Capital markets still healthy, say analysts

Analysts say that the IPO market for biotech companies in Australia is healthy right now, and they don't foresee any problems in the near future.

"It seems to have picked up a bit," said eG Capital's Alison Coutts. "It hasn't been bad recently, but companies need to watch out for the aftermarket."

Mark Pachacz, analyst and co-editor of BioShares, said that he believes Australia has the best biotech market in the world right now.

"There is a surprising resilience in the markets," he said. "Last financial year we had 25 floats and there are eight or nine companies that have either listed this financial year or that are going to list."

Pachacz said that the ASX is increasingly attractive to companies in other countries, with a number of Singapore-based companies (Rockeby Biomed, Cythera) opting to list on the Australian market, in addition to the recent listing of UK-based company Bone Medical through the reverse takeover of a Perth-based shell.

Of the ones that have listed already, Living Cell Technologies (ASX: LCT) and Somnomed (ASX: SOM) have made strong starts, with LCT up almost 40 per cent to $AUD0.32 after floating at $0.23, and Somnomed ahead by 10 per cent over its debut price of $0.40 -- itself a substantial increase over the issue price of $0.30.

And some of last year's floats including Pharmaxis (ASX: PXS) and Select Vaccines (ASX: SLT) are picking up steam.

"The capital raising market is healthy," said Stuart Roberts, biotech analyst for Southern Cross Equities. "There was a surprising amount raised in the 2003-2004 financial year. [It signals] a shift to willingness to invest larger amounts of money into the sector."

Roberts said the bear market evident in the sector over the last few months appeared to have bottomed out.

"As long as the general market remains healthy, the sector should have a good Christmas," he said.

While the IPO rush seen this time last year as the market caught up with pent up demand has slowed to a steady trickle, there are no signs that the window has closed.

"There are more on the horizon -- we have a pipeline of IPOs for the next 6-12 months at the moment," said Coutts.

One confirmed upcoming IPO is Perth-based biotech Phylogica, which is expected to lodge its prospectus in the next couple of weeks in preparation for an ASX listing in November. The company is commercialising technology developed through a collaboration between Perth's Telethon Institute of Child Health Research and the Fox Chase Cancer Centre in Philadelphia for proteomics-based drug discovery.

Upcoming floats

The latest batch of floats is set to go ahead next week, with Acrux, Sunshine Heart and Proteome Systems all scheduled to list before the end of the month.

Analysts say that companies will need to keep up the good news for a healthy aftermarket performance.

Sunshine Heart is first off the blocks with its expected float on September 28, after successfully raising $15 million in its IPO.

Next in line is Acrux, which according to CFO Jon Pilcher was due to close its IPO last Friday, after raising at least $30 million. The IPO, which was underwritten by Goldman Sachs JBWere and Wilson HTM, had the option to raise a further $8.3 million in oversubscriptions. The list date for the company is scheduled for September 29.

And Proteome Systems is still expected to list on September 30, despite holding its IPO open past the original close date of September 13. A spokesperson for the company said the underwritten $20 million placement was "effectively closed".