Cock-a-doodle-doo…

I’m abroad at the moment and I have been getting up very early each day to try and catch up on the morning news back in Australia. Fortunately, a lot of people have also been helping me to stay on top of news flow while I am away and several people forwarded me Tony Boyd’s “Chanticleer” article in the Financial Review – “Biotech Stocks in the Wild Wild West“. Outstanding article, and spot on in a lot of ways. It also made me appreciate what polished journalism looks like rather than the type of hacking you’ll find on this site.

The specific examples given in the article – Prima Biomed and Sirtex – are two excellent case studies in why Australia’s biotech market doesn’t function effectively. Partially, as Tony alludes, it is a cultural phenomenon – the “wild wild west” – but it is also very much a function of Australian continuous disclosure rules that were (in my opinion) really established with resource securities in mind rather than the specific needs of biotech. To be clear, most mature market economies have some degree of “timely” disclosure obligation for their stock markets. But in Australia it is far more prescriptive than, say, the United States, where outside of periodic SEC-mandated reporting requirements, there is no affirmative disclosure obligation unless there is a specific duty to disclose by the directors of a company.

In the case of Australian biotechnology companies, there are two types of directors that further mess up the “timbre” of disclosure. There are the very conservative, incredibly risk-averse, usually non-biotech “professional directors” that don’t have the domain knowledge or the industry expertise to really be part of a management guidance process. As a result we tend to see appropriate disclosure timing but muted content that tends to invoke something between confusion and speculation. We also see a surprising number of academics on Oz Biotech boards who are not really equipped to shepherd the process of public market communication and usually just do their bit to screw it up.

At the other end of the spectrum are the cowboy directors that blatantly abuse the listing rules in order to spruik their companies and maximise the level of stock market drama around their equities. I dislike this behavior immensely, particularly companies that announce:

  • That a patent has been filed (I also don’t care much for announcing when a patent has been granted either, but let’s not go there right now).
  • Pre-clinical / animal models, especially without peer review.
  • Non scientifically or clinically-significant interim data point in a clinical study.
  • Clinical end-points without a peer review process or availability of the data.
  • That a regulatory package, submission or status/exception has been filed.
  • Participation at conferences where there is no disclosure of clinical information or no investor presentation.

One other thing we don’t have in Australia is the really heavyweight scrutiny and involvement of organisations like the US NIH, National Cancer Institute (part of the NIH), the National Science Foundation, the AAAS, etc. These organisations unwaveringly lash out at shoddy science communication in the marketplace and will often draw attention to unfounded claims. They also play a far more active role in public education than, say, the NMHRC. The FDA is far from the only organisation with teeth and influence. Moreover, in the US, the FDA not only has jurisdiction for marketing claims in relation to clinical trials, but actively polices scientific conferences and gatherings to make sure that claims are appropriate.

In Australia, the TGA has jurisdiction for medical/product advertising but clearly doesn’t have the teeth to make Oz biopharma companies worry about too much about borderline appropriate forward-looking statements in the process of product development. The resulting laissez faire culture means that often Australian biotech executives seem oblivious to the external perception of their disclosure and announcement shenanigans, especially when engaging with international partners and sources of financing. For example, in the US, the individual responsible for regulatory affairs in a biotech company would sooner resign than agree to a forward-looking press release indicating the expectation of a positive FDA review. Anyone in the industry knows that the FDA is likely to nix it on principle, or even worse, make it an extremely painful process.

In my view, this hurts the perception of Australian biotechnology a lot. It would be interesting to put a working group together to establish a best practices guidance document for directors of ASX-listed companies based on “peer” stock markets in other countries where biotech has a more robust sector reputation. I really think this is one place where Oz biotech can really clean up its act – it will do wonders for the perception of quality, and it could help to prevent exploitation of a very retail-centric market place with plenty of money, but not much understanding of what information really means.

Anyhow, great article, Tony!

2 thoughts on “Cock-a-doodle-doo…

  1. Pingback: NVG, ANP, PYC, ACL, OBJ : A Week in Contrast | The Long Tail

  2. Pingback: Uscom : Burn Notice | The Long Tail

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