ousia's update, 120

As they often do, Bioshares has come out with a BTA update today that largely reflects an update I gave a couple of weeks earlier.

I concluded on Jan 30 (see my two Jan 30 posts on this thread) that BTA was fully valued at current levels and would drift down. Bioshares (who previously had a strong buy on the stock), have now also concluded that the stock is fully valued, even if a $100mill settlement offer is included in the valuation.

If BTA do not settle with GSK for at least $100mill, then the stock is significantly over valued at current levels.

I'm assuming A$20 per course, so predict roughly A$18mill in Relenza royalties for FY07. Bioshares has optimistically assumed US$20 per course, and so has predicted A$24mill in Relenza royalties for FY07. This per course price assumption is optimistic because Tamiflu is currently selling for US$15 per course, and I can't see governments prepared to pay such a hefty premium for Relenza.

BTA's operating costs for FY07 are expected to be in the region of A$17-18mill, so you can see that FY07 profits are not going to be anywhere near what everyone (including myself) thought before GSK released its 15mill capacity figure.

If past patterns are to be repeated, the other two Aust analysts covering BTA will also come out with updates that reflect my change of opinion on this stock.

On Jan 30 (on SS), I predicted short term consolidation at 146. This is exactly what happened until one Sydney broker sent out an email re a bogus US sale intended to spike the price so he could exit. Now that the fake US news has passed, I see the stock again consolidating at 146 before gently drifting down to around 120 ($215mill market cap) following the half year results.

Where it goes from 120 will largely depend upon the market's expectation of GSK's 07 Relenza production/sales, litigation outcome, and newsflow re licensing deals.

For the record, my BTA posts over the last six months have accurately predicted every significant price movement of this stock.