Biotechnology finds favour after the tech wreck
Biotechnology stocks have not been hit with the same disease affecting technology stocks over the past six months, according to a Deloitte Touche Tohmatsu survey.
In fact Deloitte says biotech stocks were "the flavour of the month" in the last quarter, as investors tried to find another CSL.
The latest Deloitte Biotech Index, released today, found commercial interest in Australia's biotech sector had rebounded after a plunge in its stockmarket fortunes six months ago.
Indicative of the level of interest was that 13 new biotech companies have listed, or are about to list, on the Australian Stock Exchange since July.
"Certainly it's the flavour of the month or the flavour of the last three months," says Deloitte Life Sciences partner Glen Sanford. "There hasn't been the same number of listings in other sectors."
Deloitte Life Sciences client director David Black says the profile of the biotech sector has risen over the last 12 to 18 months, helped by news from the US about the strength of the sector and the success of CSL in Australia.
"Nobody wants to miss out on the next CSL, if you can double your money in a year you're doing well," Black says. CSL shares have more than doubled in the past year to around $34.70 when the latest index was calculated.
Sanford says the latest Deloitte Biotech Index shows Australian biotech stocks have not been significantly affected by the tech stock correction in April.
"Despite the upheaval of stocks witnessed in the third Deloitte Biotech Index released in July, existing biotechnology stocks have steadied and new entrants have flocked to the market to capitalise on investor interest.
"Biotechnology stocks have continued to attract investors, often at the expense of other technology stocks."
At September 29, the market capitalisation of the index's 47 ASX-listed stocks had reached $11.89 billion, a 32.5 per cent increase on the figure at June 16.
Sanford says the Deloitte Biotech Index continued to outperform the ASX all ordinaries index with drug and blood product company CSL again powering much of the growth in the sector.
The Deloitte index rose 7.8 per cent in the three months to September 29, but actually fell 1.5 per cent if CSL was excluded.
Sanford says the index has since dipped slightly, falling 3.1 per cent between September 29 and October 20, however, the index still showed a healthy rise of 4.5 per cent for the period June 30 to October 20.
Black says a large number of recent and upcoming biotech listings have share options attached.
"In the recent listings of floats which have come to market over the past three months, we have noticed an increasing number of companies are offering share options to potential investors," he said.
"The increase in the availability of options enables investors to benefit from any future upside in biotechnology shares without spending large amounts today.
"The popularity of options clearly indicates investors expect biotechnology share prices to rise."
Recommended for you
As the government announces a public inquiry into the collapse of Dixon Advisory, risk adviser Richard Silberman has detailed the three areas that typically lead to an AFSL's collapse.
With a growing number of advisers now running their own business, they need to pivot their career identity to being a business owner rather than just as a financial adviser if they want to futureproof their business.
Zenith Investment Partners has launched a range of new managed account portfolios over the past quarter, including on Insignia Financial’s Expand platform.
The financial services technology firm has officially launched its digital advice and education solution for superannuation funds and other industry players.
