Is the one I’m currently buying.

It has completed successful trials and the path to commercialisation is clear. All that remains prior to starting manufacturing is sales. Yes my number one pick for 2010 has not made any sales! On top of that they have a serious competitor who is breathing down their necks with what could be a superior product.

No I’m not talking about Vertex Pharmaceuticals, although that’s another stock I own and the stories are very similar. The difference is enterprise value. My pick has about 1/60th the EV of Vertex.

So what do I like.

• The product should almost sell itself, just like Telaprevir, Vertex’s Phase III clinical trial product for the treatment of hepatitis C virus (HCV) infection. Actually it will require a substantially smaller sales force and marketing than Telaprevir.
• Management have done a excellent job executing a great strategy. The way forward is clear with all the pieces in place. Their business model almost guarantees both cash flow and real earnings coming shortly after their first deliveries.
• It’s a simple, easy to follow  story, in an area I’m well versed in and have a real interest in following.
• Best of all I can see 30x return potential with multiple catalysts of orders and profitability. Whereas for Vertex I can see a double, maybe, at an excited stretch. Though in fairness to Vertex Teleprevir appears better than current and prospective treatments.

I’m trying to find more out about the status of their competitor now, but as they are not publicly listed I’m reliant on a CEO or senior executive being happy to discuss their strategy and status.

[Catch the Wind is the company]

Speaking of happy, I’m happy with our Australian portfolio. It’s a good balance of dividend payers with share price potential and earnings growth stories. Telstra, ANZ Bank, Westpac, Hunter Hall and Macquarie are in the first group while Penrice Soda and Biota the second. There are a few companies that are either too small pr embarrassing for me to mention and one I simply keep around to remind me to always do my own due diligence.

The US? Not so happy, I still have ten or more companies to trim from the US portfolio. Vertex will stay, MMM has has a trailing stop for a few weeks now. The stop being part of my attempt to fold in momentum. Pharma, Biotech, Tech and Insurance are all well represented. GE and Suntech are two of my three energy plays. I have no traditional energy exposure in the US, though opportunities like ATPG appear attractive. Retail is all but gone.

Pfizer is my largest US position. It has underperformed since the March 9 bottom, but I see that changing in 2010. My favourite stock which I led off with will soon take [now has] the number one position. Depending on further research and events it is favoured to spearhead my return to my concentrated ways of old.

Elevator Pitches

Biota has pulled back from the Swine Flu euphoria. I said the following on October 16, “Biota is above my low [valuation] point, but below my upper point. I would not be a buyer here, but saying that I’ve missed scores of opportunities in my life by not being a buyer. I do think Biota could go substantially higher, an EV of around $1.1B is my upper valuation point.

A month ago I was excited about the GSK quarterly announcement, but now I see downside. I think too many people have bought into Biota expecting a huge quarterly royalty. I’ll be surprised if it is as large as many people must be thinking … and so would not be surprised to see a sell-off. Which would represent a better opportunity to so long….
$3.45 is where I thought Biota would be after LANI announcement, so I clearly have no idea.”

Apparently I did have a good idea as that was the recent top. Nothing has changed since then except the share price. Oh there was the good GSK quarterly results and production guidance, inclusion in the S&P ASX 200, IV-Relenza, two small purchases to fill out the pipeline and…was there something else? The price almost got to my buy point, but appears to have bottomed before reaching it. Keep in mind Biota is my largest position, so my buy point is low. Multiple catalysts remain, licence deal for LANI and GSK quarterly results and guidance for Relenza. GSK aren’t going to produce 190M doses a year without having a market for it. As has been pointed out by Witty at GSK and Cook at Biota they are going after the stockpiling market and so likely have some pretty firm orders.

Akamai continues to broaden their product offerings and differentiate themselves as a true online leader.

More another day, though frankly there’s not a lot that I own in the US that I’d buy right now.

Disclosure: Long all companies mentioned.

Related posts:

1. Catch the Wind Quarterly Results Q1 2010
2. Biota
3. Telstra – Stock Market Returns Inverted
4. Biota’s Revenue Mix
5. The Inefficient Stock Market
6. Falling Knife: Biota Holdings Ltd. (BTA)