New ASX biotech reporting guidelines due in March

The Australian Stock Exchange is working with a small group of biotechnology executives, analysts and investors to develop a draft proposal for reporting results and activities, similar to those in place for the mining and exploration sectors.

The guidelines are likely to be widely circulated through the industry and to analysts and investors with an interest in the sector, giving them a chance to suggest modifications and additions.

The primary use of the guidelines would not be to police company reporting, according to Eddie Grieve, the ASX business development manager for listing.

"The main driver is not necessarily a regulatory one, although that would be a side benefit. The main driver is to promote better understanding between biotech companies and the investment community," Grieve told Australian Biotechnology News. "It's not something we would impose on companies -- its success is dependent on it being supported by the industry itself."

It's also unlikely that the guidelines will become listing rules, at least to start with. Instead, they will probably be used as a code of best practice, in much the same way that the new corporate governance rules have been implemented. This would allow investors and analysts to discriminate between companies following best practice and other companies, Grieve said.

Although the guidelines appearing in the draft have not been finalised, Grieve said there were a number of key issues on the table, including:

• Reporting of patents, such as status of applications, information to be reported when patents granted and a periodic update of the company's patent portfolio.
• Licensing, collaborations and partnerships, in particular what should be disclosed and clear differentiation between immediate cash flow and potential revenues.
• Clinical trials including initiation, changes to trials and results reporting.
• Periodic reporting of cash flows and activities.

Emphasis was also being put on making information available in a form that would be comprehensible to investors, such as through glossaries or frequently-asked-questions.

BioShares editor David Blake, who is involved in the drafting of the guidelines, said he was excited by the proposal. "It should have some quite positive effects, including dampening of people who are mucking around," he said. "It should allow companies to build credibility with their investors."

From his perspective, "over-announcing" of results or activities and using misleading headlines and titles, such as the so-called 'biodollar' headlines that tout potential value of deal rather than current value, are two of the biggest problems in the industry's reporting practices at present. But he noted that he considered only a small proportion of companies to be "loose" with their reporting standards.

AusBiotech executive director Tony Coulepis said that the organisation supported the move to implement guidelines, but noted that the majority of companies reported the results in a responsible fashion. "If there is a perception that biotechnology has been doing it wrong, it's because guidelines have been lacking -- outliers do things according to their own interpretations," he said.

Coulepis also warned that guidelines would have to harmonise with reporting rules in other countries, particularly when announcements involved other companies based overseas.

Grieve said the ASX hoped to have the draft guidelines ready for distribution in March or April.