Boom time for Australian life sciences sector

The December quarter marked an underwhelming end to a very strong calendar year for the Australian life sciences sector, according to PricewaterhouseCoopers’ latest Bioforum report.

The PwC Life Sciences Index declined 0.1% for the quarter, compared to a 2.6% increase for the All Ordinaries.

But the Life Sciences Index finished 2013 up 17.4%, compared to just 14.8% for the All Ordinaries. Smaller companies were the strongest performers, with the Life Science Ex Majors index growing an impressive 29.2% over the calendar year.

IPOs from Innate Therapeutics (ASX:IIL) - a company developing a drug candidate for the treatment of secondary progressive multiple sclerosis - as well as medical R&D company dorsaVi (ASX:DVL) helped ensure the quarter was the busiest period for IPO activity in the sector since the third quarter of FY11.

In his introduction to the Bioforum report, PwC partner Manoj Santiago said the challenge for the life science sector will be to sustain its performance going forward.

“Some commentators are calling this a ‘renaissance’ for the Australian Life Sciences sector. If that is the case, what will make this resurgence different from previous periods of growth?” he asked. “History proves that it doesn’t take much for capital markets to lose faith in life sciences companies.”

He said government support for the sector has improved since the last life science boom, particularly with the new R&D tax incentive. “These are steps in the right direction, but we don’t think they’re enough to truly extract the maximum value for the Australian economy that’s presented by the sector’s performance.”

During the fourth quarter, the government also confirmed it will exclude businesses with incomes exceeding $20 billion from claiming R&D tax concessions.

The top biotechnology performer on the ASX over the past four quarters has been Admedus (ASX:AHZ), which has delivered a return of 638% over this time. Oncosil Medical (ASX:OSL) was second with a 420% return, followed by iSonea (ASX:ISN) with a 379% return and Prana Biotechnology (ASX:PBT) with a 267% return.

The bottom performers were Pharmaxis (ASX:PXS) with a -92% return, Safety Medical Products (ASX:SFP) with a -75% return, Prima BioMed (ASX:PRR) with a -65% return and Advanced Surgical Design & Manufacture (ASX:AMT) with a -52% return.