23634,00.html