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Weight loss company fading

WEIGHT loss took on new meaning last week when occasional market darling and would-be vendor of an anti-obesity pill Metabolic Pharmaceuticals, staged its own version of the amazing shrinking company.

Mid-week, as excitement grew over a drug known as AOD9604, the stock hit $1.51.

By the close it was $1.13, a miraculous fall equivalent to “weight loss” of $82 million in market capitalisation.

For veteran Perth stockbroker and true believer in Metabolic, Ray Porter, the rise and fall must have been quite exciting.

Ray, one of the last true gentlemen of stockbroking, has been in love with the stock for more years than Briefcase cares to remember, though goodness knows why because he hardly needs to lose much weight himself – except, perhaps that scruffy grey beard he’s sporting these days.

Ray is one of those city types who forms an opinion and sticks to it unlike some younger brokers who rush from hot tip to hot tip like a tart at an Eagles party.

He has been steadily accumulating Metabolic shares for years, and suggesting the same to any client at Smith Barney who listens.

Last week’s remarkable trading, when Metabolic opened at $1.23, rocketed to its all-time high of $1.51 on Tuesday, dropped to a low of $1.06 on Thursday, and then closed the week at $1.13 in heavy turnover, is a sure sign that lots of hot money is circulating around the stock which might be onto a medical breakthrough of international significance.

No-one, especially the people associated with Briefcase, need reminding of the obesity problem that dogs the western world.

Diet pills don’t work, exercise is boring and a change of lifestyle too damned hard. AOD9604, if it works, could be the key to unlock a few million swollen waistlines.

Unlike most other proposed obesity treatments, AOD9604 (please, will someone come up with a better name) fiddles with the human growth hormone we all have inside us.

In effect, it reduces body fat by mimicking natural hormone regulation.

Work on the drug, developed largely by Dr Frank Ng in association with Melbourne’s Monash University, has reached an advanced stage with a 300-patient Phase 2B human clinical trial kicking off in October.

The cash burn at this stage of a drug development program becomes quite ferocious.

Last year Metabolic ate its way through $8 million.

The exercise of options has replenished the kitty to the tune of $14 million, but to go to a full human trial will cost zillions and could be the time the company calls in a “big pharma” partner.

In the next year or so one of two things will happen.

AOD9604 will fail, and Metabolic will do what its drug can’t (shrink dramatically), or it will succeed and true believers like Ray Porter will grow fat – in the bank balance department.

 

LET the games begin; famous opening words at the Olympics, and equally applicable to what is expected on the share register of Burswood casino in the weeks after the annual meeting on October 23.

The meeting, according to Hoyle (or State law in this case), is expected to be the trigger point for the start of takeover action at Burswood as it represents the formal end (shareholders willing) to the 10 per cent ceiling imposed on any one investor.

The share price of Burswood has been doing well in the preliminary jockeying for a seat at the expected carve-up.

Over the past 12 months it has moved from a low of 65 cents to a high of 91 cents set last Friday, the day after chief executive, John Schaap, revealed a 46 per cent fall in profit to $11 million while blaming, at one point, the smoking ban at the casino for killing off two year’s of domestic growth in business – an odd comment given that his business is not growing.

Whatever the profit result, it’s the share price action that is the most fun.

Hitting a 52-week high in the week you announce a thumping profit fall speaks volumes and signals that a lot of eager-beavers are not waiting for the starter’s pistol.

Jack Bendat, Kerry Packer, Bill Wyllie and a few other rich notables, are known to be circling Burswood though, oddly enough, for different reasons.

Kerry wants it as a trophy to put alongside his Crown Casino in Melbourne. Jack and Bill want Burswood for the property it controls, which brings a wry smile to those at Briefcase.

Is it really only yesterday that Burswood was a smoking, smelly pile of rubbish, a tip for the garbage collected from Perth’s back lanes. Yep, same place that now attracts the rich and famous as it once attracted blowflies. There’s a message in there somewhere!

 

MORALITY, as we all know, has nothing whatsoever to do with business but, even Briefcase, which is as amoral as the next slithering thing in the business world, draws the line at the money made from trading in companies that make things designed to kill people, such as Metal Storm with its “highly efficient” hand gun.

Yes, before management writes in, it is acknowledged that the hand-gun designed by Metal Storm has some advanced safety features.

However, there is no escaping the fact that a hand-gun has just one purpose in life, and that is death.

This makes Briefcase wonder about his fellow men (and women) who traded so heavily in Metal Storm last Friday, pushing the stock up from 42.5 cents to 60 cents and boosting the company’s market capitalisation from $186 million to $263 million which, if you have a calculator handy, is a profit of $77 million on the day, made entirely on the promise of a device that will kill, maim and destroy many lives when it goes into production.

The advice from Briefcase is that if you must toss morality out the window when investing, stick to booze and fags. At least the victims die more slowly.

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