Ends year well. Biosensors International Group (Biosensors) ended the year with its 4Q09 revenue rising 87% YoY to US$22.4m while gross profit soared 243% YoY to US$15.2m. On a full year basis, gross profit grew 3.3x to US$89.5m. The impressive performance was primarily due to sustained growth in sales of its higher margined Drug Eluting Stents (DES). Management continues to keep costs under a tight lid as that only rose 27% YoY - paltry in view of sales growth. Bottomline was in the red at US$1.1m compared with losses of US$34.6m the previous year.

Everyone is finally catching up. Recently, J&J (with its Nevo Stent) and Boston Scientific (with its acquisition of Labcoat in Jan '09) revealed forays into the biodegradable polymer DES arena. This authenticates the technology leadership of Biosensors where it will be presenting its 2-year follow-up LEADERS trial results. The J&J Nevo stent recently presented its findings but has a narrower trial indication with a much smaller patient pool while Labcoat is even farther back in the clinical trial process. As we know it, Abbott and Medtronic are still in developmental stages.

Funding for expansion. Biosensors has projected that its FY10 cash flows will be able to repay the US$45m convertible notes that are due in Nov 2009. However, doing so would leave little cash in hand to continue on its growth spurt. The company has indicated that it will explore some form of financing. Options such as more licensing agreements with larger upfronts or strategic equity investments by another corporate are possibilities. We think pure equity issues are unlikely unless its price appreciates substantially prior to its repayment.

China still important. Management iterated that it has filed for regulatory clearance for the BioMatrix in China. While it expects approval in "the near future", no timelines were given. Its 50%-owned JWMS will come in handy with its established sales network to push Biomatrix through to the clinicians quickly.

Maintain BUY. Our estimates have been refined. We are mindful that this year included licensing revenue of US$40m is likely exceptional in nature. Core product revenue growth will continue to increase at a rate of about 40%. The net result will show FY10F registering flattish total revenue but better margins will see a stronger bottomline. We are maintaining our medtech discounted model with a raised fair value of S$0.74 (prev. S$0.71). Maintain BUY.