ousia's update: half year results

I've just had a quick look at the half year results, and, as I predicted, the numbers do not validate the current market cap. Dec loss increased from $7.1mill to $8.7mill. $700k Relenza royalty from German order and retail sales. Outlook was understandably vague, but the June half loss is likely to be in line with the Dec result. And given that GSK capacity is limited to 15mill over the next 12 months, and given that Indian production will only generate tiny revenue for Biota, it is hard to imagine FY07 revenue exceeding $25mill at the present time (operating costs expected at $18mill) – yet BTA already has a market cap approaching $300mill. Depending on how Relenza plays out in the field, FY08 could be very good for BTA or, if stockpile orders dry up, the comany may actually record another significant loss. No one really knows at the present time.

IMO, the only thing that could validate BTA's current market cap at the present time would be a generous litigation payout ($100mill+) in the short term. If the market gets the sense that this payout is not imminent, BTA is almost certainly heading south since its revenue potential is limited by GSK production capacity. In addition, I think the recent small US order indicates that demand for Relenza is not anything like what folks on this board/day traders seem to think. GSK's production capacity is not sufficient to meet global demand, but demand at present is not that far in excess of 15mill per annum. Had GSK the ability to produce 20-25mill courses this year, I think it could have completely met global demand over the next 12-18 months.

On the positive side, Biota management is doing all the right things on the licensing front. The MedImmue deal is about as good as it gets for a preclinical compound.

I'll give a more detailed analysis of the results in a few days.