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Plenty of bad news will get swept under the carpet during the current financial turmoil but smaller companies are finding the good news is getting ignored too.

Three biotechnology companies made important announcements in September and would normally expect their shares prices to jump immediately. But a resounding silence has followed their statements to the stock market with investor attention absorbed by bank bail outs and crashing global stock markets.

Brigitte Smith, managing director of GBS Venture Partners, a venture capitalist specializing in life science companies, says the market would normally respond to positive news from the companies but their announcements have been lost amongst the bad news.

“The current market is fantastic if you are gutsy enough to get into life sciences,” she says.

“There have been several companies which have hit some very important milestones which really make a difference to their value.”

Smith adds she is worried that by the time the market normalises, significant results will be overlooked as old news.

Medical dermatology company Peplin announced in September that it was starting phase 3 clinical trials of its PEP005 gel, designed to treat a skin condition that can lead to cancer. Chief executive officer Tom Wiggans said the trials, to be conducted here and in the US, meant the company was entering the final stage of stgelopment of the product. About half all Australian adults have the type of skin lesions treated by the gel, which can be used at home over two days, reducing the time and discomfort of traditional treatments. Peplin’s share price has fallen from 80 cents to 38 cents over the past year.

GBS led a $US24 million financing into Peplin in August and this private placement and Peplin’s cash reserves will be enough to fund the trials.

Brigitte Smith says the venture capitalist has followed Peplin for seven years and seen it reach a number of milestones. “It is getting better and better all the time.”

Another company in which GBS has an investment is ChemGenex Pharmaceuticals, listed here and on the NASDAQ. The company is completing trials on its omacetaxine drug designed to treat a form of drug-resistant leukemia and expects to make its final submission to the US Food and Drug Administration (FDA) in the middle of next year. It raised $12.9 million in September from a private placement and will use the money to fund the trials.

Sunshine Heart has a medical stgice that aims to assist people with moderate heart failure, whose options tend to be limited to a transplant or complex open heart surgery. The stgice is designed to improve blood flow and to reduce the workload on the heart. It requires a one-hour operation and operates outside the blood stream, reducing complications of surgery.

Smith says that over the last year the market has been waiting for the company to hit a couple of substantial milestones. The product has been tested in humans in Australia and New Zealand but investors have been waiting for it to announce approval from the FDA to try the product on patients in the US.

Sunshine announced in September that six US medical institutions would begin to enroll patients in the trial and the FDA had approved reimbursement, so the company would earn revenue from the program. Smith says the share price should have risen three-fold on this announcement, reflecting such an important breakthrough for a medical stgice company. “The price hasn’t budged. People should educate themselves on the story.”

That is the problem for the investor with no medical or scientific knowledge. There are over 70 biotechs listed on the ASX and while there is a group following them, including scientists and specialist investors such as GBS, assessing the companies can be difficult for everybody else. It is also easy to get sold on the story. With companies researching drugs to treat terrible diseases or stgices that reduce the pain and cost of treatment, who wouldn’t want them to succeed?

Smith says investors can sort the good stocks from the rubbish by following the experts. She says the presence of specialist investors on a company’s share register are a good proxy because they are able to evaluate the research and assess what is needed to get to commercialisation. If they invest it shows that not only do they rate the company’s work but that its story has placed it ahead of others in this capital-hungry sector. “These companies can invest anywhere they want in the world,” points out Smith.

Many biotechs will announce when they have attracted a significant investor or drug company onto their share register as it could move the share price. Investors can also find out major shareholders from the company’s list of its top 20 shareholders.

“A lot of the biotech and stgice companies do not have enough money and are at a really early stage. They have been oversold because they are risky but these three companies have been oversold just because they are part of the sector and I think people should be differentiating between them,” says Brigitte Smith.