Rockeby bets on bird flu tests for turnaround

ASX-listed, Singapore-based Rockeby Biomed (ASX:RBY) has said it might break even in the year ending June 2007, thanks to its new bird flu test kits.

Surging demand for the new rapid test kit, which detects the deadly H5N1 virus in both humans and birds in 10 minutes, would be key to turning around Rockeby's financial results, CEO Tan Sze Wee told Reuters in an interview.

Scientists fear the bird flu virus could mutate to a form that's easily transmitted between humans, sparking a flu pandemic that could kill millions of people and hit economic growth. More than 70 people have died from bird flu in Asia, where farmers often live close to domestic fowl such as ducks, which show no obvious symptoms of the disease, and chickens.

"Demand for the bird flu kits has been much larger than we expected. We are already in our third production run right now," Tan said. Most of the demand has come from governments who want to build up stocks, or from commercial poultry farmers, he said.

Rockeby is pinning hopes for an earnings recovery on the bird flu test kits, which were developed and manufactured by privately held Thailand Pacific Biotech.

"With the bird flu test sales, we expect the figures will constantly be guided upwards," said Tan, adding that an expected net loss of AUD$2.5 million in its current fiscal year could be reduced if it secures big tenders from governments in South Korea, Saudi Arabia and Vietnam for the kits.

Rockeby made a net loss of $4.7 million in the fiscal year ending June 2005 on sales of $140,000, narrowing from a net loss of $5.3 million in the previous year. The company had forecast sales of roughly $500,000 for the current fiscal year before the November launch of its bird flu test kit. But that sales figure could more than double this year if it clinches major government orders for the kits, Tan said.

The company's shareholders have had a rocky ride. The company, which also has the rights in Singapore to sell test kits to detect HIV in saliva, sold its shares at $0.20 each to raise a total of $4 million in 2003 when it listed in Australia. The share price peaked in January 2004 at $0.25, and collapsed to a low of just below $0.01 in September.

Since the launch of the bird flu test kits last month, Rockeby's shares have jumped to about $0.04, giving the company a market valuation of A$14.1 million.

Rockeby has the marketing rights for the bird-flu test kits for the next five years for Asia, Europe, the Middle East, South Africa and the Americas, excluding the United States. It sold its first batch of bird flu test kits earlier this month to Singapore, North Korea, South Korea, Japan, Romania, Austria, South Africa, the Netherlands and the United Kingdom, and will send a second batch by Christmas. It has a distribution deal with a Singapore-based firm that will sell the tests in Hong Kong and across South-East Asia. Tan said demand is strong in the Middle East ahead of next month's haj, an annual pilgrimage when Muslims travel to Mecca.

"The money is on the table that human-to-human transmission of bird flu will happen. The question is when," Tan said.

But the World Health Organisation's top bird flu expert in Asia told Reuters earlier this month that he had some concerns about the use of commercial test kits. Rapid tests cannot always differentiate between the sub-types of influenza, are less sensitive than laboratory tests and still too expensive, he said.

Tan said production of the bird-flu test kits could reach maximum capacity of some 60,000 per month in the first quarter of 2006 if it wins big full-year government orders. Vietnam's tender alone is for 500,000 test kits a year, or 41,700 kits per month.

The plant in Thailand could eventually produce at least 10 million tests a year, or some 833,333 a month, Tan said.

Once its financials are in order, Rockeby is "seriously considering" a secondary listing in Singapore, where half of its shareholders are based, Tan said.