Australasian Biotechnology (backfiles) AusBiotech ISSN: 1036-7128 Vol. 10, Num. 1, 2000, pp. 16-17

Australasian Biotechnology, Vol. 10 No. 1, 2000, pp. 16-17

Deloitte Touche Tohmatsu Biotech REPORT

In December 1999 we remarked that "Biotechnology is a rapidly evolving sector and is quickly coming of age." Developments during the past three months have certainly proved us right! From the beginning of November 1999 to the beginning of March 2000 we have seen:

• Three new biotech listings
• Market capitalisation of companies in the Deloitte Biotech Index up by 55.8%
• One merger affecting companies in the first edition of the Index
• One capital reorganisation and name change, and
• Numerous capital raisings

Industry rationalisation is occurring - for example, the merger between Peptech Limited and Biotech International Limited.

Deloitte research indicates that the biggest single issue facing the Australian biotechnology industry is that of raising finance to fund the development and commercialisation of the excellent scientific knowledge held by many companies. Different players in the industry are adopting different approaches on this issue:

• Peptech Limited and Biotech International Limited felt that an all-Australian merger was the best way to compete on the international stage;
• Medical Innovations have raised $2m via the issuing of unsecured convertible notes to Quadrant Capital Fund;
• Gradipore have recently announced a private placement in order to raise funds to further develop their Gradiflow technology;
• Progen recently announced an $11m placement of ordinary shares to institutional investors;
• other industry players are seeking funding from major international companies in return for either equity or future distribution rights;
• even Novogen, a company which has so far gone it alone in marketing and distribution has recently announced that it is looking at the possibility of entering into an agreement with an international partner for the distribution of its anti-cancer drugs.

It is clear that Joint Ventures or other partnerships expand market coverage, build knowledge and increase efficiency. If carefully managed they enable companies to add value to products, streamline business functions and leverage technology.

We have no doubt that 2000 will be a huge year for biotechnology, and with the expected completion of the sequencing of the human genome during the year the race for cures for major diseases is really on.

• 	1 October 1999	1 March 2000	% Increase
  Circadian	$1.70	$6.00	252.9
  Pharmaction	10c	27c	170.0
  Medica Holdings	50c	$1.30	160.0
  Medical Innovations	29c	69c	137.9
  Meditech Research	38.5c	82.4c	114.0
  Chemeq	32c	68c	112.5
  Polartechnics	$3.03	$5.30	74.9
  Gradipore	$4.70	$7.25	54.3
  Metabolic	40c	56c	40.0
  Cochlear	$16.25	$21.85	34.5
  CSL	$17.05	$21.72	27.4
  Novogen	$2.96	$3.70	25.0

  Table 1. Percentage increase in some stocks over six months.

Strong Performance

The Australian Biotech market has seen many strong performances since 1 October 1999. Table 1 shows companies whose share price has increased by more than 25% over the period.

• Axon Instruments listed on the ASX on 3 March 2000 making history by becoming the first private US company to list on the ASX. The public offer of 70 million shares at 20c each closed early, heavily oversubscribed. Axon shares debuted on 3 March 2000 at $1.65, more than eight times the issue price. The shares hit a high of $1.92 before closing at $1.66. The company designs and manufactures instruments and software for:
  • Genomics - scanning and analysing DNA microarrays disorder monitoring
  • Functional Neurosurgery - micro-electrode-guided surgery and movement
  • Cellular Neurosciences - cellular neurophysiology and imaging

Axon's first product in the genomics field, a DNA scanner, was launched last year and the company has also been developing a high-content fluorescence screening system.

• Amrad has spun off its drug screening and genomics business, Discovery Technologies (ADT), to venture capital company ExGenix. ExGenix is a consortium of investors led by Rothschild Bioscience Unit. Amrad has sold its biotechnology unit to the US firm Chemicon. The company will trade in Australia under the name Silenus.
• Starpharma, a biotech enterprise structured as a pooled development fund, listed on the exempt market run by Austock brokers in October 1999. Starpharma is in phase II trials of dendrimers, a class of synthetic molecules which have shown antiviral and anti-angiogenesis applications.

New Listings

The following companies have listed in Australia and are additions to the Deloitte Biotech Index since the first edition was published:

• Clover Corporation's core business is the manufacture and supply of natural oils. The company has developed food technology, which specialises in the placement of polyunsaturated oils in staple foods. The oil is derived from tuna, evening primrose and borage oil. The company has established contracts to use the oil in infant formula and Goodman Fielder breads. Clover's focus is to take advantage of the trend towards healthier eating and the growing market for nutritional supplements.
• Bionomics is a gene research company based in Adelaide. It will initially be developing research that emanates from the laboratory of Professor Grant Sutherland at the Women's and Children's Hospital in Adelaide and from work conducted by the University of Melbourne. The company aims to identify and map genes, which could play a vital role in the treatment of epilepsy and breast cancer.
• Australian Vaccine Technologies (AVT) is a joint venture between Neptunus International Holdings and Avax Technologies. AVT plans to commercialise a melanoma vaccine. Neptunus which has been suspended from the ASX since 1998 will begin trading during 2000 as AVT. AVT listed on the ASX on 10 March 2000. AVT shares which were issued at 20c opened at 44.3c before hitting a high of 85c. The shares closed their first day's trading at 69c. AVT, led by former Biota Holdings' chief, Peter Simpson, plans to commercialise a vaccine for malignant melanoma, known as M-Vax, and is building a plant in Sydney to manufacture the drug.

Table 2. Summary of how new Biotech listings in the past year have performed.

Company	Listing Date	Price	Issue Price at 1 Mar 2000	High	Low	Current price as %  of issue price
Medica Holdings	31 Mar 1999	$0.70	$1.30	$1.50	$0.45	185.7%
Anadis	30 Apr 1999	$0.20	$0.52	$0.68	$0.20	260.0%
Genesis Biomedical	11 June 1999	$0.20	$0.41	$0.50	$0.25	205.0%
Chemeq	25 Aug 1999	$0.25	$0.68	$0.86	$0.22	272.0%
Bresagen	21 Sept 1999	$1.00	$1.15	$1.95	$1.03	115.0%
Clover Corporation	24 Nov 1999	$0.30	$0.375	$0.59	$0.32	125.0%
Resmed	25 Nov 1999	$6.50	$12.10	$12.20	$6.31	186.2%
Bionomics	21 Dec 1999	$0.40	$1.27	$1.44	$0.65	317.5%

Upcoming FLOATs

Companies in the Biotech and health-care sector which have announced their intention to list on the ASX over the coming months include:

• EpiTan develops drugs that assist in the prevention of skin cancer and have the added benefit of creating an all-over tan. It is expected that EpiTan will list with an issue price of $0.50. EpiTan is seeking to raise $4,000,000.
• SSH Medical is a medical device company that specialises in the development of disposable speculums for application in humans and animals. In addition, it has developed platform technology that delivers magnification and light when viewing the cervix. There is a large market, as many women do not participate in cervical cancer screening due to discomfort and embarrassment associated with traditional apparatus used in examinations. SSH Medical is expected to float on 20 April 2000 raising $7 million by issuing 17.5 million shares at $0.40 each.
• Human Therapeutics, a company owned by a consortium of investors and management, has recently bought Biotech Australia Pty Ltd from Hoescht and plans to list the merged company in late 2000. Biotech Australia has been trialling molecules that treat ulcers and psoriasis.
• Gropep is a private company owned by CSIRO, Child Health Research Institute, Dairy Research and Development Corporation, the University of Adelaide (through Luminis Pty Ltd), staff and Directors. It has been reported that Gropep may float during 2000. Gropep develops and manufactures a range of insulin-like growth factors and related analogs with unique biological properties, antibodies to IGFs, IGF binding proteins and antibodies, as well as various other high quality growth factors.
• Prana Biotechnology is seeking to commercialise its patented technology which has applications covering a range of age related diseases, particularly Alzheimer's disease. Prana is seeking to raise $8m through its float on the ASX in order to fund accelerated development of its technology. Prana currently has a number of products in Phase II clinical trials, the Pre-clinical stage and in the research and development stage. Prana expects to list on the ASX soon.
• Deloitte Touche Tohmatsu maintains one of the largest Pharmaceutical and Medical Devices Industry Practices in the world. Contact: Sydney, Glen Sanford, David Black, Phone (02) 9840 7000 Fax (02) 9840 7001. For information regarding the Deloitte Biotech Index, contact David Black (02) 9840 7207; david_w_black@ deloitte.com.au; www.deloitte.com.au

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