ASX INVESTMENT TALKS · intellectual property base lies in science not generally regarded as...

SPEAKER: Stuart Roberts, Senior Analyst Healthcare and Biotech, Bell Potter LOCATION: Sydney DATE: March 2013

ASX INVESTMENT TALKS Investing in the Australian biotechnology sector

DISCLAIMER: The views, opinions or recommendations of the presenters are solely their own and do not in any way reflect the views, opinions, recommendations, of ASX Limited ABN 98 008 624 691 and its related bodies corporate (“ASX”). Information and material presented at the seminar is for educational purposes only and does not constitute financial product advice. Investors should obtain independent advice from an Australian financial services licensee before making investment decisions. No responsibility is accepted by ASX for any loss or damage arising in any way (including due to negligence) from anyone acting or refraining from acting as a result of this information or material. © Copyright 2013 ASX Operations Pty Limited ABN 42 004 523 782. All rights reserved 2013.

The stocks of biotechnology companies without revenue streams from product sales or ongoing service revenue should always be regarded as speculative in character. Since most biotechnology companies in Australia fit this description, the speculative designation also applies to the entire sector. The fact that biotechnology's intellectual property base lies in science not generally regarded as accessible to the layman adds further to the riskiness with which biotechnology ought to be regarded. Investors are advised to be cognisant of this risk before buying any Australian biotech stock.

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BENEFITS TO INVESTORS OF THE BIOTECHNOLOGY SECTOR

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• Inefficient pricing • Large returns • Potentially very large returns if the investment

is well-timed

BIOTECHNOLOGY IS RISKY

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• The sector is speculative • Investors need to do their homework

WHAT IS BIOTECHNOLOGY?

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‘Biotechnology’ is a catch-all phrase to refer to companies involved in three main activities: • New drugs • New medical diagnostics • New medical devices

WHAT’S DRIVING THE SECTOR?

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• An ageing population • More chronic health issues • More scientific knowledge • Larger companies losing productivity edge

AUSTRALIA IS WELL KNOWN FOR ITS SCIENTIFIC HEROES, LESS FOR ITS COMMERCIALISATION OF SCIENCE

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Lord Florey (1898-1968)

Sir Macfarlane Burnet (1899-1985)

Robin Warren (1937 - ) and Barry Marshall

(1951- )

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MESOBLAST (MSB) / CEPHALON DECEMBER 2010

• US$130m upfront

• US$119m equity investment by Cephalon

• US$1.7bn in milestones

Mesoblast retains manufacturing rights for stem cells, with prospects for high ‘royalty equivalent’

PHARMA WILL PAY UP TO GET NEW DRUGS – EXAMPLE 1

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ACRUX (ACR) / ELI LILLY DECEMBER 2010

• US$50m upfront

• US$87m on FDA approval

• US$195m in sales milestones

PHARMA WILL PAY UP TO GET NEW DRUGS – EXAMPLE 1I

HOW TO EVALUATE COMPANIES

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1) Go for large market opportunities 2) Phase II data is important 3) Understand the regulatory pathway 4) DO YOUR HOMEWORK!

THANK YOU, AND STAY BULLISH

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Stuart Roberts, Analyst, Healthcare and Biotech,

Bell Potter Securities Email: sroberts@bellpotter.com.au

Tel: +61 2 8224 2871

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