AusBiotech wraps up a year in biotechnology

This year Australia’s biotechnology industry can celebrate Christmas knowing that despite the challenges of the global economy and the degree of difficulty in building a biotechnology sector, companies in Australia are doing an impressive job – and can be proud of the year’s achievements. By any comparative measure we are doing very well, with an impressive return on investment from a maturing stock of quality Australian companies.

The PricewaterhouseCoopers ten year report was released in October showing the Australian Life Sciences Index has consistently outperformed the NASDAQ Composite Index and the All Ordinaries since mid-2006. This is a little appreciated fact outside the biotechnology community, but one that we can rightly celebrate and be proud of.

Take away the three majors from the Life Sciences Index and the Report shows in 2008 the Index parted ways with the All Ordinaries and has dramatically outperformed it since, almost quadrupling its performance in the latest reading. In four years the often-cited index has failed to come anywhere close to biotechnology’s performance. The NASDAQ Biotech Index, perhaps the best comparative measure of US biotechs, hit a 12-year high in July, but was nevertheless trailing behind the Australian Life Sciences Index.

The leader board of ASX-listed biotech stocks continue their progress to market with trials in phase III, new product approvals, market launches, and now building sales for products, making partnership deals and acquisitions.

The last year has seen two significant firsts for the industry. We started this year with the news of the biggest phase I deal on record in Australia with Bionomics announcing a collaboration, research, and licensing agreement with US-based Ironwood Pharmaceuticals, worth up to US$ 345 million. The sector provided the first home-grown product that has made the journey from discovery to PBS listing. Pharmaxis is to be congratulated on achieving this milestone with the listing of Bronchitol in June.

The global financial crisis has had a long tail, which has cut deep. The European crisis continues unresolved and the US economy is taking longer to recover than expected. Weakening growth in China is impacting our economic environment… but Australia’s biotechnology industry is holding its own!

There is plenty to pin our hopes on for the future. This year saw the benefits of the new R&D Tax Incentive legislation begin to flow back into the industry. The Program that can be traced back to the Cutler Review recommendations, was a momentous and pivotal inflection point for Australian innovation; the type we as a community will look back on in admiration and congratulate its architects’ foresight.

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AusBiotech is proud of its role in campaigning for and supporting the implementation of the program. AusBiotech will be taking some more formal measurements early in the New Year as part of the CEO Industry Position Survey 2013, but we can already point to more than $18 million that has come back to the sector this year, mostly in cash refunds.

For example, Viralytics reported a cash refund of $1.5 million, Cellmid $748,000, Bluechiip $920,000, Phylogica $1.9 million. Stapharma has had $6 million approved for an overseas claim, Antisense estimated a refund of $670,000, Alchemia is to receive $2 million this year and $3 million per year over three years and Biota announced a $4.2 million offset.

Funding is scarce for young companies, so this section of the value chain is where governments can have a great impact - and the Tax Incentive is delivering. AusBiotech remains focused on the hard issues; on capital attraction; on delivering to members’ business bottom line; and to supporting the development of good public policy.

A trend that started more than a year ago is continuing as Australian biotechs attract growing interest from international investors. AusBiotech initiatives this year include an expanded offering of investment events, showcasing member companies.

In the midst of the GFC we are please to have been able to establish a sustainable investment series, which has gone from strength to strength. We now have an established offering of events both around and Australia and overseas, particularly in the US.

In October AusBiotech and Beacon Events, organiser of the largest resource sector investor event in the Asia Pacific Region – Mines and Money – announced a partnership to deliver biotechnology investor meetings in Hong Kong and Sydney until 2015.

The Hong Kong-based Beacon Events, serves the increasingly important emerging markets of Asia, providing cutting-edge, market-driven programs and synergy with AusBiotech’s move into the fast-growing investment hub in Hong Kong.

Hong Kong, with its direct access to China, is developing as a pivotal hub in the Asia Pacific region, and this is especially important from an Australian perspective as a regional neighbour. Private investment by Chinese and Hong Kong-based venture capitalists has burst forth in recent years, peaking at $1 billion in 2010 and reaching $573 million in 2011. The average Chinese VC investment in life sciences in 2011 was $25 million, compared to $10 million in the US.

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AusBiotech, with support from the Victorian Government, has this month begun a project to support Board and directors’ development and promote best practice reporting and governance.

This initiative will deliver two important resources to support biotechnology companies: an updated Code of Best Practice for Reporting by Life Science Companies; and the development and distribution of a companion document focused on governance for new directors and unique issues facing directors moving into life sciences for the first time.

Biotechnology companies face unique and specific challenges and issues at various stages of their development, such as long lead times for product development and capital-raising around clinical trials. The board of directors is a key factor in developing and implementing the right commercial and scientific strategy for a company.

The new project, with its two support documents, takes these unique and important factors into account and AusBiotech looks forward to these tools being made available to the sector. In addition to the support for directors and boards, the project’s resulting documents will provide a ‘best practice’ message to investors and others – further supporting the industry.

The Code and the companion document are expected to be launched in 2013.

In policy terms AusBiotech in 2013 will remain focussed on the roll-out of the Tax Incentive, advanced manufacturing and greater access to venture capital funds. AusBiotech will also continue to monitor and respond where appropriate to the ongoing raft of patent reviews, consultations and inquiries in this area.

The annual CEO Industry Position Survey for 2013 will begin in mid-January and provide an important opportunity for members to participate in the consultation process to determine AusBiotech’s policy priorities. Biotechnology companies are urged to keep an eye out for the survey and participate, as industry’s involvement is critical to the quality of the information, which AusBiotech use actively throughout the year to underpin our work on members’ behalf.

In a new development this year, AusBiotech has joined with CropLife Australia, Grains Research and Development Corporation and the National Farmers’ Federation to form a new industry group, the Agricultural Biotechnology Council of Australia (ABCA).

The Council has been established as a national coordinating organisation for the Australian agricultural biotechnology sector, to encourage informed debate on biotechnology through the provision of credible, balanced, science-based information - and will be chaired by Claude Gauchat.

The Council was pleased to attract the support of co-patrons: The Hon John Anderson AO and Professor Adrienne Clarke.

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While this message focuses on the commercial and policy aspects of our industry, the industry is working toward a legacy that will be valued by the community and enhance our quality of life – with new medicines, diagnostics, medical devices and food necessary for a healthy, prosperous Australia.

Australia’s position in the Asian Pacific Region in what has been dubbed the Asian Century, means biotechnology is poised in the right industry in the right region.

Over the past few years, Asia and the subcontinent have been investing staggering sums – billions of dollars - into biotechnology. The opportunities for Australian companies in Asia are real and imminent and the match between Asia and Australia is compelling. While our market and economy are relatively small in comparison, our achievements, our talent and our efficient way of doing business makes our companies attractive to foreign investors and partners.

The Board and team at AusBiotech wish you all a very happy and safe Christmas and look forward to working with you on your behalf to make 2013 the best year for biotechnology yet.

The AusBiotech office will close for the Christmas/New Year break from 1.00pm Friday 21 December and re-open on 2 January 2013 at 9.00am.

AusBiotech invites you to save the dates for the following key events:

20 - 21 March, AusBiotech Business Development Forum 2013, Adelaide

26 March, Australia China Life Science Summit, Melbourne

15 - 16 May, AusMedtech 2013 Conference, Melbourne

3 - 4 September, Tech Transfer Summit Australia 2013, Melbourne

29 October - 1 November, AusBiotech 2013, Australia's biotechnology conference, Brisbane

Please visit www.ausbiotech.org for more information or call + 61 3 9828 1400.