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Big potential in healthcare for a watching brief on the brain



FLOAT WATCH: Tim Morris From: The Australian August 17, 2011 12:00AM

OUTSIDE North America,  the Australian Securities Exchange hosts more companies reliant on external finance than any other of the world's big stockmarkets.

COMPANY: Cortical Dynamics Ltd
SHARES ON OFFER: 20 million
MARKET CAPITALISATION: $30.6m (fully diluted)

With recent capital flows concentrated towards natural resource ventures, support for health technology developers has been fairly thin.

The industry has fostered just 2 per cent of new ASX floats during the past three years and the malaise is compounded by poor performances from recent debutantes.

Not one healthcare float since late 2007 has managed to hold above its listing price, so with inspiration clearly lacking, could this month's listing of Cortical Dynamics deliver enlightenment?

The company aims to commercialise a new brain monitoring system developed at Melbourne's Swinburne University of Technology. Primarily employed by anaesthetists for patients undergoing surgery, the global brain monitoring device market is a billion-dollar-a-year industry.

The technology being developed by Cortical Dynamics professes to deliver improved brain readings over traditional methods, in turn reducing risks of patient overdose or, even worse, consciousness during surgery.

Since its formation in 2004, Cortical Dynamics has invested more than $4m developing prototype brain monitors using the technology while conducting pilot trials to establish its benefits.

Before the technology can be marketed, Cortical Dynamics needs to conduct further product development, clinical trials and gain regulatory approvals. As float proceeds are poised to fund these activities during the next two years, what breakthroughs could they deliver for shareholders?

The float is a good outcome for former shareholders of Biopharmica Ltd (ASX: BPH), which funded the company's pre-IPO development. In 2007 Biopharmica's majority stake in Cortical Dynamics was distributed to shareholders on a one-for-one basis. The float offers a tenfold return for these former Biopharmica investors.

Now controlling about half of Cortical Dynamics share capital, the actions of these investors are likely to determine its post-float performance.