Biotechs Find Cash As Market Thaws
The Age
Wednesday September 3, 2008
AFTER months of being frozen out from raising capital on the sharemarket by tanking share prices and investors' flight from risk, life sciences companies are starting to return to the market.
Several successful capital raisings in the past few weeks will soon be joined by the sector's first initial public offering in several months as signs that the capital market has begun to thaw.The raisings are buoyed by the fact that the sector has outperformed the market as a whole for the past three months, according to data gathered by Biotech Daily. The industry newsletter's top 20 index - which measures the performance of 20 leading companies in the sector but excludes the three largest, Cochlear, Resmed and CSL - rose 14.3% in August compared with a 3.2% rise in the All Ordinaries Index.The latest result means that over the past three months the biotech index has risen 4.9% against a fall in the All Ordinaries of 9.6%.Leading the charge back into equity raisings was Peplin, which is developing a weed-derived gel to treat actinic keratosis, a pre-cancerous skin condition. The company last month arranged a private placement of $US24million ($A28million).Peplin's raising follows an aborted attempt to list on the technology-focused Nasdaq stock index in the US and coincided with a shake-up of the company that ousted chief executive Michael Aldridge and replaced him with US-based chairman Tom Wiggans.Despite the shelved Nasdaq plan, Peplin managed to place the shares at what amounted to only a 2% discount."It was a huge success for the company," Mr Wiggans said. "We all know that capital markets, frankly, are awful."There are a lot of companies out there right now taking capital at any price they can get it and we fundamentally sold at market."The sector's drought-breaking IPO is set down for mid-October when cancer treatment developer Beta Pharmaceutical intends to list after raising up to $5million.Some companies are desperate for cash. The Survival Index managed by newsletter Bioshares gives 21 out of 93 listed companies less than six months until they hit zero, given the cash balance and cash burn rate."They're hoping like hell we've got sunny skies and they can go out there and raise money," said Bioshares editor David Blake. "If you look at that Survival Index, there are certainly a lot of companies that are in a difficult position."Not all capital raisings have been successful. Vaccine developer Avantogen was able to raise only $1 million in its private placement, arranged by its adviser BBY.
© 2008 The Age
