Ambri slowly gets its act back together
When we looked at Ambri in this email on 14 November last year, at a time when the stock price was 27.5 cents, we took the view that the many problems of Ambri were fixable and that the stock was therefore cheap. The company, now in development of a fast-working emergency room diagnostic called SensiDx, had, readers will recall, run into stormy weather in late 2002, when it was scaling up its pilot plant to produce the cartridges which would hold individual SensiDX tests. It found that the plastic used for the cartridge interfered with the sensitivity of the test's membrane, affecting, among other things, the ability to store cartridges over long periods. On top of this there was a huge variation in the quality of the cartridges coming off the prototype production line. Ambri stock, which had received a reasonably good reception when the technology was spun out from Pacific Dunlop in mid-2001, crashed from $1.33 level of 15 November 2002 to eventually bottom at 21.5 cents a year ago tomorrow. We argued last November that Ambri's scientific team had been with the technology long enough to find ways around the technical hurdles, while we also felt that the new management team under Jonathan Wright was capable enough to take the company beyond the 'problem fixing stage' and on to commercial success. The 15 January announcement that two American companies, Dow Corning and Genencor, would be funding a couple of Ambri projects to improve the quality of the membranes and the sensors inside the SensiDx cartridges also suggested that Ambri's partners were on the case as well, which in this analyst's view was another comfort factor. This week we received some more good news from Ambri - that it was now able to obtain 75 SensiDx cartridges a day from its pilot-scale production plant. This meant that a fourth box out of a total of seven could now be ticked with regard to whether or not Ambri is on track to achieving a Commercially Viable Technology (CVT) by next month. The issues for Ambri in terms of achieving CVT could be summarised by the acronym RSS, short for Reproducibility, Sensitivity and Stability. The new cartridges needed to get able to
When your company's technology development program gets into trouble it pays to have big brothers like the above.
get the same result every time when analysing a sample. They needed to be able to detect low levels of the analyte being measured. And they needed to be able to sit on the shelf for a long time and not degrade in the process. Last November, when Ambri was only getting 10 cartridges a day from its set-up and only had on order the necessary machinery to scale up to 75 a day, its production guys were hard at work understanding would be required in terms of process control to get the RSS it needed on the bigger line. In other words, it was doing the kind of stuff any manufacturer needs to do well - getting a culture of quality control in place. This week's announcement by Ambri was simply to say that the 75-a-day line was now in place. It didn't mean that Ambri's membrane problems were over, since the company still has to work on the newly installed production line to make sure the cartridges meet its RSS standards. This, however, is a quality control issue, where the engineers in effect take the output from the new line, test that output, and then work back through the production process, if necessary all the way to the inputs, to identify what needs adjusting if the product isn't coming out as required. It doesn't seem to this analyst like Ambri has a 'scientific' issue that can only be solved through basic research in a laboratory environment. It is for this reason that we're still confident that Ambri will meet its May 2004 deadline, although one suspects that Ambri's share price will be a little weak in the run-up to the June/July 2004 release to the market of various reports now being generated on CVT. Such weakness should be regarded in this analyst's opinion as a buying opportunity. Ambri remains a Speculative Buy for Knowledgeable Profession Investors. Back to top
(Click here to view a 3-month chart of Ambri)
That's it for another edition of Australian Biotechnology Buzz. Till next time...
Stay bullish.
Stuart Roberts,
Biotechnology Analyst,
SOUTHERN CROSS EQUITIES
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