Biota Relenza Royalties and Production Update Overnight
GSK’s Q3 09 webcast is on 28 October 2009 at 13:30 GMT, 00.30 Melbourne Time.
They’ll announce quarterly Relenza sales, provide an update on production and possibly on Rotacap/Rotahaler.
Royalty estimates for BIOTA HOLDINGS LIMITED (BTA) range from $15M-30M.
Diskhaler authorised in Europe 28 July 2009 old news but
Member States of the European Union have assessed an application from the marketing authorisation holder to temporarily distribute Relenza (zanamivir) with a Rotacap/Rotahaler inhalation device instead of the authorised diskhaler. The distribution of an additional device is intended as a temporary measure during the H1N1 pandemic, because production capacity of Relenza with the approved diskhaler cannot meet the current increased demand for the medicine.
Royalty Target Range
Current Fx GBP:AUD .5542
Production: Min 15M
Target: 15*20= 300M *.07 = $21M
- Possible upside from Rotahaler in Europe, increased production. See below for GSK’s latest comments on those fronts.
- Possible downside from GSK announcing, “that this week, approximately half a million people will have received its pandemic H1N1 vaccine” GSK make more from higher margins on the vaccine. That appears to limit their desire to promote Relenza.
- Recent prescription numbers show GSK is not chasing the retail market, though bulls retort that is because GSK production is all spoken for by governments. Still it doesn’t seem like best efforts by GSK.
My royalty prediction $19M – $30M with higher more likely than lower.
LANI, and production guidance remains the hurdles to glory for Biota.
GSK Presentation 28 Sept 09 Thomas Breuer, MD, MSc Senior Vice President Global Clinical R&D & Chief Medical Officer, GSK Biologicals
- Contracts to supply Relenza to >60 governments
- Annual production capacity of 190m treatment courses by end ‘09
- Increasing production of Diskhaler; building new capacity for Rotacaps.
Hunter Hall has been selling down their large Biota position. Hunter Hall’s stake had grown to 13.14% and was worth $61M when they started selling on the 29th September. HH then sold most days until the 26 Oct, selling 1.8M shares or 8% of their holding.
My average cost is less than Hunter Halls, but it appears our valuations may be around the same. The mid threes were above my low estimate, but I see speculative upside from here being a possible double, with one more double after that possible on an extreme price blow-off.
WilsonHTM caused a stink when they changed their recommendation to sell. Though that shouldn’t have been a surprise to anyone following their valuation calls. My view is the WilsonHTM price tag of $2.28 is conservative, and demarks a line between value and growth investors which when broken the price was thrust higher by momentum and speculation.
I’m planning on staying up to cover the announcement. Julian Heslop CFO and Andrew Witty CEO will be speaking.
Disclosure: I own Biota Shares
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