One of Otago's business hopes, the biotechnology company Botry Zen, has been placed in receivership after shareholders refused for the second time in 15 months to inject new capital into the struggling venture.
Its future and 10 jobs at the company's Dunedin factory were now in the hands of receivers Matt Taylor, of WHK in Dunedin, and Peter Heenan, of WHK in Invercargill.
Company chairman Stephen Higgs said he was "extremely disappointed" the board yesterday had to ask its bankers, the Bank of New Zealand, to appoint a receiver, but added that receivership was "the only real option for the company when the capital-raising failed".
Mr Higgs said in an interview he hoped the business could be sold as a going concern to ensure the continued availability of the product to grape growers and to protect its intellectual property.
Botry Zen shareholders have already provided $12 million of new capital since it was floated on the New Zealand Stock Exchange in 1991.
But this week they refused to front up with another $1.5 million requested by directors to develop new markets in the United States, for capital investment and to get product registration in Europe.
At a special meeting in November, they approved in principle a share-purchase deal to fund that programme, under which each shareholder could subscribe for up to $15,000 in new shares.
But not enough people wrote out cheques.
In September last year, shareholders refused to provide $1.8 million of new working capital to keep the company afloat and preserve its bank credit facilities, a refusal which took the company to the brink of collapse.
Two private investors, Melic Innovators from Christchurch and Hartge Ingredients from Germany, provided a last-minute financial lifeline.
Craigs Investment Partners broker Peter McIntyre said banks and shareholders appeared to have exhausted their patience with the company's continued need for capital while reporting financial losses.
"It's a pity for Dunedin.
"It's an innovative company, but at the end of the day, it could not generate sufficient revenue," he said.
In the 2008 bail-out, Melic Innovators, the investment arm of Christchurch-based Michael and Patricia Mellon, who previously owned Bush Road Ltd in Mosgiel, provided Botry Zen with a $500,000 loan over three years and subscribed to 25 million ordinary shares, at 2c each, to provide a further $500,000 in cash.
German biotechnology pioneer Claus Hartge, of Hartge Ingredients, bought 5% of the company for $207,000, with the purchase of 10.372 million ordinary shares at 2c a share.
At the same time, Botry Zen was having production problems at its Dunedin factory, but these were addressed and the company had planned to install four new fermentors as part of a capital works programme.
In July, the company raised nearly $1.8 million, of which Melic provided $1 million, to develop markets in New Zealand and overseas.
In late October, Botry Zen hailed as significant the registration of its BOTRY-Zen control agent by the United States Environmental Protection Agency, and while it still needed registration in each state, said that was considered straightforward.
The company was to target Cal-ifornia, Oregon and Washington, but warned it needed additional capital to fund that expansion and to get registration in Europe.
Botry Zen was one of three publicly-listed biotechnology companies to set up in Dunedin this decade, an industry viewed by many as creating significant new jobs and investment in the South.
But the trio have struggled to generate revenue and to be profitable, a situation which has frustrated many shareholders, as illustrated this week.
Otago firm's profile
• The company's main product is BOTRY-Zen, a biological control for the grape wasting fungus, botrytis cinerea.
BOTRY-Zen offers season-long protection while a second product, ARMOURZEN, offers late-season protection when fungal pressure is at its greatest.
• Founded in 1991 by the late Howard Paterson, Dunedin-based Botry Zen was formed to commercialise technology discovered by researchers from HortResearch in an initiative involving Winegrowers of New Zealand, New Zealand Grape Growers Ltd and Zenith Technology.
Summary of results
Year to March 31 Revenue Net loss
2004 nil $1.274m
2005 nil $757,000
2006 $277,000 $1.579m
2007 $122,000 $1.668m
2008 $342,000 $1.221m
2009 $586,000 $1.690m
