The Australian Biotechnology sector provides investors with investment exposure to a growing number of companies seeking to commercialise leading edge technology that has a basis or application in the life sciences. These include drug discovery and therapeutic companies as well as companies involved in the commercialisation of medical products such as medical devices, diagnostics and drug delivery mechanisms.
Before considering investment in the Biotechnology sector it is recommended that you get a basic understanding of the science behind it. Biotechnology is a broad term used to describe a group of technologies associated with life sciences that are applied to achieve outcomes in areas including human and animal health, agriculture and food production, diagnostics, medical and veterinary devices, manufacturing and the environment.
Biotech research and news
ASX in conjunction with AusBiotech has recently updated The Code of Best Practice For Reporting by Life Science Companies (PDF 723KB). The Code is designed to bridge the “information gap” between the biotechnology industry and investors by providing a disclosure framework that identifies the key drivers of value for Life Science companies and gives guidance to companies on the information investors need to make informed investment decisions.Ultimately it is designed to promote and support investor confidence in the sector.
Investing in biotech companies
While there certainly are significant potential rewards to investing in Biotechnology, the sector has investment characteristics that set it apart from more traditional sectors of the market. Issues such as the novelty of the technology, the complexity of the underlying science and the early stage development of many of the companies mean that conventional valuation methodologies are often not appropriate when it comes to valuing an investment in biotechnology. It is important for investors to understand the risks of investment in the sector and the factors, events and milestones that create value for companies in the sector.