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http://www.theaustralian.com.au/business/opinion/investors-unmoved-by-drug-breakthrough/story-e6frg9if-1225796263312

Investors unmoved by drug breakthrough

ChemGenex Pharmaceuticals (CXS) 88c Universal Biosensors (UBI) $1.98
STOP sniggering! Here's two biotechs in imminent danger of earning real revenues after announcing breakthrough regulatory approvals yesterday.

Of course "major announcement" has a liberal interpretation in biotech land. In the case of ChemGenex, we couldn't get excited when the leukemia drug developer filed a new drug application (NDA) with the US Food and Drug Administration in September. Yesterday, the FDA accepted the NDA and gave the drug, Omapro, priority review status. Regrettably, investors thought sweet FA of the FDA giving NDA and the stock was unmoved. But we're assured the disclosure is significant because it means the regulatory boffins' usual protracted time line is condensed to six months. Omapro treats chronic myeloid leukemia patients who have developed a mutation and failed existing treatment.

Given the priority review, ChemGenex might be selling the drug in late 2010 in the US - in its own right. "The key is we got to this position owning the drug 100 per cent," says chief Greg Collier.

The next step is a similar European application, alongside a European partnership that will help fund the US rollout.

Commercialising a drug normally involves big wads of the green stuff, but Collier says it's doable. The specialists all go to the same seminars in the Bahamas so it's easy to spread the word. UBI, meanwhile, is skinning the biotech cat in a different way with its improved blood-glucose monitoring for diabetics. UBI and partner LifeScan (Johnson & Johnson's diabetes arm) has won US assent to sell its device, a quicker and more accurate version of what's been out there for years. The approval unlocks a $17.3 million milestone payment from LifeScan.

The beauty of UBI's revenue flows is that they're based on selling the single-use testing strips rather than the device itself (they'll be given away a lot of the time). A full-blown diabetic has to test six or more times a day. The bad news for local sufferers is that the device won't be available in the small local market. UBI's factory in Melbourne can produce 750 million strips a year. Under the deal with LifeScan, UBI gets 1c per strip sold (plus an unquantified manufacturing payment). Chickenfeed? Not when you realise that 200 million strips equals $20m of royalties. UBI shares surged 26c (15 per cent) yesterday. We had UBI as a spec buy at 50c in February so that's enough for now: the stock is a hold. We had ChemGenex as a spec buy at 75c in October and maintain the call.