Stock Talk - Biosensors

BIOSENSORS - Conversation with management

We had a discussion with management over the phone this afternoon. It appears that the stock has been the subject of the following rumours:-

1. The company did not get the CE mark - this is NOT TRUE as management are in constant contact with the CE authorities and there have not been any adverse comments. In the worse case, there could be some delay but they will still get the CE mark eventually based on their current understanding.

2. Company has been hit with a lawsuit - NOT TRUE as there has been no further progress on the appeal by BSX and Angiotech in the Netherland courts. Our view is that the appeal will not progress further.

3. Management is selling out - NOT TRUE as they are already so close to getting the CE mark and sales are gaining momentum. In fact, it should not be any surprise should management start buying the shares when they are able to from tomorrow onwards.

As it stands, the above rumours are unfounded. Also we have highlighted that the company should be posting a loss, which management has guided already since their IPO.

Despite the uncertainty in the stock market, we see current levels as very attractive.

For tomorrow, the company will release its FY2006 March results during market close at lunchtime (1230pm), followed by an analysts' briefing in the afternoon.
We will provide a further update when we are able to get further information.

Best regards
Lawrence Lye
UOB Kay Hian Research

25 May 2006


Biosensors International Group
FY2006 Results Preview

Recommendation: BUY
Price: S$1.03
Target: S$1.61

Biosensors will be releasing its results for the full year to 31 March 2006 on Friday, 26 May 2006. We expect the company to post losses of US$11.1m, with consensus estimate of US$13.7m loss. This should be in line with earlier guidance and indications from the previous quarters of accelerating expenses in clinical trials for its drug-eluting stents (DES). In addition, investments into building up its marketing and distribution infrastructure in preparation for a strong sales push in Europe and Asia also contributed to higher sales and marketing expenses. However, the key metric to watch is the continued momentum of DES sales and the imminent CE mark award for its flagship BioMatrix DES product. Current share price levels are attractive and we maintain our BUY call.

DES revenues expected to continue momentum. Since the award of the CE mark for its Axxion DES in July 2005, DES sales have been gaining momentum. Starting from a base of US$1.9m in 2QFY06, this rose 79.2% to US$3.4m in 3QFY06, and we expect DES sales to hit US$6.4m in 4QFY06. This momentum will form a strong foundation for future sales of its BioMatrix DES when it receives its CE mark, which is expected soon.

Clinical trials to push up R&D expenses. As disclosed by management, Biosensors has embarked on a number of clinical trials, one of which has a large sample size of 1,700 patients. As a result, R&D expenses are expected to rise significantly. However, in the medical technology industry, the importance of good clinical trials cannot be ignored as these can translate to overwhelming market acceptance by clinicians and a potential market leadership position within a short period of time.

Imminent CE mark award for flagship BioMatrix product. The BioMatrix DES is expected to receive its CE mark by end June 2006. With the establishment of a marketing and distribution infrastructure from the Axxion product, we expect BioMatrix to quickly penetrate the market with few obstacles. We project BioMatrix to be the main revenue driver for Biosensors from FY07 onwards.

Recommendation. There continues to be optimism and broad acceptance by clinicians who have used and tested Biosensors' Axxion and BioMatrix DES on their patients. While some investors may be concerned about the loss in FY06, we emphasise that this is already fully anticipated by the market. Reiterate BUY with a target price of S$1.61.

Best regards
Lawrence Lye
UOB Kay Hian Research

25 May 2006

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