The Straw Man.

The Independent Expert, in trying to justify his selection of EBIT multiple used in his valuation, makes many statements that are intended to persuade us that Cellestis should be valued at the low end of every range that he is able to manufacture.

There are many examples of this but let's just look at a single one:

"Whilst the overall number of people infected with latent tuberculosis is significant, the actual market for latent tuberculosis testing is relatively small as the tests are more common in developed countries for certain screening purposes."

This is "straw man" logic. Here he sets it up by admitting that latent tuberculosis is significant on a worldwide basis and then uses that to enable him to say that the QFT addressable market is relatively small.

Given that Cellestis has never built its business or our expectations on achieving sales of any note outside the developed world this "relativity" is factually irrelevant. It was really just done to allow him to include the word "small" and to add to the picture that he is trying to paint of Cellestis being a company with a poor future. It would be just as (ir)relevant to compare the market for latent TB testing with the market for iPhones.

The potential market for latent TB testing in the markets that Cellestis is addressing is estimated at 45m tests p.a. Beginning and end of story.

I and others have actually queried an acknowledged expert as to whether this is a small market in the scheme of things. We have been told that this number of diagnostics is considered huge in the world of diagnostics and that any diagnostic company would love to have a market like that.

But, don't take my word for it. Ask Dr. Radford*.

*An ideal opportunity to do that would be at the webcast that they are planning for Friday. I understand that due to a "typo" on the leaflet distributed by Cellestis there is some confusion about the actual time of the webcast. I have now had it officially confirmed that the webcast is at 10am AEST Friday July 8th.