SYDNEY — Australians may now have more biotechnology stocks to invest in following the recent float of Metabolic Pharmaceuticals Ltd., but the market still lacks depth and remains very much announcement-driven, analysts said.

That is the consensus of market observers after the first full year of operation for the Health Care and Biotechnology Index, launched in September of last year, the first such index for the Australian market.

A number of stocks on the index are conventional companies such as OPSM Protector Ltd. (an eyewear company), but it also contains biotech stocks such as Metabolic, Biota Holdings Ltd. and Virax Ltd., all of Melbourne.

Thanks to the likes of Biota and Virax, the index has seen some exciting times recently. The share prices of both companies have soared on announcements that, as analysts agree, should not have been a surprise to any of the investors in the companies.

Biota's share price surged by A$0.55 to A$5.95 (US$3.69) in one day, when the company announced the FDA had approved a diagnostic kit using the company's flu cure technology. Virax's share price surged on a disclosure concerning some promising but, as company executives readily admit, inconclusive results concerning its anti-HIV technology.

Stocks Show 'Boom And Bust' Trend

Michael Carmody, an analyst at the Sydney stockbroker Burdett Buckeridge and Young said the market is "clearly" driven by such announcements. He said a stock such as Biota (with a main product licensed to Glaxo Wellcome plc, of London, now nearing FDA approval stage, plus the diagnostic kit) would not have been "run so aggressively" if listed on the U.S. exchanges. In the U.S. market, the announcement of each phase in the development process would have been factored into the price well beforehand, he said.

The index itself has had a mixed year since being launched. The index started at around 3,200 to peak at about 3,400 several times during February and March, before falling to a low of 2,800 during October, only to bounce back in generally better trading conditions to around 3,100.

Carmody said that much of the recent recovery may be due to the inclusion of Mayne Nickless (a very large company with some general health care assets) in the index in October.

Another biotechnology analyst, Craig Stranger of the Melbourne office of Lodge & Partners, said Australian stocks can swing widely, with an element of "boom and bust" in the pricing of stocks like Biota. The recently listed Metabolic Pharmaceuticals has seen little of the roller-coaster action of the other stocks, despite developing a product with popular appeal.

A spin-off from another listed company, Circadian Ltd., Metabolic is developing a fragment of a growth hormone which is believed to play a key role in burning fat cells.

Since listing a month ago in a $A12 million float Metabolic's shares have traded at around A$0.16 to A$0.17, compared to the issue price of A$0.20. However, Stranger notes that investors are still in the black as the free options issued along with the shares in the float, on a one-for-one basis, are now trading at A$0.07-A$0.08. *