WHY IS THERE GOOD NEWS?
April 19th 2009 07:14
Tuesday April 14, 2009
Daily news on ASX-listed biotechnology companies
* ASX, BIOTECH UP; LABTECH UP 15%, LIVING CELL DOWN 23%
* EDITORIAL: WHY IS THERE GOOD NEWS?
* PEPLIN GEL TO BE ‘STANDARD OF CARE’; CAPITAL RAISING MOOTED
* JAPAN APPROVES CELLESTIS’ TB TEST IN A TUBE
* US PANEL GIVES VIVUS 30 DAYS TO SET ACRUX PHASE III TRIAL
* TISSUE THERAPIES LOSES DIRECTOR PROF DAVID GARDINER
* PHYLOGICA, AEGIS COLLABORATE ON INTRANASAL PHYLOMERS
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BIOTECH DAILY EDITORIAL
The increase in institutional investment in biotechnology stocks through capital raisings of the past months and the strong rise in share prices are primarily because serious investors can see well-managed, grossly-undervalued companies.
While some talk about leading indicators, including “high beta” stocks, falling first and recovering first, underlying this formulaic representation of volatility and correlation is that in times of stress these stocks become undervalued. While statistics can explain events, I don't think GBS Venture Partners, Acorn Capital and Starfish Ventures sit around looking at charts and say 'Let's invest in something biotech.'
What is really happening is that in the past three or four years, a large number of companies have moved from juvenile or nascent to maturing, as evidenced by the number of companies with product in the market (Acrux, Biota, Cellestis, Labtech, Nanosonics, Pharmaxis, Polartechnics, Sirtex, Starpharma) or are near, or at, the end of the regulatory process (Alchemia, Avexa, Avita, Clinuvel, Medical Developments, Peplin) not to mention another large group of companies that are about half-way there with phase II trials.
The key is that they were undervalued prior to the 2008-'09 market correction.
I have previously said biotechs are not for the faint-hearted and the money coming into the sector is not from the so-called mums and dads investors, but from very serious, well-credentialed, professional investors and equally serious day-traders and month-traders. How could you not buy Biota at 33 cents? Peplin and Chemgenex have been woefully underpriced along with the rest of the sector, but that doesn't mean anything labeled 'biotech' is a smart bet. It means that for the canny speculator there is significant high-risk potential.
The Biotech Daily Top 20 Index (BDI-20) was up 20 percent in the month of March with two companies leaping more than 100 percent; two more doing better than 50 percent; and four up by more than 40 percent.
Over the four months from November, the BDI-20 was up 30%. Biotech companies have raised more than $60 million since January and $200 million in the past 12 months with biotech-focused institutions raising a further $200 million and another $100 million expected from one institution “soon”. Major institutions like AMP and ABN Amro Morgans are back in the action and buying biotech stocks as well as investing in capital raisings.
I don't think it is because the algorithm is in Aquarius, but because the fundamentals of the stocks scream out for investors to make money, despite the antipathy of the Federal Labor Government and some finance commentators.
One could make a serious argument that the strength of the sector reflects the life sciences’ long lead-times, supported more than a decade ago by the Federal Labor initiation and Federal Coalition continuance of the Commercial Ready Grants system.
David Langsam
Editor
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