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Scott Power interviewed here in Seeking Alpha

"TLSR: Can we talk about some of your ideas? What is your favorite company?

SP: I have a couple of favorites, but the one most visible to U.S. investors at the moment is Acrux Ltd. (ARUXF.PK). It has the largest market cap in Australia's life science sector outside Mesoblast Limited (MBLTY.PK). Acrux has developed an across-the-skin delivery technology for its product Axiron (testosterone), to treat males with medically low levels of testosterone. Axiron is a new addition to the low testosterone market. Abbott Laboratories (ABT) has the lion's share of that market, with its AndroGel [testosterone gel] product. The difference between the two products is that Axiron is delivered to the armpit of a male, whereas AndroGel is applied to the upper torso. Axiron is a much easier application.

Axiron was launched about 15 months ago by Eli Lilly and Co. (LLY), its marketing partner, and it has had very good take-up to date. The company hopes to increase its market share from about 13% currently, in what is calculated to be a $2 billion market. Axiron is growing at 30% per year now.

This is a profitable business, and Lilly pays a royalty on sales, which Acrux will distribute to its shareholders. The bulk of shareholders are Australian institutions, but increasingly there are a number of Asian investors coming into the stock, and it's one that U.S. investors can identify with and will be able to follow easily.

TLSR: You noted in a research report that Abbott had begun to rebate heavily to keep Axiron from carving out market share. How much difference will this make for Acrux in the end?

SP: The rebating and discounting have been quite intense. They have caused us to delay our numbers, pushing back about 12 months from where we thought the business would be. But the rebating has started to soften, and Lilly has Axiron on the formularies of a number of insurance companies. A fairly intensive advertising campaign is kicking off in the U.S., and we expect market share to grow quite strongly on a monthly basis from the current 13%.

TLSR: The stock is down about 20% over the past six months. Do you consider this a value stock at this point?

SP: Yes. The recent quarterly result was a little disappointing in that it showed a minor pullback in growth on a quarterly basis. Lilly was reporting the quarterly numbers. We expect a strong Q4/12. We are telling investors that the share price weakness is a good buying opportunity. Our valuation on the stock is around AU$3.70.

TLSR: Would you be reevaluating that target if Q4/12 numbers come in as strongly as you expect?

SP: No, because that's what we are expecting. However, Acrux currently has an application in the U.S. Patent and Trademark Office [PTO] to extend its core patent, the application of testosterone to the armpit of a male, from 2017 to 2026. That application has been with the PTO for a considerable period of time, and additional information is being provided. An answer is expected in Q1/13. If that patent extension comes through, we'd look to add another AU$0.40-0.50 to our AU$3.70 valuation.

TLSR: It obviously hurt when Paradice Investment Management ceased being a substantial shareholder in Acrux back in late August. Did that have a cascading effect?

SP: Two institutional shareholders sold out. One was Paradice, and the other was AMP Ltd. (AMLTY.PK). Those were substantial, but they were replaced by Fidelity Investment Management and another strong Australian company, Ellerston Capital, which has the backing of the Packer family, one of Australia's wealthiest families."


http://seekingalpha.com/article/991321-analyst-scott-power-finds-the-upside-in-biotech-down-under