Aussie biotechs should jump on soft US market: Nasdaq VP

The soft IPO market in the US could be advantageous to Australian biotech companies seeking to raise their profile in the US, Nasdaq Asia-Pacific VP Patrick Sutch told an audience of biotech CEOs in Melbourne today.

"It's a good idea to get in front of analysts at the moment, as the IPO market is still very down and they are not too busy," Sutch told attendees at a breakfast forum sponsored by AusBiotech's Victorian branch and the BioMelbourne Network.

While the IPO market was predicted to open again in the next 12 to 18 months, he noted that investment banks could often provide access to significant private equity.

Australian biotech companies typically "listed far too early, and raised far too little money," he said, resulting in many ASX-listed companies being undervalued.

"Instead of begging for half a million dollars here and there, go and find someone willing to put in five million," he said.

Sutch said that it was very important for companies hoping to raise money in the US to tell their story to US-based analysts and investment banks.

"I don't think US investors care where a company comes from as long as you have a story that helps them to increase their capital," he said. Three or four success stories from Australia would bring US funding "flowing in", Sutch said.

But Australian biotech markets planning to enter the US market should think carefully about how and when they entered the US market, according to Sutch. He recommended that ASX-listed companies use the level 2 American Depositary Receipt (ADR) listing process to obtain a fully registered listing on Nasdaq rather than the level 1 listing, which only allows over-the-counter trading of shares, and is not, according to Sutch, a fully registered listing.

"It costs a company nothing to do a level 1 listing but in my opinion it doesn't add any value to a company at all," he said, adding that the cost of a level 2 listing was still substantially cheaper than the traditional IPO process and was often paid for by investment banks.

Sutch also said that companies contemplating a NASDAQ listing had to be prepared to commit to the US market, putting effort into investor relations and giving the market time.

"It's an ongoing commitment, you can't just take your money and run," he said.

About six biotech companies in Australia are currently working on level 2 ADR listings, Sutch said, and several other companies have already achieved listing via level 2 ADRs, including Prana Biotechnology and Novogen.