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Bio Technology : July 2009
AusBioFEATURE Could 2009 be a worse year for biotech than 2008? By David Blake, Co-editor Bioshares Could 2009 be a worse year for biotech than 2008? The Bioshares Index measures the performance of all small-cap Australian biotech stocks. This key measure plummeted by 60% in 2008, much greater than the bone-crunching falls in leading stock indices, which fell by 40% to 50%. The ASX All Ords fell 44.6% in 2008, the Dow Jones lost 36%, the Nasdaq Composite decreased by 40.5%, yet the Nasdaq Biotech experienced a much smaller loss of 12.6%. In mid-May however, the All Ords had made a 5% gain for the year, the Dow Jones has lost 5.6%, the Nasdaq Composite has risen 9.9% but the Nasdaq Biotech suffered a 6.4% loss. In contrast, in the first quarter of 2009, the Bioshares Index rose by 16%, and if the price movement of some stocks is anything to go by, then the June quarter may also record a positive gain. Companies such as Pharmaxis and Peplin have reported positive Phase III trial data. Universal Biosensors, a manufacturer of strips for glucose test strips, successfully renegotiated its agreement with Johnson & Johnson’s Life Scan. And the outbreak of a strain of swine influenza (A/H1N1) in human populations drove Biota’s share price to a high of $1.58, an increase of 172% from its December quarter close. Funding trends With what appears to be an up-tick in interest in small-cap biotechs in the current first half period, has there been a similar lift in capital inflows? In 2008, sector funding for ASX listed companies fell 80% from the previous year to $184m, and 70% from the average for 2003–2006. Likewise, US biotech funding from IPOs and follow-on rounds for 2008 of US$2.8b fell 68% from the average for 2004–2006. Preliminary half-year estimates of capital inflows for Australian listed biotechs are in excess of $80m, which annualises to $170m. First quarter follow-on funding (there were no IPOs) was US$900m for US biotechs, which annualises to US$3.6b, a figure that would represent a 58% decrease from the average for period 2004–2006. So some funding is being made available by private investors at levels roughly similar to 2008. But the funding is still low and is variable, with a few companies receiving drip-feed stay-alive investments and others receiving sums that are appropriate to achieving commercialisation objectives. 20 Australasian BioTechnology Volume 19 • Number 2 • July 2009