Stocks to watch

The standout biotech stock for 2007 was CSL, but that's not news to anyone. CSL has long been Australia's most impressive biotech company and is proving remarkably attractive to investors.

It has managed to boost its market capitalisation a massive $9 billion from 2006, largely due to its thriving monopoly on blood products, revenues coming through from blockbusters such as Gardasil, and a very healthy drug pipeline.

Of the other majors, Resmed had an up and down year but is healthy, as is Cochlear.

Ex majors, Innovation Dynamics likes the look of many companies in late stage trials and all of those in the top ten in terms of market cap. "ChemGenex, Pharmaxis, Avexa and Progen; Mesoblast is going well, as is Cellestis, the diagnostics company, and Arana. Biota is always a good company and Solagran has done well," Hopper says.

Australia and the world

Innovation Dynamics noticed an odd trend towards more licensing deals and alliances with European companies in 2007 but is not sure if this is long-term. Certainly, Australia has always concentrated on the US for opportunities and very much still does. What does concern Hopper and Thorburn is that Australia is yet to break through in south-east Asia.

Hopper is the executive director of BioFusion Capital, which was set up with strong objectives in the Asia-Pacific region and an eye on building the bridges between Australia and its neighbours.

"The universities and certain governments are very keen to get technology in but it's very hard," Hopper says. "The universities here don't want to sell their start-ups to south-east Asia - they'd much rather sell to Philadelphia or Germany.

"At the moment people see sophisticated technology going into sophisticated markets, but in the meantime China and India are developing their own internal resources in research and development so I think it's going to be a bit of a crunch time in the future and it will be interesting to see whether Australia can compete in that market."

And of course we can't forget our southern neighbours as well. Innovation Dynamics includes an overview of the New Zealand biotech industry in its annual BioIndustry Review, and despite New Zealand's small population, Lyndal Thorburn says she is impressed.

"They have really got their act together on the agricultural side," she says. "What intrigues me is that there is a lot of money going into human therapeutics but I can't see much coming out the other side. They need to get that medical stuff out there."