Taking A Chance On Idea That Refused To Go Away

The Age

Tuesday November 26, 2002

Fleur Leyden

Chemeq boss Graham Melrose says he barely has time these days to reflect on how a 25-year-old idea and a homemade laboratory formed the basis of a $270 million pharmaceutical company.

The Perth-based outfit, which makes an alternative to antibiotics for pig and poultry farming, has grown rapidly since it was floated three years ago.

The shares have also risen dramatically - from 22 cents in April 1999 to a high of $4.05 on November 15.

With returns of 525 per cent in 2001-02, Chemeq was the second-best performing company in the All Ordinaries Index last financial year.

In the year to date, it ranks as the fourth-best contender in the index, despite being yet to make a profit (the company recorded a $3.5 million loss for 2002).

But pigs, chickens and share prices aside, what is perhaps most intriguing about Chemeq is its humble beginnings 12 years ago in an iron shed.

After a successful research and academic career that included stints at Johnson & Johnson and chemical company ICI, Dr Melrose decided it was time to pursue an idea he had shelved 13 years earlier.

He mortgaged his home and sold his beach house and Porsche. Family and friends came on board with extra funds, and close friend Jim Parise - who is a major Chemeq shareholder - built the company's first lab in the shed that had been used for making boats.

``Jim and his mates grabbed doors from renovation sites and made desk tops out of them," Dr Melrose said. ``They salvaged taps and sinks and things from residue from Royal Perth Hospital and he made quite a nice little laboratory for me."

By 1999 the technology and market environment had improved and Chemeq floated in August that year. The company's latest share price advance (from $3.50 to $3.95 on November 15) was largely due to it securing $1 million worth of purchase orders in South Africa, for its drug CHEMEQ (RTM) polymeric antimicrobial.

The drug's attraction is that it attacks infections in the upper intestine of the animal and is neutralised before leaving the carcass. Unlike regular antibiotics, which can become ineffective to ``superbugs", the antimicrobial achieved a 100 per cent success rate in tests.

The drug has obtained regulatory approval in New Zealand and South Africa and is at various stages of the approval process for key markets in the United States, Australia, Europe and Asia. If it is cleared, Chemeq will be available to service worldwide pig and poultry markets estimated to be worth a combined $9 billion.

And in a step up from the iron shed, the company hopes to have a $25 million factory running by the first half of next year.

Chemeq shares closed nine cents lower yesterday at $3.66.

© 2002 The Age

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