This may have been posted before but I quite like it....
Alchemia in front in molecular jackpot game Richard Hemming March 12, 2012
INVESTING in biotechs could easily be called "molecular roulette" - your fate is in the hands of employees in groups such as the US Food and Drugs Administration, which look more at side-effects these days than benefits. It's said that if aspirin was discovered today, it wouldn't be approved.
One company that has hit molecular jackpot is Alchemia with its fondaparinux, a generic version of a GlaxoSmithKline drug, which is a blood thinner made of synthetic substances (rather than the traditional rat poison).
Its shares have climbed more than 50 per cent in the past two months to 42¢ boosted by news last month that Alchemia's partner Dr Reddy, the distributor, is blitzing the US with sales of $US1.4 million a week, implying a market share of 18 per cent.
Advertisement: Story continues below This is good news for investors who pumped $21 million into the company at 24¢ a share in a placement last December. This money was advanced primarily to complete the final trials of its cancer treatment that is supposed to improve the effectiveness of chemotherapy drugs. It is being tested on colorectal cancer patients, but can apparently be used across the board.
The question for investors is what exactly the research end of the company is worth. Your humble columnist would suspect that $119 million of Alchemia's $119 million market cap is attributed to fondaparinux.
What separates Alchemia from other biotechs is that its major shareholders, such as 19 per cent holder Orbis Capital, are using their muscle to ensure that the proceeds of the fondaparinux jackpot (codenamed "Jane" within the company) are ring-fenced.
The company is hoping to "de-merge" Jane from its much-higher-risk cancer R&D side.
If it does go this route, it will need to raise at least $10 million more for the cancer research end.
But the raising will depend upon its valuation.
RBS Morgan analyst Scott Power says 60¢ of his 89¢ valuation is fondaparinux, which means he values the cancer biotech at 29¢ a share, or just more than $80 million.
There is a lot up in the air for this little biotech, which posted a loss of $6 million for the first half, and we imagine the whole biotech community will be watching its progress very closely.
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