Aust biotech posts three-year performance low: PwC

A new report on ASX-listed life sciences companies by PricewaterhouseCoopers shows that the sector has posted its worst quarterly performance in three years.

According to the PwC Life Sciences Index -- a composite of 104 ASX-listed life science companies published in the quarterly PricewaterhouseCoopers Bioforum report released today -- the Australian life sciences sector declined by 13.8 per cent. This is in line with the listed US biotech sector, with the Nasdaq biotech index posting a decline of 16.4 per cent.

"The answer is not to leave Australia and go to the US," said PwC director Karen Dado. "A lot of companies think 'we have to get on the Nasdaq', and it's interesting to see the Nasdaq actually performing worse [than the ASX].

"It's just because these are risky stocks, they're the first ones to be dumped when the market turns down."

However, when the PwC Life Sciences Index includes major stocks such as CSL, ResMed and Cochlear, life science companies show a 9.8 per cent gain over the quarter. "These really big stocks seem to be able to weather the storm and clearly the little ones can't," said Dado.

In what may appear to be positive news for the industry, the report also showed that the number of IPOs increased, from two companies raising AUD$27 million in the previous quarter, compared with five companies raising a total of $66 million over the third quarter of fiscal 2005, ended March 31, the period covered by the latest Bioforum.

However, investors in newly listed biotech companies won't be celebrating yet. The average share price return on IPOs one month after listing was the lowest in over two years, at 23.7 per cent and only two of the IPOs were fully subscribed.

Secondary financing also took a beating, with a downturn in the number of companies and amount raised declining to levels not seen for over a year. Nineteen companies raised $27 million, compared with 33 companies raising $171 million in the previous quarter.

"There's always been a lot of criticism in the sector that companies [go to] IPO too early," said Dado. "But we have been arguing for the last couple of quarters that it's a route to financing. [When] you start to see that secondary financing underperformance, you have to ask the question how viable the sector is, going forward."

The US also saw a similar decline in fund-raising through IPOs, secondary raisings and venture capital investing.

According to the Bioforum report, top performers in the Australian sector included Pharmaxis (ASX:PXS), Regenera (ASX:RGA), Ambri (ASX:ABI), GroPep (ASX:GRO) and Cryosite (ASX:CTE) all of which showed a share price return over the quarter in excess of 25 per cent, with the top three companies posting returns of over 40 per cent.

Among the worst performers were Benitec (ASX:BLT), Panbio (ASX:PBO), Proteome Systems (ASX:PXL), IMD Group (ASX:IML) and Metabolic Pharmaceuticals (ASX:MBP) all showing a loss of share price return of 50 per cent or greater.