Advertisement
Advertisement
Advertisement
TANYA SOLOMON, ABN AMRO MORGANS Biotech analyst:
Over the last quarter, investor sentiment has shifted positively for biotechnology in Australia. What I’d like to talk about now is some of the key drivers of this.
Firstly, the Australian biotech sector is considered to be undervalued in comparison to its international peers, and for this reason what we’ve seen is a number of international investors, either participating in new capital raisings or topping up their shareholdings in Australian biotech companies.
In Australia we have a great track record of R&D companies that have developed into success stories. For example, look at CSL or Cochlear.
We also have a number of developing biotechnology companies in Australia that have been targets for large international players. For example, GroPep was recently acquired by international company Novozymes, for a 40 per cent premium for its pre-bid closing price.
Another reason why biotech stocks are so popular at the moment is the number of companies in Australia that have critical milestones coming up this quarter.
For example, we have Avexa, who is expected to release critical results for a clinical trial in HIV in March. We also have Chemgenex (Pharmaceuticals), who’s recently kicked off the third and final clinical trial they’ll have to do for their drug for a type of leukaemia.
Finally, there are a number of patents coming up for expiry on important blockbuster drugs. We expect the larger pharmaceutical companies to be running their slide rules over smaller biotech companies in Australia to fill their pipelines.
In the short term, the expected news flow over the next few months, new capital investments into the sector and generally a growing interest are all combining to make us think that the first half of 2007 is going to be buoyant for the biotech sector in Australia.
What I’d like to do now is to make some suggestions, for dare I say it, to invest conservatively in the biotechnology area.
Firstly, we suggest, given the long development timelines that a lot of these companies face, is selecting companies at the later stage of development and also with diversified pipelines, so that means with a range of products under development.
Secondly, we suggest you take a portfolio approach and spread your investment allocation in this sector across three or four stocks.
Finally, we suggest that you focus on an upcoming milestone, buy in early in anticipation and take profits and cover your costs leading up to the result.
Now let’s have a look at some of the hot stocks at the moment. Firstly I’d like to talk about a company still in the early stage of development, Avexa. Avexa’s lead compound is targeting HIV. It is in Phase 2b clinical trials currently, with key results expected out in March.
Why are we excited about this? Because, to date, all HIV drugs that have entered phase three clinical trials, or the next stage of development, have successfully gone on to market or commercialisation.
The second stock I’d like to talk about today is a profitable healthcare company but still in the important growth stage of development. It’s called IBA Health.
IBA Health develops healthcare information systems for both the international and domestic markets. We’re forecasting around 20 per cent earnings growth over the next two years.
So in summery, for investors that are brand new to investing in biotech, I do agree it can seem a little bit scary.
But even for conservative investors, if you take a sensible portfolio approach to investing in the sector I think you’ll be able to benefit from what we think are exciting times ahead for the biotechnology sector in Australia.
Over the last quarter, investor sentiment has shifted positively for biotechnology in Australia. What I’d like to talk about now is some of the key drivers of this.
Firstly, the Australian biotech sector is considered to be undervalued in comparison to its international peers, and for this reason what we’ve seen is a number of international investors, either participating in new capital raisings or topping up their shareholdings in Australian biotech companies.
In Australia we have a great track record of R&D companies that have developed into success stories. For example, look at CSL or Cochlear.
We also have a number of developing biotechnology companies in Australia that have been targets for large international players. For example, GroPep was recently acquired by international company Novozymes, for a 40 per cent premium for its pre-bid closing price.
Another reason why biotech stocks are so popular at the moment is the number of companies in Australia that have critical milestones coming up this quarter.
For example, we have Avexa, who is expected to release critical results for a clinical trial in HIV in March. We also have Chemgenex (Pharmaceuticals), who’s recently kicked off the third and final clinical trial they’ll have to do for their drug for a type of leukaemia.
Finally, there are a number of patents coming up for expiry on important blockbuster drugs. We expect the larger pharmaceutical companies to be running their slide rules over smaller biotech companies in Australia to fill their pipelines.
In the short term, the expected news flow over the next few months, new capital investments into the sector and generally a growing interest are all combining to make us think that the first half of 2007 is going to be buoyant for the biotech sector in Australia.
What I’d like to do now is to make some suggestions, for dare I say it, to invest conservatively in the biotechnology area.
Firstly, we suggest, given the long development timelines that a lot of these companies face, is selecting companies at the later stage of development and also with diversified pipelines, so that means with a range of products under development.
Secondly, we suggest you take a portfolio approach and spread your investment allocation in this sector across three or four stocks.
Finally, we suggest that you focus on an upcoming milestone, buy in early in anticipation and take profits and cover your costs leading up to the result.
Now let’s have a look at some of the hot stocks at the moment. Firstly I’d like to talk about a company still in the early stage of development, Avexa. Avexa’s lead compound is targeting HIV. It is in Phase 2b clinical trials currently, with key results expected out in March.
Why are we excited about this? Because, to date, all HIV drugs that have entered phase three clinical trials, or the next stage of development, have successfully gone on to market or commercialisation.
The second stock I’d like to talk about today is a profitable healthcare company but still in the important growth stage of development. It’s called IBA Health.
IBA Health develops healthcare information systems for both the international and domestic markets. We’re forecasting around 20 per cent earnings growth over the next two years.
So in summery, for investors that are brand new to investing in biotech, I do agree it can seem a little bit scary.
But even for conservative investors, if you take a sensible portfolio approach to investing in the sector I think you’ll be able to benefit from what we think are exciting times ahead for the biotechnology sector in Australia.
