Code Number: AU99014

Agreement in principle for:

i) a placement of 15% of Company's shares at 25 cents per share to Merck Lipha s.a.

ii) Merck Lipha s.a. to fund Autogen's Human Genetics Project conducted by International Diabetes Institute _ US$1 million per annum for 6 years.

iii) Jean-Noel Treilles, Chairman and Chief Executive Officer or Merck Lipha s.a., to be appointed a Director of Autogen.

The Directors are pleased to announce that an agreement in principle, subject to final confirmation, has been reached with Merck Lipha s.a. ("Merck Lipha") to form a strategic alliance which results in:

i) Merck Lipha agreeing to take a placement of 24,662,823 shares (15% of Autogen's existing share base) at an issue price of A$0.25 cents per share raising A$6,165,705.

ii) agreeing to fund the Autogen human genetics research program conducted by International Diabetes Institute ("IDI") at the level of US$1 million per annum for 6 years.

The Directors have invited Mr Jean-Noel Treilles, Chairman & Chief Executive Officer of Merck Lipha, to join the Board of Directors of the Company.

This agreement is in addition to the existing arrangement with Merck Lipha whoa re funding Autogen's obesity and diabetes research project based on animal genes at Deakin University.

Merck Lipha is a major European pharmaceutical company and is a subsidiary of Merck KgaA of Darmstadt, Germany. Merck KgaA is listed on the Frankfurt Stock Exchange and is the manufacturer of Metformin, the world's top selling drug for the treatment of diabetes. It was introduced in the United States only three years ago and even though it has been available for over 40 years in many other countries, including Australia, it has climbed to number one seller in the United States with sales of over $1.3 billion annually. Metformin holds over 50% of the market for the treatment of Type 2 diabetes in Australia.

The objective of the human genetics project is the discovery of human genes involved in weight imbalance, Type 2 diabetes and insulin resistance. The human genetics project is conducted under the guidance of Professor Paul Zimmet, Professor and Director of IDI, Professor of Diabetes at Monash University and Professor of the Graduate School of Public Health, University of Pittsburgh in the USA. Professor Zimmet is actively involved with the World Health Organisation's Diabetes and Obesity Study Groups and is a member of the Australian Federal Government Task Force on Diabetes, the Victorian Ministerial Advisory Committee for Diabetes and the National Obesity Strategic Committee.

A new laboratory in Melbourne has now completed basic fit-out and instrumentation, and key staff have been engaged. Field work with population groups in relevant Pacific islands is underway as is collaboration with the Tasmanian population study group under an agreement signed during the year. The research team is now able to explore the enormous potential of this project established through Professor Zimmet's international contacts, established over several decades, with Pacific Island nations and his negotiations to access these extremely important sera and databases. This data set is one of the most comprehensive available world-wide comprising cross-sectional samples from Europid, Asian, Indian Chinese, Creole, Polynesian, Melanesian and Micronesian populations. All of the latter groups have particularly high prevalence of obesity and Type 2 diabetes.

There is great interest world-wide in genome-based approaches to new drug discovery and expressions of interest in strategic partnering in this human genome project have been received from major pharmaceutical companies. Research is expected to commence in January 2000.

Merck Lipha have the right to elect to commercialise any products resulting from the research either in Europe only or worldwide. Autogen will receive milestone payments at various stages of research and a royalty on any commercialised products.

Autogen is confident that its strengthening relationship with Merck Lipha will continue to provide financing of major medical research programs in Australia, provide employment to well qualified and experienced Australian scientists and add value for shareholders.

Professor Paul Zimmet today welcomed the new strategic alliance between Autogen and Merck Lipha and stated:

"This new agreement between Autogen and Merck Lipha will boost significantly the research into genes causing obesity and Type 2 diabetes being carried out by the teams of Professor Paul Zimmet at the International Diabetes Institute and Autogen's other major gene project the Beacon gene project, of obesity headed by Professor Greg Collier at the Deakin University campus in Geelong.

Apart from the share placement, Merck Lipha will contribute US$6 million through Autogen's research at the International Diabetes Institute. With the International Diabetes Institute and Deakin gene projects, Autogen is at the cutting edge worldwide in the search for the genetic causes of two of the world's major diseases. The current number of diabetics world wide is 120 million is expected to increase to 240 million by the year 2010 and 300 million by the year 2050. The number of people with obesity worldwide is even higher than these figures and the market for treatment of obesity is estimated at $40 billion annually.

The agreement between Merck Lipha and Autogen is a resounding endorsement of the high scientific capabilities of Australian scientists. Here is yet another example of the overseas recognition of the top level biotechnology and medical research work being undertaken in this country while both Government and the Australian investment community have not either recognised the potential or supported it to any significant extent.

The funding that comes to the laboratories at the International Diabetes Institute will keep Australia at the forefront of world research, with the possibility of not only defining the genes that cause the major form of diabetes, that is Type 2 diabetes, but also the possibility of developing diagnostic tests to predict future sufferers and also developing drugs that will specifically target the abnormalities causing the diabetes. Current therapy, in a sense, is blunder-bus in its approach in that it does not address the actual cause of diabetes. It just lowers the blood sugar achieving the same results in less efficient manner than would be achieved by more specific therapies.

I believe Autogen has one of the best portfolios of any biotechnology company in Australia with exciting possibilities in a number of areas including diabetes, obesity, asthma, lung health and autoimmune diseases. It has also recently concluded a deal with a Japanese company to develop the first environmentally friendly immune assay for the detection of insulin dependent juvenile diabetes up to ten years before the clinical onset." 

Alchemia has attracted its third round of venture capital funding. The commitment of $4 million from Coates Myer IIF Fund brings the amount of equity capital raised by Alchemia to $8 million.

Alchemia is developing a novel technology that enables the cost effective manufacture of carbohydrates employing purely chemical synthetic methodology. The immediate commercial applications of Alchemia's technology are in the areas of pharmaceutical and nutraceutical development.

Role of Carbohydrates

Carbohydrates play a critical role in diseases such as cancer, cardiovascular disorders, microbial infections, graft rejection and auto-immune disorders. For this reason, there is rapidly expanding interest in the synthesis of carbohydrates as potential diagnostic, prophylactic and therapeutic agents for a wide variety of disease states.

The Alchemia Opportunity

The single most important factor responsible for the limited acceptance of synthetic carbohydrates in pharmaceutical or other markets has been the lack of cost effective and scaleable synthetic strategies. The synthesis of carbohydrates has been, until now, highly labor intensive, requiring very specialized knowledge and a high degree of chemical skill. This has made the use of such compounds cost-prohibitive. Indeed, breakthroughs in the synthesis of complex carbohydrates have not kept pace with discoveries elucidating their biological significance.

Alchemia's technology platform enables the efficient and rapid development of combinatorial libraries for drug discovery, as well as enabling the large-scale synthesis of defined leads for pre-clinical development and manufacture. In addition to pharmaceuticals, Alchemia's technology will also be applied to the production of nutraceuticals.

Alchemia is seeking alliances in the biotechnology, pharmaceutical and nutraceutical industries, to further develop and apply its proprietary technology. Alchemia's enabling technology for the large-scale synthesis of cost effective carbohydrate-based pharmaceuticals and nutraceuticals should position it as a major player in the field.

The equity raising will help to fund the next stage of Alchemia's growth which will include the expansion and relocation of its R&D activities and the establishment of a branch office in the United States.

Alchemia will relocate its R&D operations to new facilities at the Brisbane Technology Park. The new premises will incorporate combinatorial chemistry, bioassay and kilogram scale production facilities and will accommodate an expanded R&D team of 35 within the next twelve months.

Alchemia will expand its business development team in the United States to pursue increasing commercialisation opportunites in North America and Europe. The US office will also facilitate the next round of funding from US investors.

Alchemia's current development projects include:

· Development of VAST aminoglycoside and oligosaccharide libraries - libraries of new compounds for pharmaceutical companies using its VAST (Versatile Assembly on Sugar Templates) technology;

· Synthesis of carbohydrates for the treatment of organ transplant rejection;

· Synthesis of carbohydrates for the treatment of Clostridium difficile.

· Development of oligosaccharides containing sialylic acid in collaboration with the Centre for Drug Design and Development at the University of Queensland, funded by a $1 million collaborative START grant.

For further information:

Dr. Tracie E. Ramsdale,Chief Executive Officer, Alchemia Pty. Ltd.
120 Meiers Road, Indooroopilly 4968 QLD, Australia
Phone: (+) 61-7-3214-2717
FAX: (+) 61-7-3214-2716
E-mail: TRamsdale@alchemia.com.au
Web: http://www.alchemia.com.au/

We are expanding our coverage of financial information on biotechnology companies and we are fortunate to have secured the assistance of the major accounting firm, Deloitte Touche Tohmatsu in providing a regular financial analysis in this area. The first Deloitte Biotech Index follows the Share Price Movements.

Warning - This table is a guide only to stock movements. Persons should not use this information as the sole basis for business and financial decisions. Advice from financial advisors should be sought.

The Deloitte Biotech Index focuses exclusively on 29 listed biotechnology companies, excluding the "Blue Chip" healthcare companies found in the ASX Healthcare and Biotech Index.

The biggest companies considered in the Index are Biota, Cochlear, CSL, Novogen and Polartechnics.

Deloitte Biotech Index results include:

• From January 1997 to October 1998, the NASDAQ Biotech Index, the ASX All Ordinaries Index, and the ASX Healthcare and Biotech Index performed similarly.
• Since October 1998, the largest part of the indice increases have occurred, led by the Deloitte Biotech Index and the NASDAQ Biotech Index.
• Newly listed biotechnology stocks have generally been remarkably successful.

The rapid evolution of the Australian biotechnology sector has seen biotech stocks outstrip the ASX All Ordinaries Index more than five-fold in Deloitte Touche Tohmatsu's inaugural Biotechnology Index.

The Index demonstrates that the ASX All Ords gained just 20% since its January 1997 level, while the Deloitte Biotech Index gained 102%, the NASDAQ Biotech Index 98%, and the ASX Healthcare and Biotech Index 35%.

Deloitte life sciences partner, Mr Glen Sanford, said biotechnology was one of the most dynamic and exciting areas in the global market, and is finally coming of age. "Biotechnology is one of the biggest growth areas in the world, and the performance we've tracked in our first Biotech Index is proof of this," Mr Sanford said. "Recent trends in the biotechnology industry have demonstrated that a number of investors have changed focus from short-term speculation to long-term investment."

He said, however, he expected these capital gains would be tied to industry rationalisation. "We believe rationalisation in the industry will see biotechnology go from strength to strength. Venture capital is likely to be encouraged into Australia as a result of the Federal Government's Ralph taxation reforms, but the financial pressures of developing a product and seeing it through a lengthy approval process, together with overseas competition, will ensure rationalisation will continue.

"Global rationalisation has made news recently, and we believe this trend will keep up in Australia. We expect only a small number of today's Australian biotechnology companies will exist in their current form in five years' time."

Introduction

This is the first in a planned series of periodic reviews of biotechnology stocks. Biotechnology is a rapidly evolving sector and is quickly coming of age.

Over the past year the Australian market has seen a number of new listings of biotechnology stocks on the ASX. These public offerings have coincided with the ASX All Ordinaries Index reaching record highs.

Recent industry trends have demonstrated a number of investors have moved from short term speculation in biotechnology stocks to long term investment.

Recent industry events indicate capital gains may come about as a result of small biotechnology companies commercialising their research on their own or, more likely, they may come about as companies sign up to joint ventures and licensing deals with, for instance major international pharmaceutical companies.

Whilst the `Ralph' taxation reforms recently announced by the Federal Government may help encourage venture capital into Australia it is our view that only a small percentage of the biotechnology companies listed in Australia today will still exist in their current form in five years time. The costs involved in bringing a product from the laboratory to the pharmacy are huge and the approval process lengthy. The pressures of large capital requirements, the long product development process and overseas competition will see a rationalisation in the industry. This rationalisation is ongoing in the worldwide pharmaceutical industry. Recent examples include the battle between Pfizer and American Home Products for Warner Lambert and the June 1999 merger of Celltech and Chiroscience in the UK which created the UK's biggest biotechnology company.

We believe that biotechnology will be one of the most exciting areas in Australian and world markets. Biotechnology is now coming of age.

World Market Overview

In the graph below the movement in the Deloitte Biotech Index is plotted against other Healthcare and Biotech Indices and against the Australian All Ordinaries Index.

For the period since January 1997, the Deloitte Biotech Index has gained 102% compared to a 98% and 35% increase in the NASDAQ Biotech Index and ASX Healthcare and Biotech Index respectively. The ASX All Ordinaries Index has only gained 20% from its January 1997 level.

Over the period from January 1997 to October 1998 performance in the NASDAQ Biotech Index, the ASX All Ordinaries Index and the ASX Healthcare and Biotech Index were similar.

The largest part of the increase in all indices has occurred since October 1998, with the Deloitte Biotech Index and the NASDAQ Biotech Index showing the largest gains.

The ASX Healthcare and Biotech Index is currently composed of:

Australian Hospital         1.50%

Amrad Corporation        1.25%

Biota Holdings           ;      5.50%

Cochlear Limited              9.72%

CSL Limited                   29.27%

F H Faulding Limited      19.50%

Mayne Nickless           ;    20.56%

OPSM Protector         &nbs p;    4.48%

Progen Industries         &nb sp;    1.08%

Sonic Healthcare         &nb sp;     7.14%

The Deloitte Biotech Index differs from the ASX Index in that it focuses only on biotechnology companies and does not include the `Blue Chip' healthcare companies which are included in the ASX Healthcare and Biotech Index. These companies include:

Mayne Nickless

F H Faulding

OPSM Protector

These companies account for 44.54% of the ASX Healthcare and Biotech Index.

The Deloitte Index has been calculated based upon the total market capitalisation of Australian biotechnology shares.1 The index has been calculated with January 1997 as 100.

The difference in performance between the Deloitte Biotech Index and the ASX Healthcare and Biotech Index can be partially attributed to the significant weighting which F H Faulding, Mayne Nickless and OPSM Protector carry in the ASX Index.

The NASDAQ market was driven upwards in the later half of 1998 and 1999 by scientific break-throughs, Food and Drug Administration approvals for new products, earnings and the prevailing view that Biotechnology companies are good takeover targets.

Big buyers in the NASDAQ market included fund managers who had previously overlooked Biotechnology in favour of fast profits from internet stocks and the large pharmaceutical companies who saw biotechnology companies as a quick way to fill up product pipelines and to gain excellent science and skilled staff.

High profile acquisitions in the US market include Johnson & Johnson acquiring Centocor in July 1999, Abbott acquiring Alza in June 1999 and Pharmacia and Upjohn acquiring Sugen in August 1999.

Domestic Developments

The performance of the biotechnology stocks compared with the other ASX Indices is plotted below. 

The Australian biotechnology sector has been affected by a number of general economic factors as well as industry specific factors over the past 36 months:

• The Federal Budget announcement regarding new biotechnology funding initiatives
• The lack of confidence across all sectors as a result of the Asian crisis. This lack of confidence saw investors move into less volatile `Blue chip' shares
• A positive outlook from the US market and increases in the NASDAQ Biotech Index
• The possibility of company taxation reform
• The refusal of the Government to reintroduce the 150% research and development tax concession
• The mixed fortunes of Biota Holdings Ltd brought about by the high hopes for the flu treatment Zanamivir (Relenza©). Relenza© has received widespread popular press coverage, both in Australia and overseas.
• Positive announcements from some of the larger biotechnology stocks including CSL, Cochlear, Novogen and Gradipore
• The announcement from CSL that they had concluded a deal with the American Red Cross
• Investors becoming more positive about the potential medical breakthroughs being developed by Australian biotechnology companies

The recent capital gains taxation reforms announced in the Ralph report are likely to have a positive impact on investment in the biotechnology sector over coming months. These reforms will assist in attracting foreign investment into the Australian market.

On a corporate level, share prices of the largest companies by market capitalisation have shown similar varying degrees of success.

The five shares plotted below account for 83.3% of the Deloitte Biotech Index as at 1 November 1999. 

The performance of Biota over the past 36 months has been based, in the main, upon its headline flu product Relenza©.

Relenza has had a bumpy road despite Biota's licensing deal with the global pharmaceutical company Glaxo Wellcome.

In the 12 months to January 1999 Biota's share price more than doubled, from $3.40 in early February 1998 to $9.10 on 24 February 1999. However, on 25 February 1999 the share price crashed to $4.35 following the shock news that Relenza had failed to gain regulatory approval in the United States.

This refusal came despite the fact that Relenza had previously been approved for sale in Europe and Australia.

On 28 July 1999 Relenza finally received regulatory approval from the US Food and Drug Administration. The delay in the approval of Relenza may be costly for Biota as it gave Tamiflu, a rival product from the Swiss company Roche, a chance to become established. Biota is very much dependent upon Relenza and receives milestone payments and royalties based upon sales from Glaxo Wellcome.

In August 1999 Biota filed for regulatory approval in Japan. In October 1999 Relenza failed to gain admission to the UK equivalent of the Pharmaceutical Benefit Scheme (PBS). The refusal to admit Relenza to the UK listing and the fact Relenza does not yet have an Australian PBS listing mean that the drug costs users significantly more than it would were it listed.

In November 1999 Glaxo Wellcome commenced applying for approval to use Relenza as a preventative product and for use on children.

At the recent AGM Biota announced that it was "close" to a cure for the common cold. This cure will be tested on animals in the first half of 2000 and if tests were successful the product could be on the market by 2004.

This recent announcement is likely to see continued interest in Biota shares over the coming months. Analysts are forecasting that Biota will be profitable in 2000 and will quadruple EPS in 2001.

Cochlear

Cochlear is a bionic ear manufacturer. Prior to December 1995 Cochlear was a division of Pacific Dunlop. Cochlear carries on business in many countries around the world and faces global competition.

Cochlear shares were issued at $2.50 when it became a separate company in 1995. Since then the share price has shown phenomenal growth rising, from $3.60 in January 1997 to $17.20 in November 1999.

During the second half of 1997 Cochlear launched Nucleus 24, the worlds' first multi-channel ear level processor. Following US Food and Drug Administration approval of Nucleus 24 in June 1998 demand for the product in the US was strong.

During March 1999 the share price was assisted by rumours of a takeover and a mention of the product on the US TV program "ER". This resulted in the share price increasing from $10.60 to $12 between 22 March and 23 March.

In June 1999 the share price rose further to $13 on an announcement regarding the expected profit for the year to 30 June 1999.

Contributing to the rise in the share price is a new product, Praxis 24, currently under development. This is an implant designed to restore mobility to victims of spinal injury.

Information indicates that Cochlear has around 70% of the global ear implant market.

In August 1999 Cochlear announced a special dividend of 8c in addition to the final dividend of 12c. The special dividend was a result of strong US performance and sales for the year ended 30 June 1999 of $127.2m.

During August 1999 Cochlear shares increased in value by 24%. Cochlear is looking to launch products in Japan and China as areas of potential growth for the company.

CSL

CSL was previously known as Commonwealth Serum Laboratories and was privatised in 1994. Shares were issued at $2.40. By February 1998 CSL shares had reached $10.50 as a result of good revenue growth. 

In July 1998 CSL shares jumped following the announcement that the company was acquiring Bayer Corp's animal health production facility in the US. In October 1998 the company announced that it was focusing on joint ventures, licensing and partnering. Growth would be via reinvestment to grow the business.

CSL had received $15m a year under the Government's factor F program and in December 1998 received an offer to participate in the Pharmaceutical Industry Investment Program. The PIIP provides companies with partial compensation for lower pharmaceutical prices in Australia which are a result of government pricing controls. The program compensates companies by paying higher prices on nominated products supplied by participating companies in return for those companies meeting commitments to undertake certain activities in Australia, including manufacturing and research and development. CSL will receive up to $60m from PIIP over 5 years.

Going into 1999 CSL had very little debt and enough cash to press ahead on product development. In the week of 12 February 1999, despite strong first half results, CSL's share price fell by more than 10%. This fall was a result of the announcement that 1998/99 profit growth would be moderate and also the rumour that Smith Kline Beecham is to move into the Australian Vaccine sector (a sector where CSL has an 80% market share). Later that week CSL recorded strong gains as a result of the inclusion of the company in the Morgan and Stanley Capital Index.

In May 1999 news that CSL was working on the development and testing of Fibrin - to remove the need for surgical stitches - was published. In late May 1999 it was announced that CSL, the University of Queensland and Merck Sharp and Dohme were in partnership to develop a cervical cancer vaccine.

CSL is to benefit from increased government funding for the over 65's influenza immunisation campaign.

On 4 August 1999 CSL announced a deal with the American Red Cross for the co-development of a bandage containing Fibrin to stop bleeding. As part of the deal CSL will manufacture certain Plasma products from blood plasma collected by the American Red Cross as well as manufacturing the bandage on behalf of the American Red Cross should it be approved by the FDA. The product is not expected to enter human clinical trials until 2001, however CSL shares rose $3.32 (26%) on the news.

CSL is focusing on accelerating research and development expenditure and will undertake an upgrade of its plasma fractionation facility to help meet its commitments to the American Red Cross.

CSL will look at ways to enter the US market itself and internationalise in coming years. As a result of the announcements in August 1999 CSL shares rose 42.3%.

CSL expect that the change from Factor F to PIIP will hit profits in future years as it will receive less government money than under the previously more generous Factor F scheme.

In late October 1999 CSL lost its appeal against a patent held by Aquila Biopharmaceuticals Inc in the European Patent Office.

Novogen

Novogen is developing a range of products based on isoflavones and has a patent on a strain of red clover, the richest source of isoflavones.

In November 1997 Novogen announced a $15.7m dollar licensing deal with Protein Technologies International Inc (PTI) and that it had developed a potent new anti-cancer agent which was discovered in an extract of red clover.

Promensil, a medically tested menopausal treatment available over the counter, was launched in Australia in late 1997, in the US market in April 1998 and in Britain in the European summer of 1998.

On 29 June 1998 Novogen launched Trinovin for males suffering from prostrate conditions. In August 1998 Novogen announced that it would upgrade production facilities to cope with projected surges in demand for Promensil.

Novogen announced in September 1998 that the company was seeking SEC approval for a US listing. Permission to apply for a listing was received from the SEC in December 1998. 

During 1998 the Australian government gave Novogen a $2.79m START grant to develop anti cancer compound NV-06.

In November 1998 Novogen invested in a red clover supply network in New Zealand and on 10 November 1998 Novogen announced that it had secured it's first patent in the United States.

In early December 1998 Novogen received $3.6m in the second instalment for an equity arrangement with Ralston Purina (the former parent company of PTI).

On 6 January 1999 Novogen American Depository Receipts (ADR's) began trading on the NASDAQ.

Novogen announced that they hope to raise $60m to develop a cancer cure. The rise in Novogen share price during 1998 (from $1.80 in January 1998 to $2.75 a year later) is partially due to the approval of its products in the US.

At the same time as the first half results for 1998/99 were announced the share price fell 15c to $2.70 as a result of the ASIC request for clarification of write offs made in the 1997/8 financial year and concern about the biotechnology sector as a whole after the significant fall in the value of Biota.

In February 1999 Novogen announced they were holding promising talks with Walmart and Kmart for distribution in the US and that Trinovin is to be launched in the US in second half of 1999.

On 10 March 1999 Novogen shares increased by 45c from $2.70 to $3.15 on the announcement that its human anti cancer drug NV-06 had cleared a number of technical hurdles. The drug performed well in pre-clinical studies. Novogen can now file an investigational new drug status application with the US FDA.

Novogen announced on 15 April 1999 that it was defending legal proceedings filed against it over the patents of isoflavone compounds. Shares closed down 12c at $2.70

On 31 May 1999 Novogen announced a likely breakthrough in the treatment and prevention of heart disease and stroke. Novogen have sought a patent for the product P-081 and plan to launch it on Australian and international markets in 2000. P-081 is based on isoflavones. Novogen shares gained 18c to $2.90

On 15 June 1999 Novogen announced that NV-06 appears poised to offer treatment for two major prostate diseases. Novogen is preparing an application to the FDA to undertake clinical trials on patients.

Novogen launched its US sales campaign in August 1999 with Hollywood actor Cybill Shepherd promoting the product. On 26 August 1999 Novogen announced sales for the year ended 30 June 1999 of $19.69m and a net loss of $17.41m

P-081 is a major product to be launched in 2000 in Australia and the US, and Novogen expect to be in profit within a couple of years.

The Novogen share price increased from $2.83 on 29 September to $3.70 on 5 October. Novogen informed the ASX that they knew of no reason for the rise other than the announcement of the financial results for the year ended 30 June 1999 and the release of clinical evidence that Novogen product P-081 protects against bone and heart disease.

On 12 October 1999 Novogen succeed in gaining a START grant of $2.79m for NV-04. NV-04 to commence clinical trials within 3 years. NV-06 is in the final phases of pre-clinical development and will enter phase 1 clinical trials in 2000.

Novogen shares gained 18c to $3.32

Polartechnics

Polartechnics are focused on developing `Polarprobes' to aid in the detection of disease. These are based upon a high resolution camera and powerful real time computer image analysis software.

Polartechnics have an agreement with Johnson & Johnson which allows J&J to market Polartechnics cervical cancer probes in many areas of the world. Polartechnics receive a royalty on sales in addition to an amount for J&J being allowed to market the product. Polartechnics maintain control of the intellectual property.

Polartechnics are also working on an automated melanoma diagnosis system in conjunction with CSIRO and Sydney Melanoma Unit.

In November 1998 Deutsche Bank announced that it was investing $4.3m in the Polartechnics cervical cancer probe. The investment would allow Polartechnics further commercialisation of the device. The investment would be repaid from royalty streams from product sales in the parts of the world not covered by the J&J agreement.

In January 1999 the Therapeutic Goods Administration gave approval for the Polarprobe to be sold in Australia _ it is expected on the market in 12 months. In February large scale clinical trials in the UK were approved and the US FDA ruled that the product was a `non significant risk device'.

These announcements led to an increase in the share price from $2.36 in early January 1999 to $3.90 in mid April 1999. In July 1999 the share price was again strong as test results showed the skin Polarprobe producing good results at detecting melanomas.

Polartechnics are now looking to move to commercialisation of the Skin Polarprobe, with a strategic alliance likely.

New Listings

Below is a summary of how the some of the newly listed stocks have performed. The success of the bulk of these new listings indicates the markets desire for biotechnology stocks.

Only the float of Aquacarotene has been unsuccessful, on the first day of trading the shares which cost $1 closed at $0.50. The shares have not recovered since. 

Summary of Results

The table below summarises the latest reported results and financial ratios of the five major companies included in the Deloitte Biotech Index:

The results data above is a graphic illustration of the fact that biotechnology is a growing area and has not yet reached maturity. Like many companies in the internet sector many biotechnology companies are making losses yet are still highly valued by the market. This valuation is based upon the potential market for the technology under development and patents which the companies hold on this technology.

Market Information

All the above companies are currently trading below their 52-week highs. The wide range between the 52 week high and the 52 week low indicates the volatility in the biotechnology sector. Particularly worthy of note in this respect is Biota which was discussed above.

Other Players and Developments

All of the large multinational pharmaceutical companies are present in the Australian market and all are focusing on biotechnology as an area of growth. Around the world licensing deals between Pharmaceutical companies and small biotechnology firms are common and the acquisition of biotechnology companies by large Pharmaceutical companies are becoming more common. Recent deals include Schering-Ploughs Inc licensing AGI-1067 from AtheroGenics Inc in the US.

The Deloitte Biotech Index

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Deloitte's partners and staff are united in their belief that the best way to serve clients is to exceed their expectations. We do this by first understanding your business and the industry it operates in and then by using our expertise to deliver valuable results for our clients.

Call any of the following Life Science industry specialists to discuss how we can help meet your business needs.

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For information regarding the Deloitte Biotech Index, please contact:

David Black (02) 9840 7207 www.deloitte.com.au

© 1999 Deloitte Touche Tohmatsu. All rights reserved.

"Liability is limited by, and to the extent of, the Accountants' Scheme under the Professional Standards Act 1994 (NSW). This publication is of a general nature, intended as a background briefing only. It is not intended to be relied upon as, nor to be a substitute for, specific professional advice. No liability will be accepted for any loss occasioned to any party acting upon or refraining from acting in reliance on information contained in this publication." 

Copyright 1999 Australian Biotechnology Association Ltd.

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