Food scares could help Celsis to pass the test
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Your support makes all the difference.In the somewhat warped relationship between finance and biotechnology, some companies that in any other field would be classified as no-hoper dogs become stars on the back of well-crafted hyperbole and optimism, writes Richard Halstead. Others fall through the cracks, possibly unfairly.
Such is the case with Celsis International, a firm which does not have a wonder drug per se, but a wonder diagnosis mechanism for finding unwanted microbes in food and household products. The test, which replaces the week-long agar plate method, uses the bioluminescence enzyme found in fireflies to illuminate - and therefore identify - the offending bacteria.
The test takes 24 hours and the one-use kits cost about pounds 1.20 each. Celsis owns the rights to the synthetic enzyme, and therefore has the market to itself, but there are other competing methods of microbe detection in the pipeline. However, unlike the competition's, Celsis's kits are already on the market, and the company expects sales to climb significantly from this year's anticipated pounds 11m and is aiming to break into profit to the tune of pounds 3m in 1998, giving it a cashflow multiple of 28.
Celsis's shares, floated at 100p in July 1993, have gone on a rollercoaster ride over the years and have finally settled at 107p now that there is more certainty about its main product.
In light of food poisoning scares and the rumours flying around the market this week that it was preparing a positive announcement for next week, possibly along the lines of its already announced deals to supply kits to Unilever and Colgate-Palmolive, this may be the time to take advantage of the shares' current unfashionable status.
The down side to the testing kits remains the in-built conservatism and cost-consciousness of the food and household product industries, which are reluctant to abandon an inefficient, only marginally reliable, but very familiar detection method. But analysts following the stock at Merrill Lynch and Panmure Gordon believe that the trickle of market acceptance of the product will soon turn into a flood, abetted by food scares and initiatives such as Professor Pennington's recent report on meat hygiene in the aftermath of the Lanarkshire E.coli outbreak.
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