biotech & healthcare weekly snippets

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    BIOTECH & HEALTHCARE WEEKLY SNIPPETS
    05:27, Tuesday, 1 March 2005


    Compiled by a ABN Amro Morgans analysts Scott Power
    and Tanya Solomon

    Sydney - Tuesday March 1:
    **************************

    Pharmaxis (PXS) FDA has granted an Orphan Drug status for Bronchitol,
    entitling Pharmaxis to a range of incentives including market
    exclusivity for seven years. This is positive news. Brian Larkin.s
    commentary makes interesting reading: Pharmaxis - Strong price/volume
    action (see recent FDA announcement). Initial target at $1.10 has been
    achieved. Near support starts at $1.01. Expect perhaps some pause
    consolidation between $1.13 and $1.01. Next potential target is $1.33.
    Downgrade to ADD on weakness (from "buy").

    *****

    SDI (SDI) reported a 1H05 in line with guidance. Most
    importantly SDI provided guidance on its full-year expectations:
    Targeting sales of around A$29.8m and profit of A$9.1m or an EPS of
    7.9cps Looking forward, SDI plans to deliver growth of about
    15% on sales and 20% profit growth yoy, with the goal of achieving
    A$100m sales in FY09. We are cautious in the short-term; however, the
    International Dental Show in Germany in April will be key to showcasing
    its new product range. We are buyers closer to A$1.05.

    *****

    Clover (CLV) CLV reported 1H05 profit of A$440,000, lower than
    our forecast. Sales came in at A$7.7m, down 15% on the pcp, due to the
    loss of a European infant-formula customer and increased competition
    from both existing and new entrants in the Omega-3 market. While sales
    in Europe and the US have been disappointing to date, CLV has secured a
    contract to supply its encapsulated Omega-3 DHA to the second-largest
    bakery in Denmark, Kohberg, for bread. It has also signed a contract to
    supply its orange juice, Supajus, through 175 Boots stores and retailer
    Sainsbury. CLV is also making progress in penetrating the competitive
    US market, with a number of active projects underway with at least
    seven global food companies. But the timing for completing these
    projects is difficult to predict.

    *****

    Acuron (AVP) AVP have announced the achievement of three major
    milestones as part of the ongoing roll out of wound care product
    Vacutex.: 1) the appointment of Mr Robert Gourlie as Global Marketing
    Manager; 2) Vacutex. has been accepted on contract with the Victorian
    and Western Australian public health care systems; and 3) the receipt
    of Australian TGA approval for VacuSkin and VacuNet.
    Share Price A$1.16

    *****

    Arrow Pharmaceuticals (AWP)
    AWP reported a FY04 profit of A$19.3m, up 54% on the pcp. Revenue
    increased by 27.8% over the pcp to A$336.7m. In addition to increased
    revenue, NPAT growth was driven by significant improvements in margins
    as a result of cost control and an increasing proportion of sales
    coming through from generics. A fully franked dividend of 10c was
    declared, with AWP intending to increase its payout ratio to 30% and to
    pay dividend every six months. A 5 for 1 share split (pending
    shareholder approval) will take place in April. This should increase
    liquidity for the stock. AWP is set to benefit from continued growth in
    the generic drug industry.

    *****

    Progen Industries (PGL) PGL 1H05 loss was A$2.5m (pcp -A$1.9m).
    PGL has A$14.4m in cash. Clinical trials surrounding PI-88 are
    continuing, with 244 patients and volunteers participating. In
    our view, news on a licensing deal for PI-88 is expected before June
    05. Trading opportunity for speculative investors exists, leading up to
    a potential deal.

    *****

    PANBIO (PBO) reported a 1H05 loss of (A$1.1m) an improvement of
    26% over the pcp. PBO has been offered a A$3.5m AusIndustry Grant to
    support its Homogenous Assay Technology development, over three years.
    PBO has also provided full-year guidance of net loss for FY05 to
    between (A$1.4m) and (A$1.7m). This compares to a net loss of (A$3.1m)
    in FY04. The key takeaway is that the business is turning around: (1)
    excluding R&D spend, PBO was modestly cashflow positive A$123,000
    compared with a loss of A$2.0m for pcp; (2) fixed costs reduced by
    A$1.5m, further to come with consolidation of operations from US to
    Aust; (3) R&D program are on track; (4) slightly lower sales in 1H05
    due to lower West Nile sales (lower incidence of disease and competitor
    product on market), however the outlook is more positive.

    *****

    DCA Group (DVC) The integration of MIA is on track, with an
    encouraging improvement in margins. Radiology posted EBITDA margins of
    26.9% better than pcp (I-Med 25.5% and MIA 24.9%) and better than
    peers. We had had thought this may have been an issue for
    DVC and are pleasantly surprised. Integration is on target to achieve
    synergy savings of A$7.5m for 9 months and A$15m thereafter. Aged care
    margins are steady, higher nursing costs offset by increased government
    funding. DVC is on target for 500 new beds for FY05, but occupancy is
    down slightly to 95% from 97%, due to acquiring facilities with below
    average occupancy and some increased competition. DVC is on
    track to achieve its guidance of EPS of 16cps or A$65m (pre-gw and
    amort) for FY05.

    *****

    Generic Drug Industry News:
    -------------------------- Novartis to buy Hexal, Eon Labs for
    A$8.3b cash Novartis AG agreed to buy German generic-drug maker Hexal
    AG and its U.S. affiliate Eon Labs Inc. for about $8.3b in cash to
    become the world's biggest maker of low priced copies of brand-name
    medicines. Novartis, Europe’s fourth-biggest pharmaceutical company,
    will pay A$7.4b for closely held Hexal and a 67.7 percent stake in Eon.
    The Basel, Switzerland-based company will start a tender offer to
    acquire the rest of Eon for A$31 a share, or about A$1b. The CEO is
    seeking 10% of the market for generics with the purchase. Novartis’s
    Sandoz generics unit, its slowest growing division last year, will
    surpass Israel's Teva Pharmaceutical Industries Ltd. in a market that
    Vasella expects to grow to $100b in sales by 2010.

    The possible impact on the Australian Generic Drug market is
    more rational pricing from Hexal (market share 4%). Hexal is the third
    largest generic drug supplier in Australia, behind Alphapharm and Arrow
    Pharmaceuticals (AWP).

    Please note that Biotech & Healthcare Weekly Snippets provides
    a summary of our views only. Full reports can be found at our website
    www.abnamromorgans.com.au

    ENDS

 
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