Capital keeps flowing into ASX Biotech shares in 2021

What is driving capital inflow into ASX biotech shares?

| More on:
woman in lab coat conducting testing representing biotech

Image source: Getty Images

Investor funds continue flowing into ASX listed biotechnology shares this year, with a total of almost $485 million of capital raised this year to date.

Adding the flurry of initial public offerings (IPO) undertaken in the biotech domain, one observes that this total increases to over $1 billion, according to today’s Australian Financial Review.

Here, we examine just what is driving this recent trend in capital inflows towards ASX Biotech shares.

What is behind the surge in inflows to ASX Biotech shares this year?

There has been a spate of capital raised for ASX Biotech shares this year, such as Imugene Limited (ASX: IMU), Immutep Ltd (ASX: IMM) and Aroa Biosurgery Ltd (ASX: ARX).

For instance, Imugene recently “completed an upsized $95 million offer”, issuing ~300 million additional shares at a price of 30 cents apiece.

Aroa also “banked $53 million in a placement and share purchase plan [SPP]” earlier this week to eligible investors at $1.165 per share. $5 million of this total is sought from the SPP.

There appears to be “four big reasons behind the recent flurry of [capital] raising” trends that have occurred this year.

These include the establishment of new equity-focused healthcare investment funds, outsized returns in the broad sector, and a cluster of collaborations with big pharmaceutical companies.

Moreover, it also appears the biotech sector “has the flavour of the month for investors”, as per the Financial Review.

Bell Potter Securities analyst Darren Craike was quoted saying:

A lot of generalist funds are looking for alpha [above market return] in their portfolios…so many have started to gravitate to healthcare where there have been some exceptional returns in the last two to three years.

Moreover, the trends look set to continue for the time being, with a number of pre-IPO’s on the cards.

To illustrate, Tissue Repair which is a regenerative medicine and aesthetic dermatology company, plans on “targeting a $25 million raise” via listing this year.

Additionally, upcoming biotech names Triad Lifesciences and Vitfrafy Lifesciences “are also confirmed to be pursuing listings” this year.

ASX Biotech shares snapshot

The basket of ASX Biotech shares contained within the S&P / ASX 200 Index (ASX: XJO) has provided a return of 116% since March of this year.

This select group has outpaced the overall broad index, which has posted a return of ~12.5% this year to date.

Such returns help to explain the attractiveness of ASX Biotech shares for Australian investors at the current standing.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

More on Share Market News