Renewed interest in biotech stocks
Date : 12/11/2006
Reporter: Kathy Swan
ALAN KOHLER: Over the past five years, resources stocks have performed five times better than those in the biotech sector, but lately there has been a spurt on the Nasdaq biotech index in the US, which has rekindled some interest in the sector here, and, given Australian biotech boffins, some confidence that investors might be interested in backing their new generation of drugs. Kathy Swan reports.
KATHY SWAN: Any humble investor could help find a cure for cancer or AIDS or any number of life threatening illnesses and chronic conditions by investing in a biotechnology company with good ideas and good management. But interest in the speculative world of biotech stocks has been lacking for a couple of years or so, thanks largely to the resources boom.
DAVID BLAKE: We think the sector's reached a trough and it looks set to be on something of a rebound, though the thing about that is that we don't think that the rising tide we see coming in biotech will lift all boats.
KATHY SWAN: Industry analyst David Blake of Bioshares Australia says, when enough interest returns to biotech stocks, there will be movement on the Australian Stock Exchange.
DAVID BLAKE: Biotech goes through funding cycles, and certainly there is, for new entrants, what's called the IPO window. The IPO - we have signs that the IPO window may be about to open, and certainly we see a lot of the IPO entrants waiting behind that window, and it's not just two or three companies, it may be as many as 14, 15, 16, 17 companies in the life sciences area that would be looking to list.
KATHY SWAN: There are already more than 120 biotech firms on the ASX, and the trick is picking a good company and then waiting.
DAVID BLAKE: Biotech doesn't happen by Friday. It happens over a number of, the value creation happens progressively over a number of years.
KATHY SWAN: Oddly enough, success is no guarantee of market recognition.
JACKIE FAIRLEY: VivaGel is what's called a topical microbicide. "Microbicide" simply means something which inactivates microbes. In our case, it's viruses.
KATHY SWAN: Australian bio company Starpharmas's anti-HIV anti-herpes gel has won more recognition and funding in the United States than it has here. CEO Jackie Fairley says VivaGel has won two grants from the National Institute of Health in the US, one alone is worth $US20 million.
JACKIE FAIRLEY: The $20 million is actually a very large grant, and particularly unusual that it's granted to an Australian company. Many of the recipients of grants would typically be US based.
KATHY SWAN: Starpharma is a nanotechnology, specialising in manipulating very, very small matter.
DAVID BLAKE: They're developing the very first, what's called, nano medicine, and that will be one that will, and has already, generated headlines around the world.
KATHY SWAN: VivaGel, for example, is basically synthetic molecules, developed by Starpharma to specifically target HIV and herpes virus molecules. That technology alone is enough to make Starpharma an attractive takeover target, and it's recently enhanced its assets further.
JACKIE FAIRLEY: We announced in October, just a few weeks ago, in fact, the acquisition of the US company, DNT, Dendritic Nano Technologies, Limited. Both Starpharma and the Dow Chemical Company, based in Michigan in the US, were major shareholders in DNT.
DAVID BLAKE: Now, there is a very comprehensive intellectual portfolio contained within Starpharma. That in itself could make it a very attractive asset to a pharma company who wants complete ownership.
KATHY SWAN: Another Australian company, Perth-based Phylogica, has heavyweight international backing for discovering and developing a new anti-inflammatory for stroke, rheumatoid arthritis and burns.
STEWART WASHER: In terms of international customers and engaging with international people, like Johnson & Johnson, Opsona and others, it's absolutely critical.
KATHY SWAN: Phylogica is a drug discovery company founded by Dr Paul Watt, who used ancient bacteria that's still around today, to build a library of biodiverse micro-organism shapes to create new specific treatments.
STEWART WASHER: What we have is a platform for building, you know, drugs too but people's diseases. People are coming to us and saying "Make us a drug," and contracting us to do that. So you will see quite a few of those deals come in over the next six to 12 months.
DAVID BLAKE: They have a useful technology at its early stages, but they've already generated some interest from a large pharmaceutical company who want to test it and see whether it has some legs. That's quite a positive sign for investors.
KATHY SWAN: Biotech companies also need a little bit of financial genius to help stay ahead of the high cash burn of research and development, with less than half the companies listed on the ASX generating revenue. For most, a major international backer is crucial, but not for one company, Pharmaxis.
ALAN ROBERTSON: That's a philosophy that runs through our company, the molecule-to-market approach.
KATHY SWAN: Pharmaxis CEO Alan Robertson says the Sydney-based company is making its own deals internationally to market products targeting airway diseases from asthma to cystic fibrosis.
ALAN ROBERTSON: We're building an international business here that ... export, manufacturing and exporting product worldwide. Aridol is the first product, Bronchitol is coming up very fast behind. We have additional products in our pipeline.
KATHY SWAN: Aridol is an airways inflammation test, to identify patients with asthma, how badly they have it and what treatment they need.
Swedish health officials ran their own tests on Aridol and approved it, which will open more doors in Europe and beyond.
ALAN ROBERTSON: Our strategy at this point is to work with specialist small distributors worldwide for Aridol.
KATHY SWAN: With about 50 million asthma sufferers globally, Aridol's got great potential. But Pharmaxis's next hope, Bronchitol, may be even greater, as it will improve the lot of cystic fibrosis sufferers, by allowing lungs to clear out mucous.
ALAN ROBERTSON: The patients are already demonstrating that they want the product, and our intent is to sell and market Bronchitol ourselves, including in the United States.
KATHY SWAN: Pharmaxis, Starpharma and Phylogica are doing well, but success can be hard to come by in biotech stocks.
DAVID BLAKE: Give yourself 12 months. Do some learning, find out about things. Don't give up if it all doesn't go well for you straightaway. And it will take time.
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Please note: Transcripts on this website are created by an independent transcription service. The ABC does not warrant the accuracy of the transcripts.
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There has been rekindled interest in the biotech sector in Australia.
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