Shares digital

SHARES RATING

BHK 1 (low)-5 (high)

Management: 3

Market: 4

Product: 4

Financial strength: 3

TOTAL SCORE: 14/20

With heart disease the number one cause of death in developed countries, makers of artificial organs and digital technology BHK hopes to wow the market with its cell therapy product MyoCell when it becomes the first Korean company to climb aboard the junior market on 10 March.

BHK operates cell therapy and artificial organ businesses focused on developing products to treat major organ failure, particularly heart failure. MyoCell is aimed at treating heart failure without recourse to a major surgical procedure and thanks to its method of using cells from the patient’s own body, the risk of tissue rejection is reduced. The product represents the largest source of future revenue growth for the company.

BHK’s artificial organs business designs, manufactures and distributes artificial human organs such as the T-PLS life support system, currently on sale in Korea and China, and the C-PAK artificial kidney, for which regulatory approval is expected in the first half of 2008. The group also runs a digital technology business which makes high-end portable consumer electronics products for both the domestic and international markets. The division generates immediate cash flow to support BHK’s activities and provides technical expertise to the artificial organs division.

Already listed on the Korean Exchange with a market value of around $80 million, the group plans to list 6.3 million global depository receipts (GDRs) on Aim. Each GDR represents one ordinary share of 500 Korean won expected to be issued at 82p, and upon admission, the group should have a market capitalisation of around £5.1 million. No capital will be raised on admission; instead BHK plans to raise funds once the flotation has been completed. BHK’s reasons for joining Aim boil down to the objectives of raising its profile in the UK and the rest of Europe, providing access to international capital markets and increasing awareness of its brands and businesses.

Going forward, BHK hopes to obtain the necessary regulatory approvals for MyoCell in Korean and other Asian countries and then look to distribute the product outside Asia. MyoCell is expected to start generating revenues in the second half of 2009 and the group believes that the Korean domestic market for MyoCell is worth around $215 million. The potential market within other Asian countries where BHK holds distribution rights is estimated to be worth around $800 million. In addition, BHK will aim to extend the markets for T-PLS across Asia and Europe, and obtain regulatory approval for the next generation of artificial organs. Finally, the company plans to continue its focus on new product innovation, strengthening its sales teams and collaboration with the artificial organs division.