BioWorld International Correspondent

SYDNEY, Australia - The Australian Stock Exchange indicated that it will tolerate the practice of commissioned research reports, after seeing a number of them, but only if investors and the market are aware of their nature.

An ASX spokesman told BioWorld International that the stock exchange was not against the concept of commissioned reports, as long as investors understood where the report came from and listing rules were not breached.

If those conditions are met then it "is up to the investors and the market how they react," he said. "Transparency is the key."

The ASX's statements were prompted by the release by biotech companies of a string of paid-for research reports in recent months, including a report released last week on Melbourne-based Norwood Abbey Ltd. The 71-page report by the Cohen Independent Research Group in San Rafael, Calif., cost $22,000 and valued the stock at between A$1 and A$8.50 (US$6.57). Norwood's shares, priced at about A70 cents when the report was released, jumped 15 percent, although by the close of business on Monday, it had dropped back to A60 cents.

Other companies for which commissioned research reports have been issued include Metabolic Pharmaceuticals Ltd., also done by Cohen, but Metabolic did not initially indicate it had paid for the report with a mixture of cash and options.

Norwood senior vice president, corporate development, Bernie Romanin, defended the practice, saying that he "took umbrage" at any suggestion that the report had been commissioned to manipulate the share price.

He said the company was in the process of getting a Nasdaq listing and the report was part of the process of informing U.S. investors about the company. The company was also doing a series of presentations, but it also needed a report to give to potential investors a greater awareness.

At present, Norwood is too small to attract the attention of a broking house of independent research company, so the only way to get a report done was to pay for it.

Norwood checked several research groups before deciding to commission Cohen, he said.

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