***wait for the bullish break!!!, page-5

cst gets some press (the age) Cellestis soars as it steps up fight against TB
By Rebecca Urban
March 2, 2006

KEEPING tabs on the mountainous rise of medical diagnostic maker Cellestis has become an awe-inspiring spectator sport among the sector's analysts.

The company's market value has risen about 70 per cent since October — earning it two speeding tickets from the stock exchange — and if the trend continues it won't be long before it overtakes drug developer Novogen as the country's largest listed biotech stock.

Spun out of CSL, Cellestis has developed the first new diagnostic test for latent tuberculosis (TB) in more than 100 years.

And unlike many biotechs, it has developed past the research and development stage, selling its product here and overseas.

But, despite the obvious achievements, stockbroking house analysts avoid researching the company.

"It's too overvalued," is the routine response provided by analysts when asked why a company with a $409 million market value (more than $500 million if shares locked into escrow are also counted) is not covered.

Cellestis' recent half-year report reveals a $1.6 million loss was booked on sales of $1.8 million.

And while revenue is consistently rising, critics argue that the sales revenue so far does not justify its $4.29 share price.

David Blake, of Blake Industry and Market Analysis, believes that Cellestis' current valuation conservatively implies that it is making around $18 million to $20 million in sales a year, and booking an $8 million profit.

Cellestis shareholders, however, are fixated on a different set of numbers — market potential.

Although the majority of TB cases and deaths occur in less developed nations, screening for the air-borne disease in the West is a serious health concern compounded by immigration, high-density housing and military activity.

More than 40 million tests for the disease are performed each year in the US, Europe and Japan, typically using the more cumbersome 110-year old tuberculin skin test, known as the Mantoux.

Cellestis is aiming for its speedier QuantiFERON-TB Gold test to capture at least 15 per cent of the US market (about 10 million tests a year) by 2008.

Kits sell for about $US15each, of which small royalties are paid to CSL and a Danish research institute, and the company's costs are fixed around $5 million a year.

A few back-of-the envelope calculations reveal huge potential for Cellestis.

Julian Mitchell, investment director at JM Asset Management, bought shares for 20¢ in the 2001 float, drawn by Cellestis' focused marketing strategy aimed at the military, immigration departments and prison systems.

He also liked that there was no major incumbent preventing market penetration, and felt its management team, led by co-founders and part owners Anthony Radford and James Rothel, had integrity.

The biotech sector occasionally cops flak for attracting spruikers, but Dr Radford and Dr Rothel are the exact opposite.

Cautious, bordering on reticent, they refuse to talk up sales figures or flood the market with boastful, but immaterial, announcements.

Asked when the company might break even, Dr Radford said he would prefer not to make promises.

However, he pointed out that the recent signing of a distribution contract in Japan, which dictates minimum product sales of $7.5 milliona year from June 2007, would have a significant impact on the bottom line.

Cellestis shares yesterday closed at $4.29, up 8¢ on the day.

http://www.theage.com.au/news/business/cellestis-soars-as-it-steps-up-fight-against-tb/2006/03/01/1141191732570.html