Investors are still punting on explorers, it's just that they're in medical research. Just look at the share prices of Prana Biotechnology, which has climbed about 50 per cent in the past month, and Nanosonics, which has shot up 85 per cent in the past three months.
Barry Henderson, a one-time high-flying small-cap fund manager for Colonial First State, now invests for himself. He says biotechs are a standout for those looking to take a little risk.
"Biotechs are a natural place to invest," he says. "These stocks can go up, even if the market is going south."
Henderson owns shares in a number of biotechs, including Nanosonics (NAN), a medical-device company whose "Trophon EPR" disinfects ultrasound probes used for pregnancies. Its product is distributed exclusively by GE Healthcare in the US and its stock has climbed as sales accelerate.
The sector has been a big beneficiary of increasing expenditure on health by the ageing population. Many of the best-performing companies have a big research capability, but they also have earnings and, in some cases, pay dividends.
Among the biotechs that have doubled in the past 12 months is Sirtex Medical (SRX), whose "SIR-Spheres" treatment for liver cancer uses radioactive isotopes to target liver tumours that are inoperable. Its sales mainly come from the US and have been growing quickly as the treatment goes from being a last line of defence to the first for oncologists.
The recent performance of Prana (PBT), which is researching a cure for Alzheimer's disease, has taken many market watchers by surprise. In late September last year, it was at 26¢; in the past month, after a couple of announcements, it has shot up as high as 42¢, and it has a market cap of $145 million.
It has two early-stage clinical trials in progress, one for Alzheimer's and another for Huntington's, which is also a neuro-degenerative disease. Its stock has climbed on news that equates to high levels of patient interest, but not definitive results. The Huntington's results are due in October, and the Alzheimer's in March next year.
With Prana there is an element of the "Bradbury" effect as it is one of the last standing in the hunt for a cure for Alzheimer's. In August last year, industry giants Pfizer, Johnson & Johnson and Eli Lilly all but threw in the towel after spending billions of dollars on research.
There is a big unmet medical need. The Alzheimer's Organisation estimates dementia costs about $600 billion a year globally. "We're hoping to make a dent in that," Prana's chairman and chief executive, Geoffrey Kempler, says, "but our market cap is still very low, even after the steep increase."
Its cash levels are also low - about $16 million - and it has no pharmaceutical partner with deep pockets to fund trials.
Richard Hemming edits the fortnightly newsletter Under the Radar Report: Small Caps.
Prana forces the pace