Alchemia Still A Buy Despite Delays

Array
(
    [0] => Array
        (
            [0] => ((ACL))
        )

    [1] => Array
        (
            [0] => ACL
        )

)

This story features AUSTRALIAN CLINICAL LABS LIMITED.
For more info SHARE ANALYSIS: ACL
The company is included in ASX300 and ALL-ORDS

By Chris Shaw

Even possible delays can’t stop ABN Amro Morgan from remaining optimistic on the prospects of biotech play Alchemia ((ACL)), the broker retaining its Buy rating and $1.06 price target on the stock even though the company’s recent dealings with the Food & Drug Administration in the US are resulting in a lengthening of time lines for its product coming to market.

The company’s main product is a synthetic heparin known as fondaparinux that has been given approval for a launch in the first half of 2009, the broker expecting as a result of the FDA delays first sales should now be registered by July of next year rather than its previous estimate of January.

To factor this in the broker has reduced its forecasts for both FY09 and FY10, but the key in its view is the changes don’t impact at all on how successful it expects the product will be once it has fully entered the marketplace.

Other news supports the broker’s positive view on the stock as it points out the group’s cash position as at the end of December was $20.3 million and the company has recently been granted two new patents in Australia, providing the company with legal protection for its development work through to 2022.

In the broker’s view current share price weakness reflects nothing more than some tax loss selling for the end of the financial year and a lack of investor interest in the more speculative end of the market, which implies an opportunity for those willing to take a longer-term view.

As a result the broker suggests the stock offers a good entry point at present for those investors with a higher risk profile. With a market capitalisation of little more than $50 million at present the lack of investor interest is matched by a lack of broker coverage, the FNArena database showing no other analysis of the stock at present from the major brokerages in the country.

Shares in Alchemia today are slightly higher and as at 1.40pm the stock was up 0.5c at $0.345, which compares to a trading range over the past year of $0.305-$0.98.

Click to view our Glossary of Financial Terms