BioWorld International Correspondent

A fall in the Nasdaq biotech stocks and a change in investor attitude has resulted in a sharp drop in Australian biotech indices since November.

Analysts contacted by BioWorld International had a range of explanations for the change, with one being that Australian investors that like to take risks now are putting money into small mining stocks.

The small or "spec" mining stocks, of which there are plenty on the local market, bear some similarities to biotech stocks in growth potential and risk. And, analysts said, they are now seen as a better bet than biotechs.

Other explanations include the lack of any real success story and the theory that the local stocks are moving in sympathy with the biotech sector of the Nasdaq market.

The Australian market boomed through most of last year (albeit turning down sharply in the last few weeks), with that boom extending to the resources stocks and, to a lesser extent, the biotech stocks. But the surge, starting around May for biotechs, came to an end late last year.

An index compiled by Melbourne-based stockbroker Intersuisse Ltd., which emphasizes smaller stocks, shows a decline of about 15 percent from November, to 6,828 by the end of March.

Intersuisse analyst Peter Russell said that he still considered biotech stocks a good investment, even after the losses of March, since the biotech index still is nearly seven times greater than when it started at a base of 1,000 in 1996.

Companies like Biota Holdings Ltd. in Melbourne have highlighted the market in previous years, but Biota long has fallen out of favor with the market and is suing GlaxoSmithKline plc over the market failure of the flu cure Relenza, which uses Biota's technology.

One possible leader was Metabolic Holdings, which had a promising obesity treatment in clinical trials, but questions arose about the treatments' trial results, and the share price since has more than halved to A63 cents (US48 cents).

Alison Coutts, director at EG Capital in Sydney, said that a biotech index kept by EG also shows the same decline in the market segment's general fortunes since late last year.

She noted that the sector is "inherently volatile" and can "swing back" at any time, but it is depressed at the moment, and part of the reason for that depression is the sluggish Nasdaq index.

A lot of money also is going into the resources sector, she says.

One company recently faring badly is Prana Biotechnology, of Melbourne, which announced that it was re-evaluating a treatment for Alzheimer's disease after problems arose in manufacturing material for a clinical trial. Investors slashed the stock price after the announcement, from A43 cents to A15 cents by the close of business on Friday.

But such is the general neglect of the biotech sector that the announcement and drop in share price went unrecorded by the mainstream media.