BIOSENSORS International Group swung to a net profit of US$379,000 for its fourth quarter ended March 31, 2009, from a US$20.7 million net loss for the year-ago corresponding quarter. But the turnaround was not sufficient to lift it out of the red for the full year. Total revenue for Q4 surged 87 per cent to US$22.4 million, largely boosted by sales of its flagship drug eluting stent (DES) BioMatrix, which obtained the European CE mark in January last year. DES products account for US$10.7 million of its total revenue in Q4.

Biosensors also benefited from a US$2.8 million income arising from its share of profit in a jointly controlled Chinese company JW Medical. The performance in the quarter would have been better, if not for a US$3.7 million foreign exchange loss. For the whole year, the group slashed its loss to US$1.1 million, from US$31.6 million for FY2008. Total revenue surged to US$119 million from US$44.3 million. Of that, US$45 million came from licensing and royalties.

Operating expenses for the year went up 27 per cent to US$73.3 million, mainly due to rising sales and marketing costs required for the launch of BioMatrix in Asia and Europe. It was partially offset by a 22 per cent fall in R&D expenses to US$20.9 million. The group was also dragged down by a US$9.98 million tax cost, which more than wiped out its profit before tax of US$8.86 million.

Biosensors said this was because of the tax expenses related to the US$40 million receipt from a licensee and royalties revenue being recognised. The results statement revealed an unsecured debt of US$46.8 million. This arose from a US$30 million convertible bond issued in 2006 and due in November this year.

FY09 revenues of US$119.0m are marginally ahead of our estimate of US$117.0m. BioMatrix revenues were down 3% QoQ due to exchange rate fluctuations even though sales volume increased. Full year net loss was US$1.1m, better than our estimate of a US$11.2m loss, due to better gross margins, lower R&D expenses, as well as exceptional write-back from restructuring in USA and Netherlands (US$1.7m) and tax credits (US$1.5m) from withholding taxes paid.

Two subgroup analyses of the LEADERS trial presented at EuroPCR in Spain (May 09) continued to demonstrate equal safety and efficacy to J&J’s Cypher stent, this time in complex patient populations. Strong clinical data and growing industry acceptance of biodegradable polymer drug-eluting stents (DES) are key positives for Biosensors, in our view.

The company reiterated its product revenue guidance for FY10 (US$90m-100m excluding licensing). We believe Biosensors will turn mildly profitable in FY10 as BioMatrix revenues continue to ramp up and margins improve further. In FY09, the company secured regulatory approvals for BioMatrix in Brazil, India, Egypt, Mexico and Venezuela. We expect the company to secure regulatory approval for China in FY10.

We base our price target on DCF, assuming 11% COE and 3% terminal growth.