Bumper performance shares boost at Regenera

The top executives at emerging biotech company Regenera had a bumper year in 2005 courtesy of performance shares, which are rarely used in Australia.

Chief executive William Ardrey, who left the company last month, earned a total of $1.02 million while executive chairman Tony Fitzgerald earned $839,000.

They gained most of their income from the conversion of performance shares into ordinary shares after achieving key business goals.

Regenera is poised for further development after negotiating a merger last month with private US company Advanced Ocular Systems.

The merger brings together two companies operating in different segments of the ophthalmology market and creates a business with a market capitalisation of about $92 million.

Regenera issued 65 million perfor-mance shares last year to Dr Ardrey, Mr Fitzgerald and about 10 other promoters, who were involved in a $12 million capital raising and acquisition of its core intellectual property.

Like share options, performance shares are designed to give the recipient an incentive to achieve defined performance hurdles. They are meant to align the interests of executives with the shareholders.

A crucial difference is that options allow the recipient to buy ordinary shares at a discounted price, whereas performance shares convert to ordinary shares at zero cost.

At Regenera, the performance hurdles include regulatory approvals, licensing agreements and commercial sales agreements.

Regenera’s biggest milestone in 2005 was the signing of its first major licensing transaction with Alcon Manufacturing, and the receipt of its first licensing payment.

On the back of these and other milestones, Dr Ardrey converted one million performance shares during the 2005 financial year.

He has converted a further 1.5 million since June 30 and still holds a further six million, which indicates he could reap even bigger profits in future, despite having left the company.

Mr Fitzgerald told WA Business News last year that performance shares would help the company achieve important milestones, for the benefit of all investors. He said Regenera should be compared with other biotech floats that did not have performance shares but instead offered a larger free carried interest for the promoters.

Looking ahead, Regenera plans to change its name to Advanced Ocular Systems.

The current chief executive of AOS, Dr Kenneth Taylor, will become managing director of the merged company, based in the US, while Mr Fitzgerald will continue as chairman.

He said the merger would create a larger, better resourced and broader based ophthalmology company, with an international presence.

“The increased critical mass will help to attract more interest from investors and will also help in commercial negotiations,” Mr Fitzgerald said.