* Drug makers line up to list as IPO market rebounds
* Investors with taste for risk switch from mining to health
* Miners under pressure as investment boom fades
By Maggie Lu Yueyang
SYDNEY, Nov 6 With a track record of funding
junior miners, Australia's IPO market is now warming up to
something that might be just as risky as the diggers - drug
Mining stocks have come under pressure over the past year as
Australia's decade-long mining investment boom fades and top
consumer China takes a slower lane to growth.
Investors with an appetite for risk, who may previously have
been lured by the promise of riches under Australia's vast
Outback, are now turning their attention to start-up drug
"The early stage (drug) companies are high-risk and it's
akin to a junior mining explorer, so investors that are in that
sort of risk profile are quite likely to look at biotech as
well," said James Posnett, manager of listings business
development at the Australia Securities Exchange (ASX).
The S&P/ASX 200 health index, which includes the
world's No.2 blood products maker, CSL Ltd, and hearing
implants maker Cochlear Ltd, has soared about 33
percent in the past 12 months, versus a 27 percent fall on the
S&P/ASX300 Metals&Mining Capped Index.
A National Investor Sentiment Survey in September found that
48 percent of respondents named healthcare as a sector where
they were looking for opportunities, more than any other. Mining
and energy ranked fourth at 44 percent.
The previous survey results in October 2012 had mining at
the top with 51 percent, compared with healthcare at 31 percent.
Healthcare companies are now looking to cash in on
Australia's surging IPO market, which is expected to rebound
this year to levels not seen since the global financial crisis.
They will join broadcaster Nine Entertainment Co Pty Ltd , property investment manager GDI Property Group and
Kohlberg Kravis Roberts-owned mining services company
Bis Industries - some of the non-health companies already lining
up to list.
Australia's notoriously shallow pool of venture-capital
funds leaves small healthcare firms, some of which have little
but clinical trials to show to investors, little option but to
tap the stock market to finance their research.
The return of healthcare companies considering IPOs comes
after lean years from 2008 to 2012, when Thomson Reuters data
shows only seven such firms floated with shares valued at a
total of $212 million.
This year has seen two healthcare IPOs already. The biggest,
in-vitro fertilisation company Virtus Health Ltd,
raised about $333 million at its June debut and the stock has
gained more than 30 percent since then.
Down the track there are at least seven more healthcare
companies that either have filed listing plans to the ASX or are
mulling a float in 2014.
On the mining side, there were 218 listings on the ASX from
2008 to 2012, raising an average $420 million a year. That has
slumped to seven listings so far in 2013, raising a total of
just $34 million.
"I think the market has been positive in general, so
(it)wouldn't be bad timing (for an IPO)," said Darren McKennay,
CEO of Sydney-based medical devices supplier LifeHealthcare,
which is considering an IPO valued by local media at A$100
Other potential listers include Melbourne-based animal drug
maker Nexvet Biopharma Pty Ltd, which is hoping to raise up to
A$30 million next year, and Innate Immunotherapeutics Ltd, which
said it is targeting a A$12 million float.
RISK AND REWARD
While it might seem counter-intuitive to compare miners with
drug makers, for investors the profile is similar.
Drug companies, particularly those at early-stage trials,
are much like junior miners with a promising field that has yet
to move into production.
"Early-stage biotechs have a high probability of failure,"
said Anton Uvarov, a senior healthcare analyst at financial
services firm RM Capital.
Balancing the uncertainties over trials and research,
Australian drug makers have the advantage of an aging population
at home and increasing demand from Asia's burgeoning middle
Australia's pharmaceutical exports jumped 6.2 percent to
A$4.1 billion in 2012, and industry body Medicines Australia
says the value of drug exports to Asia could leap fivefold by
But for every success in the pharmaceutical industry there
are many more failures.
"If you happen to get the one or two that have done
extremely well then you've done OK," said Don Williams, chief
investment officer at Platypus Asset Management.