CMQ 0.00% 8.3¢ chemeq limited


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    Chemeq apologises for its pig of a year
    By Michael Evans
    December 23, 2004

    With more than a week to go before year's end, pig and poultry biotech researcher Chemeq has thrown in the towel, excusing itself for being the bourse's worst performer of the year.

    In a year when the ASX 200 index has gained 22 per cent, Chemeq's share price has fallen 80 per cent - well adrift of the next worst performer, Henry Walker Eltin, down 53 per cent.

    In a letter unlikely to bring much Christmas cheer to shareholders, the company's chairman and chief executive, Graham Melrose, acknowledged "Chemeq's share price has fallen dramatically" and that "this has been financially painful for shareholders".

    And Dr Melrose should know.

    "As the largest shareholder in Chemeq and recently having invested a further $6.5 million cash, I have shared in that pain," Dr Melrose wrote in a letter titled "end of year perspectives".

    The company has seen nearly $450 million wiped off its market capitalisation this year. Its share price opened the year at $5.47. It closed Wednesday's trading 5c weaker at $1.08.

    The company was forced to scale back a capital raising this year after ASIC intervened because of concerns about revenue forecasts and the resignation last week of two senior managers sparked a further share price dive.

    Dr Melrose attributed the company's woes to manufacturing problems of an anti-microbial drug at a new factory south of Perth.

    He said construction was completed in August and conditional approval was received from the Australian Pesticides and Veterinary Medicines Authority to commence production.

    "However, as is common with new manufacturing plants, initial end-to-end production testing has not gone exactly to plan.

    "In this case, the filtration process is taking longer than expected," he said.

    He added that "while the delay is unfortunate, we believe this difficulty can be overcome."

    But he was upbeat about next year.

    "Importantly, the short-term problem in plant optimisation does not change the value proposition of Chemeq and, in the longer term, Chemeq's share price should reflect true value," he wrote.

    He said the company was "in a strong financial position" and it had "sufficient working capital until June 30, 2005".

    It also had "a number of future funding alternatives open to" it and they were still being assessed.

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