Advanced manufacturing heading overseas, says survey

AusBiotech has released the results of the Biotechnology Industry Position Survey (2014). Conducted by AusBiotech and supported by Grant Thornton Australia, the survey finds that advanced manufacturing associated with the biotech industry is following traditional manufacturing and heading overseas.

The survey showed 73% of respondent companies are manufacturing: 44% in Australia and 54% overseas (with a crossover of 25% that manufacture both in Australia and overseas). In 2013, only 36% of companies were manufacturing overseas.

Dr Anna Lavelle, the CEO of AusBiotech, said the survey results are prompting calls for further tax reform to enable Australia to be internationally competitive.

“Australia would benefit enormously from a well-targeted tax incentive to attract and retain R&D once it reaches commercialisation, its benefits and the associated high-tech manufacturing,” she said.

“Sympathetic policy settings are critical to aid the structural transformation of Australia’s economy toward high-tech, knowledge-based industries, which have the capacity to generate a globally competitive economy, higher exports and sustainable, high-skilled jobs.”

Michael Cunningham, national head of life sciences Grant Thornton Australia, added, “It’s imperative that Australia takes action to remain competitive and relevant on the world stage, especially when other economies including the UK or Singapore are already reaping the benefits of their tax regimes and some Australian companies are seeking these nations to develop our IP.

“Maximising Australian innovation, and reinvigorating the manufacturing sector in Australia, largely depends on the existing R&D Tax Incentive being complemented with a tax regime that can secure Australia’s competitiveness for the future.”

Australia already supports the R&D phase of IP creation via the R&D Tax Incentive. But AusBiotech and a number of industry bodies and businesses are advocating for the introduction of the Australian Innovation and Manufacturing (AIM) Incentive, a ‘patent box’-style incentive to keep home-grown IP once it reaches commercialisation, as well as associated manufacturing, in Australia.

“If Australia is serious about becoming a knowledge-based economy, we need public policy that will encourage IP and its spillover benefits to stay in Australia, thereby creating wealth and jobs,” said Dr Lavelle.

The AIM Incentive is designed to address the gap that leaves our IP vulnerable and support Australian innovators and manufacturers, while retaining our home-grown IP and attracting IP created overseas to be commercialised and managed from Australia. Cunningham said the incentive would “see the government provide tax relief based on the retention of IP ownership and associated commercialisation of IP in and from Australia”.

Other key findings of the Biotechnology Industry Position Survey 2014 include:

• The industry’s outlook for the coming year is bullish with 81% of respondents expecting their business to grow, and 70% of companies intend to hire more people.
• The R&D Tax Incentive was very well received by the industry and its intact preservation remains the number one public policy issue within the industry.
• The number of companies identifying the Australian operating environment (economic conditions and public policy) as conducive to growing a biotechnology company improved significantly this year, up to 38% (from 16%: 2012 and 24%: 2013).
• Respondents remain cautiously optimistic regarding the change of government. A significant majority are opting for a ‘wait and see’ approach.
• Positive shifts in investor sentiment both locally and internationally have translated into an improved funding position for many respondents. The number of companies holding less than 12 months’ cash decreased to 22% this year (37%: 2013). Only 33% of respondents were definitely planning on raising capital in the coming year, while a further 17% flagged fund raising as a consideration.

The full report can be found here.

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