Stocktake: Peptech ... Patently On The Up
Sun Herald
Sunday March 2, 2003
What's driving Peptech's share price?
Duncan Gordon, client adviser and research manager, Baker Young Stockbrokers, Adelaide: The licence dispute between Peptech and Johnson & Johnson (J&J) will be a major driver of the share price as Peptech looks to secure multimillion-dollar royalties from the sales of the blockbuster arthritis drug Remicade in the US.
Alison Coutts, director, EG Capital stockbrokers: Investor gloominess over the prospect of having to wait a likely six to nine months to get a better view of Peptech's position with its dispute with J&J.
What's the best thing going for it?
Gordon: Peptech's anti-TNF patent position isn't the only asset the company owns. Peptech stands to benefit from its stake in UK biotech company Domantis by forming a drug development pipeline and its animal health division is on the cusp of major marketing deals for itsbreakthrough reversible castration technology.
Coutts: The intellectual property held within it especially within its 36 per cent stakehold of Domantis.
What are the big risks?
Gordon: Drug development is not a risk-free enterprise and the clinical trial process often throws up challenges that need to be resolved.
Coutts: That J&J will keep stringing Peptech out. J&J is a large pharmaceutical company with big legal and other resources. Fighting patent disputes is almost a core business for them.
What's the three-year outlook?
Gordon: Peptech has the potential to convert royalty flows from its TNF patent position into a strong drug development pipeline, placing the company in a unique position in the Australian market of owning a broad spread of intellectual property and being able to fund the transition of this technology into viable products.
Coutts: It stands to spin out a big free cash flow and will be Australia's only materially profitable biotech company.
Buy or sell?
Gordon: Peptech can trade well above $3 over the year. A speculative buy pending a successful outcome to the licence dispute with J&J.
Coutts: The share price will be up substantially above $2 this year, so it's a buy but not for those who cannot handle a fair amount of risk and volatility.
© 2003 Sun Herald
