Australian (ASX) Stock Market Forum

Biotechs - Are they the flavour for 2007?

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silence said:
I'd like to see something other than mining become the flavour. I'm hoping for phosphagenics (POH) to take off - countless good announcements seem to do nothing to the price though.
Click to expand...
RBY is the same
 
Snakey said:
Since the start of the year quite a few biotech companies have taken off NAL, BPO, SOM, PNO just to name a few. Whats going on and has any one have any ideas why this is happening? Last year alot of Biotechs got hammered as the money went across to mining. Now there alot of over inflated mining stocks and some very cheap bio stocks. Any thoughts????
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Biotechs haven't been performing for some time...
Never really understood why Bios have been hit so hard, mind you that there
are some very promising companies out there... :banghead:
 
chops_a_must said:
Running pretty hard right now.
Click to expand...

Chops

XHJ is only healthcare stocks in the ASX 200 - only 10 stocks. The biotechs we are referring to here are mostly microcaps, so that graph really doesn't mean much in the context of this discussion. Also note that the majority of the index is taken up by CSL as it is weighted by market cap - no crap its moved up, CSL has gone mental in the last 2 years!!!!

If you were to paint a picture of the microcaps, I would think you would find that in the last couple of years there has been quite a large decline, with a recovery in the last couple of months in 06 and 07.

Cheers
 
reece55 said:
Chops

XHJ is only healthcare stocks in the ASX 200 - only 10 stocks. The biotechs we are referring to here are mostly microcaps, so that graph really doesn't mean much in the context of this discussion. Also note that the majority of the index is taken up by CSL as it is weighted by market cap - no crap its moved up, CSL has gone mental in the last 2 years!!!!

Cheers
Click to expand...
I'm well aware of this. It's just the only indicator I could find that was really remotely linked to the sector.
 
Dont know if any of you saw it, but there was an article on the Biotech sector in the Money section of the paper on Wednesday (Sydney).

It states average annual returns since 1986 have been 25.5% with the last three years receiving returns of 40%+! Is this mainly due to CSL?

CSL, Peptech, BIOTA and SIRTEX are listed as recommendations by the author as having a 'promising future'

any thoughts?
 
Jay-684 said:
Dont know if any of you saw it, but there was an article on the Biotech sector in the Money section of the paper on Wednesday (Sydney).
Click to expand...
Here is the article

http://www.smh.com.au/news/investment/a-wild-ride-that-can-pay-off/2007/01/22/1169330826278.html?page=fullpage

A wild ride that can pay off

Martin Roth
January 24, 2007

The pharmaceutical, biotech and life science sector has been one of the sharemarket's star performers.

As bird flu fears swept Europe and North America during 2005 and 2006, a small Melbourne biotechnology company was abruptly thrust into the spotlight. The firm was Biota Holdings, developer of the anti-flu drug Relenza, one of only two anti-virals that had proved effective in combating the lethal H5N1 strain of the bird flu (the other was Roche Holding's Tamiflu).

Relenza, described by immunologist Sir Gustav Nossal as "one of the greatest Australian research inventions", is in demand around the world. The US Government plans a $2 billion pandemic anti-viral stockpile, with Relenza expected to be responsible for up to 20 per cent of this. Last November, Britain's famed Royal Society and the Academy of Medical Sciences, in a joint report, called on the British government also to begin stockpiling the drug.

It is an Australian success story, another example of how this country so often punches above its weight in global medical research. Unfortunately, the Relenza story also illustrates why many investors shy away from biotech and pharmaceutical shares.

In August 2005, investors caught a whiff of Relenza's potential and Biota's shares began to soar. From about 50 cents at the beginning of the month, they touched $2.75 in mid-October before falling as low as $1.35 a month later. Occasional double-digit percentage price rises or falls within a single day were a phenomenon.

Meanwhile, Biota Holdings has not reported a profit since its June 2000 financial year, it does not pay dividends and it is engaged in litigation against Relenza's distributor, GlaxoSmithKline, for allegedly not promoting the drug vigorously. The case will not go to trial until next year and the outcome is, of course, uncertain.

The result of all this is many private share buyers cast their eyes over companies such as Biota, and even over market heavyweights such as CSL, and decide biotech and pharmaceutical stocks are best left to investment professionals or short-term traders. That is a shame, for the stocks have been stellar long-term performers.

In January, Commsec released a market analysis revealing that in the 21 years to 2006, the pharmaceuticals, biotechnology and life sciences sector was the best performing of the 24 Australian Stock Exchange industry groups, with a remarkable average annual gain of 25.5 per cent (capital gain plus dividends), compared with 14.1 per cent for the broader market. Second was the media industry group with a 23.8 per cent return, followed by retailing with 21.8 per cent.

Craig James, chief equities economist for Commsec, says much of the performance came from the outstanding accomplishments of pharmaceuticals and blood products company CSL, formerly Commonwealth Serum Laboratories, which was floated in 1994 at $2.40 a share and was trading at about $65 by the end of last year. However, he notes the sector had been outperforming the rest of the market even before CSL came along. Despite common belief, the sector is not more volatile than others.

"Biotech in Australia consists of a large number of small companies," he says. "Not all will do well. But companies that have found a niche, exploit that and live through the early stages of ramping up the company have gone from strength to strength. Those that are successful can be very successful."

Other trends are at work, too. An ageing population is an obvious and often-cited factor. The percentage of the population aged over 65 rose from 8.3 per cent in 1971 to 12.4 per cent in 2001 and is forecast to jump to 21.3 per cent by 2031. These people are expected to be huge consumers of pharmaceutical products and the drug companies are eagerly formulating lots of new ones to keep them happy.

Another compelling reason for the sector's buoyancy is explained by Gavin Duffy, senior analyst with E.L. & C. Baillieu. "Healthcare in Australia is underwritten by government funding and the big health insurers," he says. "Sometimes the big funds put pressure on costs but at the end of the day whatever's agreed is paid out. You don't get a bad debt element. Producing drugs is a guaranteed income."

He says in recent years there has been a degree of rationalisation within the industry, reducing competition. "Look at Sigma," he says. "It dominates the domestic market. The Federal Government may put pressure on it under the Pharmaceuticals Benefits Scheme but it covers the field from manufacture to wholesale to retail. It has opportunities to preserve margins."

Nevertheless, investors need to be aware of the drawbacks. This is a diminutive sector that represents less than 1.4 per cent of the market. (By comparison, it is more than 7 per cent in both Britain and the US.)

Eighty seven pharmaceuticals and biotechnology companies are listed on the ASX but most are tiny, with products that are still yet to become a commercial reality.

Only three make it into the S&P/ASX 200 index of the 200 largest companies: CSL, Mayne Pharma and Sigma (and of these Mayne Pharma is about to be delisted following its acquisition by US company Hospira). A further 19 are in the S&P/ASX All Ordinaries index of the 500 largest stocks.

Those companies that have any earnings at all tend to be on high price-earnings ratios. Dividends, where they are paid, are usually small. Some of the stocks are barely liquid. And they are volatile.

Commsec says over the long term they are no more volatile than other industry groups but short-term price movements can cause heart-in the-mouth moments for even seasoned investors.

David Blake is co-editor of the Bioshares weekly stock report and has been covering the sector since 1998.

"A lot of hype surrounds the sector and you have to get away from this," he says. "You have to focus on the business. You have to look on each company as a business rather than as a cure for this or that. Don't fall in love with an exciting product. Do your homework. Ask questions. Learn all you can."

He concedes novice investors might be better advised to concentrate first on another sector, where the inevitable mistakes could be less costly. "Not everyone understands market behaviour. It catches people out. For example, you should be ready to take profits if a stock runs up too much. A good company with good products can still see its share price driven up to a point where it is too high. So a stock might fall 30 per cent for no apparent reason."

But his optimism remains high. "When you get through some of the negatives you discover that it is a very attractive sector," he says. "There is phenomenal demand growing for these products. We have barely scratched the surface of treating people's health-care problems."

Biotech stocks with a promising future

CSL Gavin Duffy at E.L. & C. Baillieu describes the company as "a world leader that will just keep on growing". It is already a global leader in blood products and flu vaccines and some analysts say its Gardasil cervical cancer vaccine could earn billions.

Peptech (PTD) David Blake of Bioshares recommends smaller stocks including Peptech, Biota and Sirtex Medical. Peptech, a leading developer of antibody drugs, is already profitable. It has no debt and good cash holdings, as well as a strong income stream from royalties and licence fees.

Biota Holdings (BTA) Although Biota is not in profit it does have strong cash holdings. Its Relenza anti-flu drug has huge potential and the company has some promising drugs to treat influenza, respiratory problems and hepatitis in the pipeline.

Sirtex Medical (SRX) A world leader in liver cancer drugs, with fast-growing sales and profits. Hunter Hall Investment Management has taken a large stake in the company. However, legal proceedings between the board and the founder are a negative.
 
I've been moving large chunks of my portfolio over to biotechs in the last few months. RBY and BLT have given me some good movements but the volatilty is scary and I agree that you have to be prepared to sell on those peaks rather than have a long term commitment. It seems market sentiment often turns sour pretty quick even after good announcements - take RBY and BLT as two prime examples. Hype/Day-trading seems to drive these to excess. I guess part of this is that people find it so hard to value 'blue sky' stuff like a 'cure for aids'.

Despite vast quantities of resources in the ground what else does Australia have to offer the global economy apart from inventions (biotech advances being in that space)??

With water issues and environmental concerns can we continue to offer any other form of wares to the world? I've heard a number of respected public speakers and business minds talk about Australia's competitive differentiators and the like for moving forward in the next 20 years or so.... it wasn't all good... and I'm going with the theory that AUS is only left with innovation i.e. a brains trust sort of place... as it's future. I know that's a very black and white statement but it helps me to understand why we should consider the biotech sector as the next big thing for AUS market / economy.

In my opinion we're going to see biotechs go pretty hard in the next few years in Australia - the only question in my mind is how long to keep riding resource stocks before transititioning over to biotechs?

My portfolio is purely in those two sectors - Resources and Biotech. Although I'm going to take my biotech gains and move to some more stable less volatile sectors soon.

I don't expect everyone to agree - I'm just hoping to show a perspective.
 
Jay-684 said:
Dont know if any of you saw it, but there was an article on the Biotech sector in the Money section of the paper on Wednesday (Sydney).

It states average annual returns since 1986 have been 25.5% with the last three years receiving returns of 40%+! Is this mainly due to CSL?

CSL, Peptech, BIOTA and SIRTEX are listed as recommendations by the author as having a 'promising future'

any thoughts?
Click to expand...

I have been in and out of Peptech for some years...

Reality is that this stock is currently overlooked and therefor underpriced...
A true, or more accurate value of PTD is $1.75+, being the most cashed up Bio Co out of the lot.
Ozewolf... :horse:
 
ozewolf said:
I have been in and out of Peptech for some years...

Reality is that this stock is currently overlooked and therefor underpriced...
A true, or more accurate value of PTD is $1.75+, being the most cashed up Bio Co out of the lot.
Ozewolf... :horse:
Click to expand...

Which reality would that be? The "I own it therefore it should be higher than it is now reality?" PTD current price $1.56, current P/E 49x, book value $0.52 cps (including cash of $0.25 cps), FY06 revenues down -55% on pcp FY06 NPAT down -80% on pcp.

Care to enlighten us with how you come up with a valuation of $1.75+.
 
Anyone heard about (or holding) TIS Tissue Therapies a company engaged in research, development and commercialization of its international intellectual property in wound healing and tissue regeneration.

I can't find a thread - will start one if I can find out how.
 
Just creating a watch list for the bio's
Feel free to add ta.
blt,bpo,bta,cir,csl,cuv,gtg,iba,imu,lbt,mbp,nal,nls,nrt,pgl,pno,poh,psd,ptd,pxs,rby,rhc,rtl,sbp,som,tis,vcr
 
constable said:
Just creating a watch list for the bio's
Feel free to add ta.
blt,bpo,bta,cir,csl,cuv,gtg,iba,imu,lbt,mbp,nal,nls,nrt,pgl,pno,poh,psd,ptd,pxs,rby,rhc,rtl,sbp,som,tis,vcr
Click to expand...
coh, rmd
 
constable said:
Just creating a watch list for the bio's
Feel free to add ta.
blt,bpo,bta,cir,csl,cuv,gtg,iba,imu,lbt,mbp,nal,nls,nrt,pgl,pno,poh,psd,ptd,pxs,rby,rhc,rtl,sbp,som,tis,vcr
Click to expand...

AGX for whatever its worth
 
TheAbyss said:
ASX, you can still take a risk and swim the waters out to the boat! It hasnt left safe harbour yet.
Click to expand...

:) Indeed! Lets see if it holds at new levels. THAT would be a good sign.
 

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