another positive article

in the Brisbane Times today, have a read (full article on http://www.brisbanetimes.com.au/business/resurgent-dollar-not-all-gloom-and-doom-20091023-hdb7.html):

The life sciences boom has been so strong that the broker Intersuisse noted that the sector "looked to have taken coaching from Usain Bolt" when commenting on September quarter performance. The Intersuisse Biotechnology index rose 41.6 per cent in the three-month period, outpacing the All Ordinaries (20.1 per cent) and the Nasdaq Biotech index (12 per cent).

The strength of the rally has surprised pundits. Early in the year newspaper headlines were predicting the collapse of a swag of underfunded biotech minnows. Now commentators are identifying life sciences as the next hot sector.

So why the turnaround? One theory proffered by the industry newsletter Bioshares is that the sector is "one-third of the way into what may be a two-year bull market" with the change in sentiment driven by two $300 million acquisitions (Arana Therapeutics and Peplin) announced this year that delivered solid returns to shareholders, together with a swag of companies getting to the pointy end of product approvals processes. Revenue is soon to follow.

According to Bioshares, the sector has been through a 10-year investment cycle that is just now starting to bear fruit. A key factor is the ridiculously low base from which the rally began. One example of a strong performer is Alchemia. If all goes to plan, Alchemia will move into profitability towards the end of next year after its lead product, a generic blood anticoagulant, fondaparinux, is registered by the US Food and Drug Administration.

Alchemia started the year with a market capitalisation of just $25 million despite forecasts that it should generate profits of about $US35 million a year from fondaparinux within a couple of years.

Alchemia's forecasts rely on its distribution partner grabbing a large slice of the $US250 million fondaparinux market. This should be achievable as Alchemia's fondaparinux will be the first generic to gain approval, and new competition appears unlikely due to the complex manufacturing process.

GlaxoSmithKline owns the only fondaparinux product on the market, and Alchemia told the Wilson HTM Life Sciences conference last week that GSK's manufacturing process involved 60 steps and took 10 years to devise. Alchemia holds patents over technology that simplifies the process.

Alchemia's capitalisation is $85 million, but the stock looks set to rally further once FDA approval comes through and investors look to price the company on a multiple of forecast earnings. Combined with a solid product pipeline, this is enough to attract a BUY rating from Carpathia.