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Small fish Keratec shows IP transfers can create value

Tuesday 23rd December 2008

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Keratec, a company seeking to commercialise proteins extracted from wool, has agreed to cooperate with a U.S. company with similar products, Keraplast Technologies.
The New Zealand company, a subsidiary of Wool Equities, will initially get a 10% to 30% share of any ensuing sales by Keraplast under an exit strategy. Longer term, Keratec will relinquish its interests to the American company.
Keratec and Keraplast were unable to agree on valuations under an earlier proposal for a joint venture that could ramp up sales of high-value proteins. The two companies had a cooperation agreement to try to safeguard the value of their intellectual property. Wool Equities also failed to secure a licensing agreement for its IP.

As part of the deal, Keratec's chief science officer Rob Kelly will provide his services via his own company. After the transaction, Keratec will write off biomedical IP of about NZ$600,000 while parent Wool Equities will write of goodwill in Keratec of NZ$1.3 million.

The all-up impact is a NZ$1.9 million non-cash expense for Wool Equities of NZ$1.9 million and remaining Keratec IP still owned by the company of NZ$750,000. In turn it gets potential sales, up to a point of NZ$8 million, when the percentage of its share halves.

The company has been downsizing after the sale of its Covita and Paraco units to Crown Research Institute AgResearch. A spokesman for the company couldn't immediately be reached.

Wool Equities last traded at 26 cents on Oct. 16.

By Jonathan Underhill

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