http://www.thewest.com.au/20040803/business/tw-business-home-sto1...

http://www.thewest.com.au/20040803/business/tw-business-home-sto128984.html


Chemeq in production but sales still a glitch

MICHAEL WEIR


Animal antibiotic company Chemeq has overcome a major production hurdle but is still chasing crucial sales deals needed to underpin its long-delayed $35 million Rockingham plant.

The company revealed yesterday that the hi-tech plant had successfully produced the key ingredient in Chemeq's ground-breaking drug, but full-scale production would be delayed until it secured firm orders.

A previous sales deal with a South Africa buyer lapsed at the end of June because of further delays in finishing the plant, but the company hopes to win another agreement now that it has achieved first production.

Chemeq also has a deal valued at between $1.7 million and $4.4 million with an Australian buyer, conditional on the drug gaining regulatory approval.

Chemeq spokesman Peter Cassuben said yesterday's production milestone would help speed up the regulatory process.

Chemeq's drug already has regulatory approval for use in pig production in South Africa and New Zealand and has also been awarded expedited review status by the Food and Drug Administration for the lucrative US market.

"It's important to note that this is fairly early days for commercial production and the company isn't quite there yet," he said.

Mr Cassuben said the company had no plans to stockpile drugs and would only ramp up production to meet firm sales contracts.

The Rockingham plant, which is more than 12 months behind schedule, has produced the active pharmaceutical ingredient (API) of its patented drug Chemeq polymeric antimicrobial.

The dry powder still needs to be put in a liquid form and packaged to become the finished product, which Mr Cassuben said was "comparatively straight forward".

Chemeq hopes the drug will replace the use of antibiotics to aid growth in commercial pig and poultry production. Chemeq shares lost another 3¢ to $4.69 yesterday as the market continued to take a more cautious view on the company's push into commercial production.

The shares have dived 22 per cent from a peak of $5.98 at the end of May.

Patersons Securities analyst Nick Allan said the market was watching for proof the company could sell the drug at the volumes and price it had touted.

The company also needed to quickly lock in orders to justify a mooted expansion of the 20 tonnes-a-year plant to 200 tonnes.

"They need to lift production beyond 20t given their remarks on the likely sale price because even at full scale it does not justify the current valuation," he said.

He said it had been suggested the drug would sell for about $1000/kg or $1 million/t.

"Even at full production that's only $20 million in revenue which is not sufficient to justify a market capitalisation of $400 million," Mr Allan said.

He said the company had significant blue-sky potential if it achieved all the milestones it needed to and successfully tapped the multi-billion dollar animal pharmaceutical market.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>