cst in the smh

G'day,

This article is well worth reading in full as it gives some quite sage advice on investing in biotechs.

http://business.smh.com.au/medicine-for-an-ailing-market/20080416-26gz.html

The article makes specific mention of Cellestis:

Cellestis (share price $2.31, market cap $220 million) is the largest, and has been listed longest, of any of the five companies on our list. The company floated in 2001, raising funds at 25 cents a share before capturing the imagination of the market, rallying strongly to more than $4 a share in early 2006.

While the share price has since pulled back to $2.31 per share (yes, still a "ten bagger" versus its debut price), the fundamentals that captured the excitement of the market remain in place and over the longer term. Cellestis is well placed to claim the lion's share of its target market - testing for latent tuberculosis in the developed world.

Its technology, known as Quantiferon, was originally spun out of CSL. There is no question that the current generation of the test, known as Quantiferon In-Tube, is more sensitive and specific than any other widely available test and there is a clear market for tuberculosis testing in prisons, among health-care workers, the military and in immigration. Cellestis management has estimated the size of the market for TB testing in the US, Europe and Japan as being more than 40 million tests a year. With a selling price of around $20 per test, this would represent a substantial market.

While the Quantiferon test is superior to the test that it seeks to replace and sales growth has been strong, the company's growth trajectory has been slower than investors originally hoped. Nonetheless, Cellestis notched up its maiden profit in the half-year to December 2007 and with sales building every quarter, profit growth should build quickly from here.

As it already has a market capitalisation of $220 million the "blue sky" in Cellestis may not be as great as with some of the smaller companies on our list. The quid pro quo is the risk is lower. Biotechs run on news flow and the day that the likes of the US military announces it is adopting Quantiferon In-Tube across its testing program promises to be a ripper for the Cellestis share price, should it come.