Excerpts from Morgan Stanley report titled "THINPREP GOES...

Excerpts from Morgan Stanley report titled "THINPREP GOES MOLECULAR" dated June 10...David R Lewis is the analyst

Hologic is paying US$580m for TWT. Morgan Stanley estimates that they will need to get 20-25% mkt share to justify the price and that the HPV mkt size doubles in the next 4-5 years. "Both these assumptions are possible and HPV genotyping and the broader molecular pipeline (ie Chlamydia, gonorrhea) maybe sources of upside...leveraging TWT's technology into broader STDs seems very logical."

Reality check implied valuation...Sonic have 5% market share and probably 6% of Europe.

Assuming 25% mkt share = US$580m value then Sonic HPV volumes @ 5% mkt share = US$116m value = A$2.23 per GBI share.

GBI also developing a multiplex Chlamydia, gonorrhea test and also 3-in-1 test for Chlamydia, gonorrhea and HPV.

As Hologic are acquiring TWT before it has received US regulatory approval Morgan Stanley states "time must have been of the essence. We can envision several other diagnostic players that could find this asset very attractive and the company may not have had a choice but to move faster and enter a competitive bid."

Morgan Stanley believes that the US HPV market size will be 20-30m tests pa.

Overall in the US if GBI achieves 8% US mkt share (remembering that Sonic already have about 5% now) = 2m tests pa at A$16 per test and @ GBI EBIT % of 50% = A$16m at 15x = A$250m value = $4.61 per share (pre loyalty options)

Finally Morgan Stanley states that TWT's HPV tests offer advantages over Qiagen's in ease of use, automation and smaller sample volumes required...GBI test may even be more competitive that TWT's in these respects..."this will drive the reference labs to consider the test"

Citi report June 9 reaffirms that "the main rationale for the acquisition is TWT's HPV tests" and other points to note are "HPV testing growing at 32% yoy and 11% in Q12008

cheers