Tuesday, October 9, 2012

Special Situation Ideas for week of 8-October-2012

I have come across these with some decent catalysts while reading various publications. Might be worthwhile for readers to look into:

PRXL - Potential Long – This s a mid-cap company which is into clinical research. Large number of firms have become budget conscious. Gets 75% revenue from clinical trials; is one of the two or three strategic partners to drugmakers such as Eli Lilly, Pfizer, Merck and Glaxo. Most of big drug makers face major patent expiration. Parexel earned lot of revenue from late stage clinical trial studies with phase 3 & 4 constituting the bulk of the revenue. Additionally, PRXL also offers consulting services and clinical trial technology. Firm also has global network, which is a huge asset with 70 locations in 51 countries. Also provide advance technology tools including medical imaging to facilititate clinical development process. The industry estimates that the firm will see growth in revenue and earnings of 25% + over the next 2 years. Also recently launched unit to work with mid-size bio pharma companies, which constitute most of the ongoing development programs.                                   

EXASPotential Long -  Has developed a sophisticated colon-cancer screening test based on DNA markers. EXAS hopes that its self-administered stool test can detect 85% of cancers and more than half of pre-cancerous growths, with a false-positive rate of only 10%, much better than existing test, which detects an estimated 65% of cancers and fewer than 25% of precancerous growths. Trial results, expected in early 2013, if favorable, FDA approval within a year - 2014. Revenue can $500M - $1B by the end of this decade. EXAS is trying to arrange for Medicare and private insurers to pay for it. Potential takeover takeover target by a larger health-care outfit. Centers for Medicare and Medicaid Services, agree to pay for the tests soon after a favorable FDA ruling. 80M Americans 50 or older. If 30% of them take the test every three years, thats 8M tests a year at perhaps $300 a test, translating to $1.2B in revenue or almost $4 a share, but unlikely before 2020.                                  

A note on playing China – Lot of people is still invested in Chinese real estate. For those who don’t know, there has been a decent slowdown in numbers and the returns might not be phenomenal to say the least. However, I believe, that over he longer and medium term, one of the better play to play china is the Chinese investment in infrastructure and one of the beneficiaries of this will be the firms that are in the transportation sector. And I believe one of the best was to play transportation is Chinese Railway sector. Those who can invest in China, I have come across few names – CSR Corp (Largest producer of locomotives. Also produces wagons, carriages, ect.  Another is China Railway Construction Corp (largest railway construction company). Zhuzhou CSR Times Electric (supplier of train borne electrical systems and components). Other names being, Daqin Railways and Guangshen Railways.