Monday, April 27, 2009

Biota - a wild speculation

Biota is an Australian listed company.  It has a share in a drug that cures influenza and almost certainly works on swine flu.  The stock went about 60% today.

The drug (Relenza) is a true wonder except that it has several features that make it very difficult to market.

First – and foremost – it must be taken very early in an influenza infection.  Indeed it is most effective if taken at the first sniffle.

The problem is that influenza – which can be debilitating and is sometimes fatal – starts life with about the implied threat of a common cold.  There is absolutely no way you would be crawling to the doctor to get some Relenza when you have the slightest sniffle.

By the time the influenza has taken hold – and you are running fevers and have joint pain and feel near death then the drug is ineffective.

The second problem is that the drug is inhaled through a turbo-inhaler.  Taking it is somewhat more pleasant than having an injection – but certainly less palatable than a tablet.

The third problem is that there is a competitor drug (Tamiflu) which is taken orally and is a little more consumer palatable.  Against this there are some links to psychological problems (especially in Japan) with Tamiflu.  More importantly there are resistance problems with Tamiflu that appear absent with Relenza.  

The main market for Relenza is stockpiles by government health authorities who are holding it as protection against bird flu going super-contagious.  Some governments tend to prefer Relenza stockpiles because of the lesser resistance problems.  The German Government stockpiles Relenza because they believe it more effective than Tamiflu.  That said the market is dominated by Tamiflu.

Biota is a company that has been living on very little money – the moneys made almost entirely from selling to Government stockpiles.  Needless to say governments are reliable if parsimonious payers.

Still Biota has AUD60 million cash (and equivalents) on hand and a market cap of AUD250 million.  

If Swine flu is the real deal then Biota will be a huge stock.  And if not – then maybe the fear will encourage more government stockpiling.

I speculatively purchased Biota today.  It is unusual that I purchase anything after a rapid 60% rise… and I may do some dough.  But this looked to me to be a sensible speculation – and not a bad hedge against global catastrophe.  Now I guess I have to be prepared to do my dough.

3 comments:

Anonymous said...

allergy season here in the northern hemisphere -- no way i would know if i had the beginnings of the flu. it's going to be hell not being able to rub my eyes in public.

Anonymous said...

You would have been better off buying LNN. Lion Nathan.

Steinlager. Now that product is very easily administered.

With the news from Kirin, it's going to be a good Monday morning for this Seppo!

_Bob Dobb

Anonymous said...

Even easier proof - closed-end investment trusts that trade at a premium. If markets are rationally priced, it is impossible to outperform them on risk-adjusted basis, therefore no fund deserves a premium. A fund premium is irrational unless it is possible to outperform on a risk-adjusted basis. Therefore any market with a fund premium is inefficient and efficient at the same time, or it is priced irrationally. Since the former is logically impossible, the latter must be true.

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