Life science stocks decline in last quarter

The value of the Australian life science sector declined 3.5 per cent during the fourth quarter, ending 30 June 2006, according to the latest BioForum report from PricewaterhouseCoopers (PwC).

The decline is in line with the ASX All Ordinaries, which showed negative growth of 3.2 per cent.

Early stage life science stocks - removing the three biotech giants CSL, Cochlear and ResMed from the analysis - declined 14.6 per cent over the quarter, and the NASDAQ Biotech Index declined 14.3 per cent over the same period.

"The market is currently risk averse and the shift away from small life science stocks continues," Andrew Sneddon, life science partner with PwC, said. "However, secondary capital raisings were strong in this quarter, and M&A activity was healthy.

"Partly because there are no initial public offerings (IPOs) on the horizon, the good news stories of the sector are not being heard, even though important milestones are being achieved. The three phase III clinical trials reported in the biotechnology sub-sector are a good example of the sector's continuing progress."

The medical devices sub-sector (excluding Cochlear and ResMed) was unchanged compared to the previous quarter and the biotechnology and pharmaceutical sub-sector (excluding CSL) fell 14.2 per cent.

For the second consecutive quarter there were no initial public offerings. Secondary financing is trending up again after a decline in the third quarter (ended 31 March). 26 companies raised a total of $89 million in quarter four (ended 30 June), compared with the $44 million 15 companies raised in quarter three.

Partnerships formed and deals done

Australian life science companies formed 16 partnerships in the quarter ended June 30 compared with 35 the previous quarter. Notably NeuroDiscovery (NDL) began four collaborations, directly and indirectly, two of which are to develop its drug NSL-105, which is to be used to treat various painful conditions.

There were 19 merger and acquisition or divestment deals during the quarter ended June 30 compared with five the previous quarter. Peptech announcing its acquisition of Promics for $5 million and a conditional extra $7 million payment was of particular note.

Clinical trial results and regulatory activity

In the biotechnology sub-sector 58 results were reported; seven pre-clinical, three phase I, 25 phase II, three phase III and 20 other trial results. This compares to 40 results in the previous quarter. In the medical devices sub-sector seven favourable results were reported, compared to 11 the previous quarter. Notably Peplin obtained positive results from both its phase IIa trials of PEP005 Topical in actinic keratosis and basal cell carcinoma treatments. Psiron reported positive results from three Phase II trials for different treatments.

Seventeen biotech products were approved over the quarter, compared to 15 the previous quarter, and nine medical devices were approved, compared with 11 the previous quarter. Of note was that Biota Holdings obtained approval from the TGA to extend the use of Relenza to treat influenza in children as young as five years of age. Safety Medical Products received approval from the TGA to market and sell Exelint products in Australia and New Zealand.

Source: Pricewaterhouse Coopers