The Australian market is too small and too busy dealing with our mammoth banks and miners for a modest pharmaceutical company to flourish, unless it really knows how to sell itself. That’s some of the broad conclusion offered to us in this morning’s edition of The Distillery by the nation’s business commentators.
The Australian Financial Review’s Matthew Stevens delivers the definitive history of Biota as the company’s management pushes to move the company’s headquarters from Melbourne to Rockville, Maryland.
"Just as Biota stands proof of the quality of Australian innovation, so too it highlights how a shallow capital market (and you can read that how you want to) almost fatally constrains the creators of great intellectual property to own and effectively valorise the product of their genius. The fact is that Biota earns a relatively piddling royalty from its flu drug, which is almost exclusively manufactured and sold by GSK. That is because local investment markets have neither the will nor the deep pools of available long-dated capital needed to see projects like Relenza from thesis to product. The result is that the likes of Biota have to endure a fearsome dilution of the wealth that will be generated by what they own just to ensure there is any wealth generated at all. And that is why, in the end, Biota’s chairman, Jim Fox, has decided he is more than happy to go to Rockville.”
Business Spectator’s Stephen Bartholomeusz agrees, saying that it’s a reflection of the poor commercialisation of science-based products and a lack of understanding in the market.
"Both those issues are factors in the decision by Biota Holdings to merge with Nabi Biopharmaceuticals of the US and relinquish its ASX listing. The merger is more of a reverse takeover of Nabi by Biota than a true merger and, indeed, is more of a funding raising than a merger. Nabi is a company that has a lump of cash, a modest royalty income stream and not much more, other than its NASDAQ listing. It is that cash and that listing that has motivated the Biota move.”
The Australian’s John Durie says the banks and miners don’t leave a lot of room for companies like Biota and the market operator is becoming aware of this.
"The possible departure from the Australian Securities Exchange comes just as its boss, Elmer Funke Kupper, has started waving the flag for Australian listed companies. In stark contrast to his predecessors, Funke Kupper has finally woken up to the fact the ASX competes with the rest of the world for listed companies and must court corporates just as fervently as past ASX bosses knelt in worship at the front door of the big investment banks such as UBS. Funke Kupper has started issuing press releases to celebrate new listings, like last week's entry of Breaker Resources, the 23rd new listing this year. He is also trying to encourage smaller companies by allowing them to raise more money, subject to shareholder approval.”
And the Herald Sun’s Terry McCrann asks quite simply, what other choice did Biota management have.
"The realistic 'alternative' would be a real takeover of Biota at some point in the future. In those circumstances, shareholders would get cash, while directors, CEO and CFO – and a lot of research scientists – would get the flick. Biota, its patents and products, its accumulated knowledge and future prospects would sail across the Pacific never to be seen again. Now all that could still come to pass. But Biota now has a much better chance of building what could be described as a 'mini-CSL future' first.”
Finally on Biota, The Australian’s Criterion columnist Tim Boreham describes it as a "merger of unequals” and an effective back-door listing with a capital raising.
In other company news, The Australian Financial Review’s Tony Boyd asks whether Newcrest Mining chief executive Greg Robinson and his management team have what it takes to manage the gold miner’s complex portfolio of assets in the wake of the Lihir Gold acquisition. The Age’s Adele Ferguson picks up on the concerns for regional lending due to the worrying numbers at Bank of Queensland and the sudden delay to the Genworth Financial float. The writer also gives a right of reply to the ASX following her story from yesterday that Distillery featured. And Fairfax’s Insider columnist Ian McIlwraith looks at the shrinking pay packets at the top of Goldman Sachs Australia.
Meanwhile in economics, The Sydney Morning Herald’s Clancy Yeates has secured an advanced copy of a report from Deloitte Access Economics that expects the gulf between our mining sector and the rest of our economy to widen. The Sydney Morning Herald’s Ian Verrender says the Reserve Bank has ignored the calls from many corners of the economy for an interest rate cut for good reason – inflation, so far, has been right where it’d like it.
And in the world of politics, The Sydney Morning Herald’s Lenore Taylor speaks to the Business Council of Australia’s Jennifer Westacott, who is frustrated by Canberra’s divisive tendencies, while The Age’s economics editor Tim Colebatch praises Joe Hockey’s speech in London, with feeling.
THE DISTILLERY: Don't care one Biota
Jotters lament the lack of opportunity in Australia for innovators like Biota, while one finds a growing gulf between mining and the rest of the economy.
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