Low dollar tipped to stimulate biotech investment

Analyst commentary suggests the devaluation of the Australian dollar during 2014 has left biotech in a good position for investment, as well as a target for takeovers and mergers.

Invion CEO Greg Collier, speaking to the Australian Financial Review this week, said that the weaker Australian dollar will make clinical trial work more expensive but may also motivate takeover activity, with companies looking more attractive at 20% cheaper.

Despite some trial and regulatory setbacks last year, the industry raised over $450 million for the 12-month period and delivered some stand-out performances. Among the top performers were Actinogen, which increased its value by 134% to $34 million; and Benitec Biopharma, which increased by 54% to $112 million.

The majors - CSL, ResMed and Cochlear - also performed well, increasing their market capitalisation collectively by 27% for 2014.

Also in the Australian Financial Review this week was an article (13 Jan 2015, ‘How biotechnology investors are being duped’) that quoted Sirtex Medical’s David Cade, suggesting that biotech companies are “spruiking” their benefits while “conveniently ignoring the risks”.

While it may or may not have been the intention to suggest that biotech companies are acting inappropriately to misrepresent themselves, the article nevertheless requires a response. The article implies that Sirtex’s practice of educating potential investors on opportunities as well as inherent risks is unique, when the reality is quite the reverse.

Both individual companies in Australia’s biotech industry and AusBiotech, as the industry body, are acutely aware of the industry’s complexity, promise and risk, and continually seek to deliver appropriate disclosure, education and reporting. AusBiotech holds regular investor events for this purpose and has also produced two resources to support biotechnology boards and investors: the Code of Best Practice for Reporting Life Sciences Companies and the Guide for Life Science Company Directors.

The code, developed with the ASX and investors, provides guidance on disclosure of developments of material importance, including risk. The guide, developed with the AICD and industry experts, carries an entire chapter on risks unique to the biotech industry.

The web button shown below appears on websites of companies that follow the code and is available on request from AusBiotech. See www.ausbiotech.org/biotechboards for more information.