Biotechs show signs of renewed market life

So far in this quarter, companies in the sector have raised $119 million, compared with $27 million in the March quarter.

While the total raised is well below the $1 billion raised by biotechs in 2007, some analysts say it is an early sign that investors are returning to this highly speculative market segment.

However, a handful of companies, many with late-stage drug development projects, have attracted the bulk of the fresh cash. Pharmaxis - which is moving towards a European and US commercial launch of Bronchitol, its cystic fibrosis product - raised $47 million earlier this month, while Impedimed raised $15 million and CathRx $6.9 million in the quarter.

"The increased capital flow into the sector has been assisted by the strong gains in stocks in the sector, largely from the leading pack of tier-1 biotechs," said David Blake, biotech analyst and co-editor of industry publication Bioshares.

The health of the industry has improved sufficiently to support an initial public offering, the first in the sector for many months. Pallane Medical, which has merged with biotech company Dia-B Tech, has lodged a prospectus with the ASX to raise up to $15 million for the global commercialisation of a test that identifies viruses more accurately and quickly than those now on the market.

Mr Blake said a vanguard of biotech companies was well placed to benefit from an upturn in the economy.

"The capital raisings we have seen are part of this continuing theme of a certain group of (biotech) companies that are better placed, better structured and better organised," he said.

"They have collected the vast bulk of funds in the last few years and they are doing that again."

He said stronger biotech companies had been able to raise money because they had generated clinical success. "Three companies in that category are Chemgenex Pharmaceuticals, Pharmaxis and Peplin," he said.

Mr Blake said many biotechs had also undergone "painful restructuring", shedding staff and consolidating their operations to cope with the financial crisis.