Biotech & Life Sciences
The biotechnology sector and life sciences industry are thriving in Australia, yet there are no major indices tracking this market. iQDEX is now providing this benchmark to investors and the industry by tracking the full spectrum of Australian companies, from early stage biotechnology companies through to large scale global pharmaceuticals.
Australia has a thriving biotechnology sector and broader life sciences industry, particularly applied to medical care and human health. Deep capital markets support these industries with a healthy appetite for biotechnology and the life sciences. A recent report on the Australian healthcare and biotechnology sector by the ASX outlined a combined market cap of $111 billion for the top 100 healthcare and biotechnology stocks1.
Despite the strength of this sector, there are currently no major indices that track the entire spectrum of companies. For example, the S&P/ ASX 300 set of healthcare indices track biotechnology, pharmaceuticals, life science and healthcare equipment companies within the ASX 300, however, the vast majority of companies in these sectors are outside of the ASX 300. iQDEX’s set of indices captures the full spectrum of Australian companies from early stage junior biotechnology companies through to large global pharmaceuticals. iQDEX serves as a complete benchmark for these industries in Australia.
These indices provide a balanced measure of the sector by using a modified market capitalisation weighted methodology. This method imposes an 8% cap on the weight of any one company within the index at rebalancing. For more information, please see the rules section.
iQDEX comprises of two indices:
iQDEX Biotechnology All Caps Total Return Index: Reuters Instrument Code: .IQBIOTECTR
The iQDEX Biotech All Cap index is designed to benchmark the performance of ASX listed medical biotechnology companies. The index captures all stocks on the ASX for companies operating in the biotechnology sector. This is index currently consists of 36 stocks.
iQDEX Life Sciences All Caps Total Return Index: Reuters Instrument Code: .IQLIFSCITR
The life sciences index is a benchmark for the broader industry tracking the performance of companies with medical devices, pharmaceuticals, diagnostics, etc. in addition to biotechnology. This index currently consists of 103 stocks.
Base Level: Both Indices commenced on 30 June 2015 with a base level of 100
Together these two indices will highlight the performance and activity of the industry in one platform. Highlighting early stage to developed biotechnology companies to set a standard within this high performing sector.
1 ASX, Health Care and Biotechnology Sector Profile, April 16, 2015
Universe: All ASX listed companies within the healthcare sector (per Global Industry Coding System, “GICS”)
iQDEX Biotechnology: To be included in the Index companies must be listed on the Australian Stock Exchange and operate within the Biotechnology sector. Review of each company’s operations and pipeline is undertaken, rather than relying on appointed GICS sub codes to determine if the company operates within the biotechnology sector. This ensures all index constituents are truly biotechnology companies and not a miscoded company from a closely related field such as the medical device industry.
In line with the European Federation for Biotechnology’s definition of biotechnology2, this index considers a company to operate within the medical biotechnology sector, if a significant part of their products or service offering requires the use of cellular and biomolecular processes in advancing human health.
iQDEX Life Sciences: To be included in the index companies must be listed on the Australian Stock Exchange and operate within the one of the following sectors per their GICS code:
- Life Sciences Tools & Services;
- Health Care Technology;
- Health Care Equipment; or
- Health Care Supplies.
There are no restrictions on liquidity or market cap for the indices. This allows the index to capture the full spectrum of companies in the sector, providing an accurate benchmark for Australia, which has a high proportion of early stage companies that do not meet typical liquidity and market capitalisation restrictions.
Methodology: The Index uses a modified capitalisation weighting methodology, which is not adjusted for float. The index weight of any single stock is capped at 8% and the excess weight is redistributed proportionately over the remainder of the index constituents.
The index is rebalanced and additions/deletions are made after market close on the third Friday after the close of each quarter. The index is calculated by Thomson Reuters, utilising their corporate actions methodology, which is available here. The indices are calculated on a daily basis by a dedicated Thomson Reuters support team.
2. Bull, A. T., Holt, G., and Lilly, M. D., Biotechnology: International Trends and Perspectives (Paris: Organisation for Economic Co-Operation and Development, 1982).