Reading the biotech tea leaves – part one
The world of biotech is changing so often it can be a bit hard to keep up with the rate of change within the industry, let alone keep up with the scientific breakthroughs happening in labs all around the world.
2016 in biotech is shaping as an interesting year, to put it lightly.
Last year we had the much-vaunted Innovation Statement from the Prime Minister telling us that he wanted Australia to be an ‘agile’ nation.
We will have to wait and see whether that will flow through to the biotech space.
Then there’s the well-documented woes of biotech stocks in the US after a bull run which lasted years.
Which begs the question: is the current difficulty in the market a correction, or the start of something more substantial?
Another question being asked is what are the trends in tech which are set to dominate the space over the next year?
With those questions in mind, Finfeed spoke with a raft of players in the biotech space about what they expect to see in the industry over the coming year. In this two-part feature, Scott Power senior analyst RBS Morgans and Stewart Washer, chairman of Orthocell, Cynata Therapeutics give us their top five points of interest.
Scott Power – Senior Analyst Morgans (Emerging Healthcare Space)
Scott Power has spent the last twenty years investing in and researching emerging companies.
Firstly in his role in the venture capital industry with QIDC and more recently with Morgans which he joined in 1997.
Here are Scott’s top five biotech issues for 2016
E-Health and Telehealth
I think there interest in technology generally, and I think health lends itself to many technology applications.
There’s a lot of cumbersome work practices and waste in the healthcare sector which lends itself to the better use of technology.
I think globally the technology sector is performing better, so we’ll start to see more tech companies go after this space.
The innovation statement
I think what the Prime Minister is trying to do is encourage innovation across a number of areas, and the ‘emerging healthcare sector’ as we refer to it is a potential beneficiary of that.
We’ve all been around to know that the sort of political comments that get made take time to translate into any sort of concrete result – but that’s not to be dismissive or critical. It’s a very positive platform to talk about.
Over time there will be some very interesting developments to come out of the Australian market on the back of that.
Stocks to watch
Impedimed Limited (ASX:IPD) is one we’re looking at, and what they have developed over the last number of years is a system which monitors minor changes in [lymphatyc] fluid levels in the body.
That has application across a number of conditions and diseases...but it looks like they’re going to get into the heart failure market, which is new for them.
Early changes in fluid level or your weight can be an indication of early-stage heart failure. The earlier you identify a condition, the earlier you can start treatment.
IDT Australia (ASX:IDT) are a manufacturer of active pharmaceutical ingredients and also run clinical trials.
They have recently bought a suite of generic drugs from a large multinational company, and they’re looking to get them re-registered and sell them as generic drugs here. That type of transaction is done internationally but hasn’t been done a lot in Australia, so it will be interesting to see how that plays out.
Has the biotech sector run out of steam in the US?
Over the last couple of years there’s been a massive boom in the biotech market, but in the last few months that’s run out of steam and has been affected by the global volatility.
I think on the back of such a big run, based on the volatility around at the moment, my gut feel is that the run is over for another 12 months or so.
Immuno-oncology is attracting a lot of interest lately, and it’s because the technology is now at a point where it has matured and it is ready.
We’ve seen several big companies have drugs approved in the space so we’re in that sweet spot now.
I think a lot of the bigger companies have been the beneficiaries of early-stage biotech companies which really went through a series of successful clinical trials subsequently the larger companies have jumped into the space.
Stewart Washer, chairman of Orthocell, Cynata Therapeutics (ASX:CYP), Minomic International
Stewart Washer has 20 years of CEO and Board experience in medical technology, biotech and agrifood companies.
Previously Washer was the CEO of Calzada Ltd (ASX:CZD), the founding CEO of Phylogica Ltd (ASX:PYC) and the CEO of Celentis where he managed the commercialisation of intellectual property from AgResearch in New Zealand with 650 scientists and $130m in revenue.
Washer was Chairman of iSonea Ltd (ASX:ISN), Resonance Health Ltd (ASX:RHT) and Hatchtech Pty Ltd, a Director of iCeutica Pty Ltd, Immuron Ltd (ASX:IMC) and AusBiotech Ltd.
It’s an impressive CV, so what does he think will happen in biotech over the next year?
The innovation statement
I think at the end of the day we’re all still sorting through the details of what it actually means to us...but the whole statement I think will help private start-ups rather than mature companies that are already established.
The whole feeling on innovation has moved from innovation should only exist in mining companies to quite the opposite, so we’re getting audiences with investors that we’ve never been able to get. The whole feeling has shifted and people are catching onto that.
Blip, dip, or blippy-dip?
I think we’re in a period of growth in Australia. We didn’t see that boom in Australia you saw in the US , so during that period you saw interest in our companies behind those in the US.
I think it’s more of a correction in the market. There’s so many mature companies doing so many good things and actually making money now across the sector that the market simply can’t ignore it.
It’s not like the dotcom boom when the companies weren’t actually making money, but had website hits. If anything I think it may serve to separate the wheat from the chaff, and the good quality stocks will run hard.
Digital will touch everything
There’s a little bit of crossover occurring, and that’s happening in an area called digital health. That touched wearables which can track all sorts of things.
We’re not talking another Fitbit, but rather being able to apply smart-sensors to be wrist-worn or body-worn that are tracking certain health indicators. We’re talking heart rate, even neurological effects.
With smart algorithms, we can turn the data from those devices and make a wellness device which can monitor us and tell us what to do and not to do, and also provide a heck of a lot of data to doctors and clinicians.
Regenerative medicine will feature prominently
This has been something which I think has been poorly defined in recent years. It’s used as a throwaway term to describe growing organs and all sorts of longer-term things...but what is making some really good inroads now is using stem cells to repair things.
Mesenchymal stem cells are a big thing right now. With those you can treat inflammatory diseases, auto-immune disease, and help a whole range of people.
There are about 400 trials underway at the moment, so that’s going to be one of the bigger things happening this year.
The other regenerative medicine is where we’re repairing organs with your own cells, or autogenous stem cells.
That’s something that’s getting a lot of international attention at the moment.
Australian biotech stocks will get more coverage, from an unlikely source
I think Australia will be more biotech literate, but mainly by proxy. We’ll start to see US analysts writing on ASX-listed stocks.
When we start to see a lot of smart analysts in the US and Europe writing...and hopefully we’ll see a re-growth in our analysts here.
It’s a real problem for the coming year that we have a lack of biotech analysts in Australia, because a lot have left the sector. I think US analysts may fill the gap there so investors will become a lot more savvy and literate in the space.
Liked this? You can read part two of our series here.
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