Appears to me the market still hasn’t fully factored in most likely implications of current swine flue impact. BTA and CSL both underpriced compared to likely sale of Relenza and likely development of vaccine by CSL. On the other side, while QAN has been trending down, impact of growing panic especially regarding long haul flights and panic in Asia still to be fully reflected. CWN also likely to be impacted by reduction in visitors in Australia (scared to get their hands in contact with poker machines and scared of large numbers in crowded areas) and impact likely to be even greater in Asia.
BTA: has 7% royalties on Relenza, one of basically only 2 drugs that are an effective treatment (and the other drug Tamiflue is already reported as having resistance in some cases). GSK has announced upscaling manufacture of Relenza to 50-60 million packs selling for approximately $20 for 09/10 financial year. Likely royalty payment to BTA approximately $70m -$84m. This announcement was made beginning of May before real swine flue fear escalated. Have contingency plans in place with Chinese manufacturer to increase further. Already in 3rd quarter this year BTA received $32.3m in royalties. So likely royalties for BTA likely to be much higher then projected early May. BTA market cap. Is under $300m and it has several other highly promising drugs in pipeline. Will be very surprised if price doesn’t escalate markedly and/or significant takeover offer for company.
CSL – proven performer in vaccine market. They along with others will develop vaccine before end of year. US government have already made an order of $180m based on this premise. Again sales will be very high and not really factored in to share price. In addition are still doing better then expected in plasma market; Recent result from Baxter is indication of this (and based on reaction in Baxter share price also indicates recent court proceedings in US regarding price fixing of plasma products are unlikely to have much impact on bottom line).
My thoughts only but taken (for me) big position in BTA (2 weeks ago)and CSL (over past month) and gone short QAN and MAP (both over past month.
