Cellestis: Predictive.

I have mentioned before that the predictive value of the QFT diagnostic is extremely important in proving its value.


This longitudinal study by Diel confirms the ability of QFT to identify all of those contacts of a case of active TB that subsequently progress to Active TB.


It is actually quite difficult to conduct a study like this where a large number of people are identified as having TB but are not treated. Therefore these results should be treated like "gold".


In essence, in a group of 903 people exposed to TB, the TST reported a huge number of positives (604 or 229). QFT only reported 198 positives.


The crucial part, however, is that whilst reporting less positives, the QFT did not miss a single case that progressed to Active TB over the subsequent years. The TST missed 2 of the 17 cases that progressed to Active TB.


Rationale: Only limited data are available on the predictive value of Interferon- release assays (IGRAs) for progressionfrom latent tuberculosis infection (LTBI) to active tuberculosis (TB). Objective: To build on our initial study comparing theQuantiFERON®-TB-Gold In-Tube assay (QFT) with the tuberculin skin test (TST) in close contacts of TB cases and evaluating progression to active TB for up to four years. Methods: A cohort of close contacts of smear-positive index cases established between May 2005 and April 2008 was tested with QFT and TST. Through April 2010, progressors to active TB were consecutively recorded. Results: Of the 1,414 contacts (141 children), 1,033 were still resident in Hamburg at the end of the study period, and results of both tests were available for 954. QFT, but not TST results were associated with exposure time (p < 0.0001). For QFT, 198/954 (20.8%) were positive; 63.3% (604) were TST positive at > 5mm and 25.4% at > 10mm. 903 contacts refused chemoprevention and 19 developed active TB. All 19 (100%) had been QFT-positive with a progression rate of 12.9% (19/147) over the observation period. Corresponding values for the TST were significantly lower: 89.5% (17/19) and 3.1% (17/555) at > 5mm, and 52.6% (10/19) and 4.8% (10/207) at > 10mm, respectively. The progression rate of 28.6% (6/21) for QFT-positive children was significantly higher than 10.3% (13/126) for adults (p=0.03). Conclusions: Results suggest that QFT is more reliable than the TST for identifying those who will soon progress to active TB, especially in children.


(finally, I beat Rog on one)

Mea Culpa.

Judging by the comments that I have received privately and the public comments that have been posted on my blog since I released my CST Projection Spreadsheet, I have done a terrible job of explaining exactly what that spreadsheet is all about. It seems that the consequence is that many people have misinterpreted what the spreadsheet is saying. I did say that the spreadsheet is a projection not a prediction. Perhaps I should have been a little clearer. Hopefully I can correct that here.


Firstly, none of us can predict or forecast the future with any level of absolute accuracy. All we can do is assimilate all the known information, make some realistic assumptions and process it all to achieve a reasonable "feel" for the potential future that we can comfortably use to make decisions. Even the "gospel" that is regularly published by our brokers and analysts is no more than that. They may use all sorts of esoteric formulas, metrics and methodologies but in the end their forecasts are even less accurate than the seven day weather reports that we see on TV each night. It's nobody's fault, it is simply an outcome of the fact that nobody can predict the future.


Having said all of that, if we approach the problem of assessing where we should invest our hard earned with a level of thought and logic we can make superior decisions.


Okay, back to Cellestis and my Spreadsheet.


Having received the 2010 FY Financials and Briefing Papers last week I am able to add a further level of confidence to my investment in Cellestis. In addition to all of the business potential that I have seen in the business, it excites me that we are now starting to accumulate a contiguous set of financial numbers that I can use to better glimpse the future through the fog.  That is, I now find myself invested in a Company that has both a spectacular potential for growth and a demonstrated ability to translate even its early success into profits and dividends in my pocket. I have to say that after almost ten years of faith based practically wholly upon my assessment of the potential of this business, it is exciting to see the financial kinetics come to life.


So, to make a long story short, if we sit back and really look closely at what we have here we can see that we have both a financially successful, sound Company and the potential for outsized growth. For many years we had only the second of these investment assets.


As I have said many times in the past, my various spreadsheets and calculations are tools that I use to make my own assessments. I often provide them to others so they can, if they wish, use them themselves. I expect each of us to make differing assumptions and thereby achieve different outcomes. 


The actual figures that I provided in my spreadsheet could, if you wish, be described as a "worst case". That is, they are nearly totally the type of numbers that you might apply to any Company, based upon their known financial track record, without applying any knowledge about the actual business operation. Admittedly, I have performed a small amount of fine tuning based upon available financial knowledge (eg the tax situation).  Whilst,  in my eyes, the results from even these conservative figures are better than satisfactory, my personal belief, based upon my accumulation of knowledge about the business and its market, is that reality will prove to be substantially better than those figures show. 


If you go back to that spreadsheet and change some of the assumptions you will be quite surprised at the impact on the bottom line (ie the profits, dividend and ultimately share price). Start with some of the suggestions made in the comments that others have made. Increase the sales growth to 40%, 45%, 50%, whatever. Take a stab at when you might expect a "tipping point" and put in the growth spurt that you think may be resultant. Take a look at those marketing expenses and think about how they will decrease as a percentage of  sales as we move forward. Have a look at the enormous amount of cash that the Company accumulates and think about the dividend payout. I really can't tell you what those figures might be - if I did then I would be predicting the future and that would not be fair on either of us. 


In conclusion, may I just point out the following.


Even a dividend of 10c next year, at the current price of $2.50 provide a yield of 4%, fully franked (5.7% grossed up). Frankly, that is not a bad yield from a Company that is in the early stages of exploiting its market and has spectacular growth potential. 

Cellestis: More Data.

I have made a small addition to the Cellestis Growth Projection Spreadsheet.


We know that the Sales for 2010 equated to 1.81m tests. Because our Sales Growth percentage represents the growth in native currencies it is a proxy for volume growth also. Therefore, we can apply the same growth factor to the number of tests sold to have a look at the projected market penetration.


I have included these figures in the spreadsheet.

Cellestis Growth Projection

With the release of the 2010 FY figures, I have updated my Cellestis Projection Spreadsheet.


I must point out that this is a PROJECTION, not a PREDICTION.


Some assumptions/guesses that I have made:

• Sales growth is 35% year on year
• I have adjusted the figures for 2009 to account for the change in accounting method of COGS (Selling expenses are now represented in selling expenses, rather than be included in COGS)
• Dividend payout remains at 62%
• Tax in 2011 is less than 30% because we still have some tax credits overseas. For subsequent years I have allowed a tax rate of 30%.
• I have set future shares option expense to zero. It is my understanding that the new rules make it almost impossible for companies to issue such options in the future. I do have to admit that I don't understand the accounting that is used for this anyway.
• I have set "other income" (ie interest) at 5% of the cash balance at the end of the previous year.
• In calculating Cash on Hand, I have not taken into account the timing of debtors/creditors or dividend payment dates (it's not material anyway)
• Everything else is an intelligent guesstimate.
• I have not projected a "tipping point". It's just to hard to know when or if this might come and what its impact might be.
• I have not included any foreign exchange impacts. It's just not possible to guess the future forex numbers. If I had to take a stab, I really can't see the $AU going too much higher. Therefore the chance of a negative impact from forex might be quite low.

I am sure you will play with it to reflect your own thoughts/guesses/knowledge. Have fun.

Comments/corrections/additions welcome.

I know what you mean, Rog.

I know what you mean, Rog. When I see pictures like this I can only think "What's not to like?"

Cellestis Data Sheets 2010.

The Cellestis Data Sheets updated to include the 2010 Full Year Data are now available through the link at the top of this page.


As usual, any notification of errors, typos greatly appreciated.

Cellestis - Some quick observations.

I guess everybody has seen the full year figures by now and have made their own assessment. Of course we would all have preferred bigger numbers but the numbers are what they are. Once again, the foreign exchange rates have taken the gloss off our 38% increase in sales, year on year.


If we are a little forward looking we might be greatly encouraged.


Let's make a couple of assumptions.

• That next year we "only" achieve a further 38% sales Growth. (conservative)
• That the A$ gets no "worse". (not unreasonable)

So, that 38% Sales increase would bring our Sales to $56m and Gross Profit to $39m. Let's be generous and allow $20m for expenses. Net profit before tax is therefore $19m and Net profit after tax is $13.3m - a 60% increase year on year.


The Company seems to also be demonstrating that they are not shy about paying a decent dividend. On the above figures it would not be at all unreasonable to expect a full year dividend next year being doubled to 10c.


Of course if our sales increase is more than a "mere" 38% then ....

I can see clearly now.

I suspect that, for most of us, if we are able to cast our minds back to when we very first embarked upon our adventures in the share market and, furthermore, if we are able to be totally honest with ourselves, we probably approached the market with a thought something along the lines of "All I have to do is buy shares and then sell them for more than I bought them for and I have made a profit - all good".


I am pretty sure that we would now look back on such a position of being one of naivety. We know that it is certainly not as easy as such a view implies and regardless of where we find ourselves today, would now realize that there is so much more to it.


I believe that, broadly, between us we would have ultimately found ourselves in one of three groups.

• Those who lost enough money to become discouraged with the whole "game" and moved on to other ventures. (The people in this group are probably not reading this blog).
• Those who found that they are in that very small group of people who have developed the skills, perseverance and tools to consistently make profits by buying and selling stocks (ie trading).
• Those who ultimately took a different path and became stock market investors. Just like the traders above, they developed the necessary skills to become investors.

As I say, the first of the above groups are unlikely to be reading this blog. I have seen figures that indicate that a distressingly high percentage of people "burn out" in this way - often within 12 months. It is interesting to consider what happened to their money - clearly the majority of it has gone to those in the second two groups above.

I am not a trader. There are a number of reasons for this - most of which would be tedious and boring (and probably boorish) for me to go into here. I offer no criticism of traders - if it works for you then all's well. I can't really offer you anything of value.

I consider myself to be in the third group - an investor. My apprenticeship (of multiple decades) is far from over. I suspect that in my dotage I will still be able to enjoy the thrill of an "Aha!" moment or two. 

I have seen many attempts to define "an investor" (usually done as a comparison to "a trader"). I don't think there is any one definition that can clearly define all of us who consider ourselves to be investors. Maybe that is as it should be - after all it is what we think of ourselves that counts in the end (in this and all things). However, if pressed, my definition of an investor (or at least me) is somebody who is interested in becoming a part owner of a business with the ultimate aim of receiving the financial returns that the business makes (this is important and hopefully will become a little clearer later in this article). That does not mean that I do not sell the businesses that I have bought - it just defines the reason why I bought the business. There are multiple reasons for selling a business, including; the business no longer is a good business in the investors' eyes; somebody is willing to pay a substantial amount more than the investor believes the business is worth; a better investment comes along; personal financial reasons; and so on. Certainly, the length of time that a stock is held does not make the differentiation between trader and investor. There is probably no reason why a trader could not hold a stock for several years and there is no reason why an investor might not sell an investment after one day.

The rest of this article is purely about investing in the stock market. (Traders may leave now, if they wish, and draw another chart)

After due consideration and much thought I have now managed to reduce the investing process down to two (yes, just two) simple steps. Basically, they are just two questions that need to be asked and answered.

1. Is this a good business?
2. Can I buy the business at a price that makes financial sense for me? (note the bolding of me - hopefully I will remember to address the importance of that later on).

Now, the above may seem trite at first glance. However, it is my hope that I can flesh that process out enough that you might even consider writing them on a piece of paper and tacking it to the wall above your desk. 

I should also say that none of this is revolutionary, new or even startling. It is, in fact, just the distillation of the knowledge that the greats such as Warren Buffett, Charlie Munger, Philip Lynch, Roger Montgomery and many others have been trying to push into my head over a number of years. Perhaps Roger Montgomery may be slightly embarrassed to be included in this list but I have included him specifically because he has demonstrated in his book "Value.Able" an ability to think clearly and better still, to explain his thinking and knowledge in an understandable and resonant manner. I don't agree 100% with everything he has to say but I would highly recommend his book to anybody that wants to really think seriously about the investment process. I hope to find the time to write a review of his book at some future time.

Back to the two step investing process. 

Is this a good business?

I do not plan, here, to tell you what makes a good business. The important thing - and this is probably the most important thing in this entire article - is that any determination of whether a business is "good" must not in any way include any examination of the listed stock of the company on the stock market. It is absolutely essential that we have a clear and unambiguous distinction between the business and the representation of the company on the stock market. If I could say this 100 times I would. If I could come around and shout it in your ear, I would. I even feel inadequate that I am unable to find the words and explanations that would make this resonate with you. Hopefully, one day, I will find the right words to convey this basic tenet. In the meantime, allow me to make some observations, some of which, hopefully will resonate with you.

The basic descriptors of a business' financial affairs are the Profit and Loss and Balance Sheet. Have a look at them. Is the Share price represented in them in any way? No, it isn't. Movements in the Share Price have absolutely no impact on the finances of the business. Therefore, movements in Share Price do not change the value of the business one little bit. 

The shares that are listed on the share market do not belong in any way to the Company. Listing a company on the share market is essentially a "one-time" operation. The shares are sold into a third party market (the share market) and from that point on the Company has nothing more to do with that third party market. The shares will change hands within that market at a variety of prices over time - this has nothing to do with the Company. It is entirely discrete from the business and from the point of view of operating the business in the best possible way should, ideally, have no impact. (In fact, a business that spends large amounts of it's time and resources in performing actions that are wholly designed to impact the share price, instead of running the business in the best possible way, may well be validly excluded from our category of "good" businesses.)

So, in assessing whether a business is a good one we must avoid looking at anything that is derived from the Share Price. We should not be interested in the current Share price, the historical Share Price, the price chart, Price/Earnings Ratio, Yield, "expert" price projections etc etc. It's not as hard as it sounds - it becomes second nature after a short while. In the meantime, just ask the question - "Does what I am looking at change when the Share Price changes?". If the answer is "Yes" then do not let it impact your consideration of whether this is a good business.

We can look at all of this from a slightly different perspective. Our aim should be to be smarter than "the market". That is, we want to back our view against the view of the market. As soon as we include the market view (ie the Share Price) in our calculation of the value of a business then we are accepting the view of the market as part of our considerations. It makes no sense to put the market view on both sides of the equation My View Vs Their View.

As I said, I am not planning, in this article, to tell you how to identify a "good" business. It is a big thing to discuss. There are many different ways of doing this and many different factors to consider and weight. I hope to address that in more detail in future articles. In the meantime, I can offer no better advice than that of Warren Buffett - ask yourself the question "Would I be happy to own this entire business". Once again, a statement that is easy to dismiss as trite, however, the exercise of visualizing yourself as the owner of the business goes a long way towards approaching your assessment with a clear head. (It also assists with that important task of dissociating the business from the Share Market in your mind).

One final observation that goes some way towards linking the above with the second question that follows. A crap business is still a crap business, regardless of the price that you can buy it for. That is, if the business does not meet your definition of a good business then your should not be interested in investing in it. The following question need not be asked. Move on. There are plenty of good businesses available - keep looking.

Can I buy the business at a price that makes financial sense for me?

Once you have identified a good business then all that remains is to find out whether you can buy it at a price that makes financial sense for you. Now (finally!) you can log on to your broker and have a look at the share price.

Again, the purpose of this article is not to take you through the process of deterministically answering that question. It is actually a fun topic and one that I want to address in a future article (I promise). However, here, we can look at this in general terms.

Let's not lose sight of our central aim of investing in the companies listed on the share market. It is to make money. It is to make more money than we could make by using our money in other ways that we might choose. As such we clearly need to identify how the investment is going to financially reward us and when. Our rewards (I'll stop saying financial rewards from here on) may come to us as our share of profits being paid to us (dividends) or through the value of the company increasing to the extent that we can find somebody to buy some or all of our shares at a price that it makes sense for us to sell them at. Most likely it will come as a combination of both. Of course one of our basic beliefs (that I have not explicitly expressed but have implied) is that the market often "gets it wrong". That error can be either way. It may mean that an increased value of the Company may not become reflected in the Share Price for a long time. It may also mean that there are times when the market is willing to pay more for the Company than what we consider the true value. Both actions of our investment, buying and selling, need to be made with those considerations in mind. Personally, my preference is to buy a company that will reward me excellently through the payment of dividends, forever. I've forgotten where the "Sell" button on my brokers' screen is. (My "other" two step investment strategy is: "Buy good shares; Lie on the beach")

Of course we now look at Yield, PE and so on. These tell us about the actual returns in our hand from the investment that we might make. Again, the purpose of this article is not to drag you through these (quite simple, in the end) calculations. If you can't wait for me to get around to doing that via my rather haphazard approach to this blog (you don't pay me enough to be anything else) then there are many other resources that will take you down that road.

I highlighted the me in the question that we are examining. i.e. Can I buy the business at a price that makes financial sense for me? The simple point that I am trying to make here is that the method and timing of returns from an investment suit each of us differently. An exaggerated example demonstrates this. 

A Company that requires that a significant proportion of it's profits for some time to come be reinvested back into the business with a promise of outsize returns some time in the future may be quite acceptable to a younger person who has a living income from wages. On the other hand, a retiree who is dependant upon receiving regular income in the form of dividends to be able to support their lifestyle would probably not find that to be an appropriate investment. 

There are many variations and nuances that make the investment considerations of each of us quite different. Each potential investment is quite different for each of us. I firmly believe that there is such a thing as a valid speculative investment. Often I see the speculative investment disparaged and somehow confused with a trading methodology. This is wrong. A speculative investment can be assessed via the very same investment process that I have outlined here. For the individual, any speculative investment may or may not make financial sense, depending upon the individuals' personal circumstances. This is no different from a "non-speculative" investment (if such a distinction can be clearly made). Of course we could very easily drift into a discussion of risk and risk/reward - topics that are often completely misunderstood (even by those who purport superior knowledge). I have some quite strong views on this topic that, once again, will have to wait for another time.

As always, comments welcome.

Press.

The following article was published in the Herald-Sun (Victoria) yesterday.

Now, I have no idea why an article quoting figures from the December half year should be published now, just days before the full year results are to be published. However, it's a nice item.


A salient point that is made by Dr Radford is one that I have bashed on about many times over the years and is one of the significant reasons that I am invested in this business. He very clearly defines the business strategy of the listed company - it is to fully realize the commercial potential of the QuantiFERON diagnostic. He is very firm about not taking the path that nearly all other Australian biotechs take - selling off the farm early in the process and thereby foregoing much of the financial benefit to be derived from the discovery. I am much heartened to hear "from the horses mouth" that this belief and strategy is still in place. I like being invested in a Company that recognises that the shareholders deserve financial rewards for their investment, faith and perseverance.


The QuantiFERON product is 100% owned by our Company - we are not dependant upon receiving crumbs from the table (royalties) from a giant pharma. The risk has been ours and now the profits are ours.


This has been achieved without a massive dilution of our equity by the all too common massive capital raisings that plague other startup biotechs.


And, to top it off, we have no debt.


One final point. Until now I had always recognised Rog as the master of article titles. I now suggest that Rog should bow at the altar of the author of this article. The title "Fully rad approach to TB" deserves a place of honour in the gallery of headlines. 

Forrest gets phished.

Apparently, Google in China was hacked overnight. The effect of this was that at some point when I went to read my gmails, I was prompted to re-enter my password (google does this from time to time legitimately). Of course it was a hacked page and it allowed somebody in China to get my gmail password.


Once they had it they then send some rubbish email about a cheap Apple computer to all of my contacts (not to my blog subscription list). 


At the same time they deleted my last few days emails and deleted my contacts list. Consequently, it is a little difficult for me to apologize directly to my contacts. I know that many of my friends read this blog so the easiest way to apologize is to do so here. My apologies for the inconvenience.


Of course I have now changed my password so all is okay. I'm just embarrassed to have fallen for a phishing attack.

Franking Credits.

This discussion follows on from our earlier discussions about dividends.

The Company have previously stated that it is their intention to pay fully franked dividends. Now, we don't know if they will continue that policy into the future. There may come a time where the level of foreign profits are such that it is not practical to continue to limit the dividend to that which can be fully franked. However, just for the moment, maybe we can assume that this policy remains in place. We might even go further out on a limb and project that the Company sees no benefit in accumulating large amounts of franking credits and therefore may well pay a dividend that exactly matches that which can be fully franked.

Given the above, I thought it would be interesting to try to establish exactly what the franking credit situation may be at the moment. It actually turns out to be quite hard to do - not the least because franking credits are accumulated on a cash basis.

A couple of basic facts.

Franked Dividend. A franked dividend is simply a dividend that the company has already paid the Australian Income Tax on. A fully franked dividend will have had tax paid at the 30% Company tax rate. Companies do not have to pay fully franked dividends, they may pay unfranked or partially franked dividends. The Australian Taxation Office (ATO) will give us (the dividend recipient) a credit on our tax for the tax that has already been paid on the dividend. For simplicity, I will restrict this discussion to fully franked dividends. It is easiest to understand by an example. If we receive a $.70c fully franked dividend then we will receive a tax credit of 30c. That is because the company would have needed to earn and pay tax on $1.00 to produce a post tax amount of $.70. In essence, when we do our own tax, we record an income of the dividend plus the franking credit ($1.00) and then subtract 30c from our final tax amount to be paid. Thus, if our marginal tax rate is 30% then we will have effectively no tax to pay on the cash dividend received. If our marginal tax rate is higher than 30% then we end up paying the difference between our tax rate and the 30%. If our marginal tax rate is less than 30% then we end up with a credit that will be offset against any other income tax that we have to pay - or if there is none then we receive a nice cheque from the ATO. The best situation is that when we hold the shares in a Superannuation account that is in pension mode. There is no tax to pay and the entire franking credit (30c) is paid to us by the ATO.

Often, it is easiest to examine our dividends as a "grossed up" amount. In the example above (a fully franked dividend), the grossed up dividend is the cash dividend divided by 7 and multiplied by 10 (therefore a 70c ff dividend grosses up to $1.00). This is convenient as it allows us to compare the yield directly with the yield that we might get from alternate investments (eg Bank Deposit, Bond). It is very common to apply the same methodology to dividend yield %. That is, a dividend yield of 7% ff grosses up to 10%. The current Telstra dividend yield, for example, is 8.5% ff which grosses up to a touch over 12% (hint, hint).

Foreign Tax. For companies that earn some of their income through overseas subsidiaries there is another little complexity. Such subsidiaries will likely have to pay tax in the country in which the subsidiary operates. (Generally) Any tax paid overseas will be allowed as a credit by the ATO against the tax that would be paid in Australia. However, such tax will not provide any franking credits. In a "worst case" situation this means that a company that earns all of its income overseas may not earn any franking credits and will not be able to pay franked dividends. More usually, the Company will pay some tax overseas and some in Australia. This means that not all of the earnings of the company can be paid out as fully franked dividends. Either the company will pay only as much dividend as they have franking credits available to make the dividend fully franked, or they will pay unfranked or partially franked dividends.

Cellestis have expressed a desire to pay fully franked dividends. Whilst most of our sales are made overseas, we are in the fortunate situation of having an essential part of the manufacturing process in Australia. This means that a judicious setting of the price that we charge our overseas subsidiaries for the product enables a respectable amount of the profits to be booked in Australia where they will be taxed by the ATO and thereby attract franking credits. The fact that we have extensive expenses (Sales and Marketing) based overseas helps with this also.

I'm guessing that you knew all that.

Now, to specifics. It would be interesting if we can establish what the tax situation of Cellestis is, particularly how much tax they are paying in Australia to provide franking credits.

As I mentioned above, it is actually quite difficult to reconcile the franking credits account - largely due to the fact that it is run on a cash basis. However, if we look at the 2009 Annual Report we find this.

This tells us that in 2009, 93% of the company earnings were recorded in Australia. Consequently, we would have to presume that the vast majority of the income tax paid has been paid in Australia and will therefore have attracted franking credits. This would imply that there is absolutely no reason that the Company could not pay a very high percentage of earnings as fully franked credits, if the Company so wishes.

Now, the reason that such a high percentage of the profits were booked in Australia is due to two factors; firstly that a very high part of operating expenses are incurred overseas; and secondly that a large amount of the profit is recorded because of the price that the Australian operation is able to charge its foreign operations for the supply of product. It would follow that, whilst the second factor should remain reasonably constant in the future, the overseas expenses as a proportion of actual sales will reduce. Ultimately it will mean that the 93% will progressively reduce but not by enough to reduce the ability of the company to pay large fully franked dividends.

It is worthwhile noting that retaining franking credits in the Company provides no real benefit to anyone. I do note that it would appear that the 1.5c ff dividend paid for 2010H1 would not have used up all of the franking credits available. I can only guess as to why the Company might have decided to limit the dividend in that case. It may be that it was felt at that point that it was important to assure the stability of the company by retaining cash. That consideration, at that time, may have outweighed the desire to provide a higher immediate cash reward to shareholders. 

Ultimately, the upcoming financial results will go a long way towards clarifying this situation.

Interesting Numbers.

Here are some interesting numbers that I was alerted to today.


Back in 2008 there were 93 biotech companies listed on the ASX that were required to report their cashflow quarterly. 


As of 2010 that number has reduced to 68.


It would be nice to be able to report that the reason for the reduction has been a large number of these companies being released from quarterly cashflow reporting (by stint of reporting positive cashflows for 5 consecutive quarters). Sadly, that is not the case. Most of this reduction in numbers is the result of these companies being delisted or moving to another field of endeavour.


In fact, only a very elite handful (3?) of these companies have reached that measure of success. As we know, Cellestis is one of this group.


It is interesting to further note that of the 68 companies remaining, nearly half have less than 12 months cash burn on hand and will likely require further cash injections to survive.


As I have said before, investing in startup biotechs is a high risk business. I am personally very happy that I decided to invest in Cellestis.

So far so good.

Thank you everyone for your entries in the CST Guessing Competition to date. The competition is still open for those that have been cogitating long and deeply over this.


Summary results so far.

Full Results.