Pharmaceutical company Chemeq may have set two unlikely records over the past fortnight, with the most announcements to the Australian Stock Exchange and one of the biggest share price falls.
The company issued no less than eight market updates in the space of seven working days but still failed to win investor support.
Its shares, nudging $6 at the start of June, were down to $4.80 at the start of August and are currently around $3.70.
The problem for the company is that announcements about production breakthroughs at its newly built Rockingham factory have been overshadowed by adverse news on the cost and sales front.
Chemeq disclosed last week that the cost of its manufacturing facility had blown out to $52 million, compared with a previous estimate of $35 million.
Remarkably, the company claimed “the infrastructure was delivered on time and on budget”.
This claim was based on a cute distinction between building costs, which were on budget, and equipment costs, which were nearly three times above budget.
Expansion plans announced by the company make it almost inevitable that Chemeq will need to raise substantial additional funds from investors.
Having just produced its first samples of polymeric antimicrobial – a new drug designed to replace the use of antibiotics in pigs and chicken – the company is already proceeding with an expansion of capacity.
The current factory has a design capacity of 20 tonnes a year, and the upgrade is designed to lift capacity to 50t at a budgeted cost of $21.9 million.
This is well above Chemeq’s current financial resources, which comprise cash reserves of $6.3 million and a newly established “$5 million borrowing facility with a major bank”.
The company also says initial design work has been undertaken for a second factory with a capacity of up to 400t, which would cost an estimated $160 million.
In the meantime, the company is yet to announce any firm sales orders.
In fact, it will be unable to sell any product until at least October, when its factory is due to be audited by the Australian Pesticides and Veterinary Medicines Authority.
Its single previously announced sales order expired on June 30 and since then Chemeq has only reported conditional agreements with potential customers and distributors.
Executive chairman Graham Melrose has maintained his usual optimism, stating: “The company has made excellent progress in the past 12 months and is ready at the starting blocks of commercialisation.
“There is a critical worldwide gap for a market-ready replacement to antibiotics due to the emergence of antibiotic resistant bacteria and new regulatory controls restricting the use of antibiotics in animal food production,” he said.
Dr Melrose insists the global market for its drug is worth nearly $9 billion, though the company is targeting medium-term opportunities it says are worth $3.5 billion.
However, the only regulatory approvals it has obtained are in South Africa and New Zealand for use in pigs.
