Past five years show life sciences industry growth

The Australian life sciences industry has grown significantly in the past five years and shows signs of a positive future, according to the 15th edition of PricewaterhouseCoopers' quarterly BioForum report.

Released today, the report usually provides a snapshot of the past quarter for the life sciences sector, but this time also included data on performance over the last five years from December 31, 2000 to December 31, 2005.

"Overall, for the five years, it has been reasonably solid but there's been some tough up and down periods," said PricewaterhouseCoopers partner Andrew Sneddon.

The industry has grown by about 50 per cent, from 60 listed companies five years ago to 111 at the end of 2005. Excluding major stocks such as Cochlear, CSL and ResMed, the industry's market capitalisation has also grown about 50 per cent, from AUD$11 billion to $20 billion, said Sneddon.

During the five years from 2001 to 2005, the sector's value excluding majors increased by 58 per cent, outperforming the strong ASX All Ordinaries which gained 49 per cent.

"One of the biggest drivers of the ASX lately has been commodities and mining stocks," said Sneddon. "We're on an enormous resources high which doesn't seem to be going to die in the short term. So for a small baby sector, [life sciences] hasn't done too badly."

In 2001, nine companies were valued over $100 million compared with 15 companies today.

The number of listed medical device companies tripled from 10 to 30 over the period 2001 to 2005, while the number of pharma and biotech developers doubled to 79.

However the average capitalisation of companies in the medical devices sector, excluding majors, has fallen 47 per cent while the average value of biotechs and pharmaceutical companies has increased slightly, by 7 per cent.

"Most of the medical device companies are struggling by comparison to the pharma an biotech companies. Part of it is that many of the life sciences companies have started to do these global partnerships and starting to have portfolios they are taking to market," said Sneddon. "Also, for a small market, there are too many [medical device companies] trying to do the same thing."

While 58 companies have listed in the past five years, only nine have raised $20 million or more.

In the last quarter of 2005, secondary raisings have been significant, with $161 million in 19 raisings. This compares with the first quarter of 2005, with $46 million for 24 raisings.

"The key is even though companies go in small, if you build a team that has got the right respect and you focus on delivering milestones and strategically trying to grow your business and get in revenue as early as you can, the market will keep funding you," said Sneddon.

The last quarter also saw a total of six IPOs. "A little better than the previous quarter," said Sneddon. "CathRx and AtCor came on at a premium, the others struggled a bit."

Over the past five years, Sneddon has seen a trend where companies are starting to think more globally. For example, companies like Pharmaxis and Novogen have listed on Nasdaq, Psivida on the Frankfurt exchange and Phosphagenics on London's AIM market. Companies such as Life Therapeutics, Sirtex, Novogen and Biota are also seeing global sales of their products.

"The industry is still in its infancy in many ways. There's still too many small companies, but they're starting to think a lot smarter and more global, which we saw as positive for the future," said Sneddon.

Life sciences companies are also starting to recruit people with global skills, said Sneddon, however he would like to see more companies, particularly those with good global successes, looking offshore quicker.

"For some of these companies, the sort of money they're going to have to raise to get their products to market is $100 millions. You're never going to fund that in Australia by itself," he said.