biota boss warns of speculation

Biota says 'pandemic' speculation may be overdoneArticle from: Font size: Decrease Increase Email article: Email Print article: Print Submit comment: Submit comment George Lekakis

April 28, 2009 12:00am
BIOTA boss Peter Cook yesterday warned investors against speculating in the company's scrip on the back of reports that the so-called "swine flu" could trigger a lethal pandemic.

Shares in the Melbourne-based flu drug developer yesterday soared almost 82 per cent or 71c to close at $1.58.

More than 17 million shares were traded, making it the busiest trading day since November 2005 when the company's scrip was talked up amid fears stemming from the avian flu outbreak.

After passing through $2 in 2005 Biota's stock price rapidly retraced as it became apparent that the bird flu threat to human health was not as universal as some had feared.

Markets across Asia were affected yesterday, with airline and tourism stocks hit hard on fears of a more widespread flu outbreak.

While Mr Cook acknowledged that a new strain of swine flu was a cause for concern, he noted that recent cases in the United States and Britain had been associated with relatively mild symptoms.

"When we went through the avian influenza event four years ago, every time there was a report of a goose or duck dying in Europe our stock price went up," he said.

"If people speculate in the stock on those terms then they will end up disappointed.

"To assert, right now, that this (swine flu) will cause a massive rise in sales, well, that class of response is erroneous and lacks understanding."

Biota licenses the rights for its flu drug Relenza to US pharmaceuticals giant GlaxoSmithKline and collects a royalty for every course sold.

Biota collects 7c in every $1 generated by Glaxo through Relenza sales.

Australian broking analysts last week upgraded their earnings forecasts for Biota after Glaxo announced big increases in Relenza sales in Britain and Japan.

The governments of both countries are re-stocking their flu drug stockpiles after they ran down during the northern hemisphere winter.

The Japanese Government is increasing its holdings of Relenza, which is said to be more effective than the alternatives against recent flu strains to hit that country.

Mr Cook said it was difficult to assess the long-term impact of swine flu on Relenza's sales, but it would probably be positive.

"This outbreak has probably concentrated the minds of US administrators on working out whether they are prepared for a real pandemic," he said.

"An important part of being prepared is to ensure that a nation's drug inventory is adequate to meet a crisis," Mr Cook said.

Wilson HTM analyst Shane Storey said there was a real prospect that the US Government could double its stockpile of flu courses from 80 million to 170 million over the coming months.

"I would be reluctant to adjust our earnings forecasts until we see formal adjustments in orders from the US and other governments," he said.

"Relenza accounts for about 20 per cent of the US Government's stockpile, so the key signal will be if it decides to increase that ratio."

Mr Storey cautioned against expectations that the swine virus would trigger a pandemic but said any restocking by governments would support the company's share price.

Before yesterday's rally, Mr Storey had set a 12-month price target of $1.38 on Biota.