Australian biotechs partner far and wide

There's no tyranny in distance for some globetrotting Australian biotechnology companies, writes Michael Vitale

Successful biotechnology companies understand that partnerships must be an essential part of their business plan. Only the very largest biotechs can hope to take a product all the way from concept to market -- most will need to rely on other companies at various points along the path from bench to bedside.

You might expect that Australian biotechs, being located so far from the world's major development clusters and product markets, would find partnering a challenge. Yet the data show that, as the Australian biotechnology sector matures, its members are increasingly able to form significant alliances with overseas companies. Moreover, the flow of idea is not one-way -- increasingly, overseas biotechs are licensing intellectual property to their Australian partners, not just from them.

Tracking biotech partnerships is as much art as science. A search of the archives of Australian Biotechnology News and the databases of Recombinant Capital (Recap, www.recap.com) turned up more than 75 partnerships between Australian biotechs and overseas partners between 2000 and 2005, as shown in the table below. Without question, some alliances were either not reported or were missed in the search, meaning that the partnership picture is more extensive than described here.

The group of overseas partners is quite diverse, comprising 68 different companies for the 76 partnerships. These partners range from the very large (Genentech, Merck, and Johnson & Johnson, for example) to the very small, and while most (48) are American companies, there are also partners in the UK (7), Germany (3), France (2), Canada (2), and six other countries. One partnership was reported with a Japanese company, and one with a Korean company, but Asia is otherwise absent. Perhaps surprisingly, there is only one reported partnership with a New Zealand company, that between Sydney-based EvoGenix and Auckland's Genesis Research and Development. Clearly, trans-Tasman collaboration has some room to develop.

Most of the overseas partners (55) were other biotechs, while 13 were pharmas. Cancer drugs and diagnostics were by far the most frequent focus (16 partnerships), with central nervous system disorders and infectious diseases the focus of four partnerships each. As might be expected, more than half of the partnerships involved a licensing arrangement of some type, while another quarter were based around co-development or collaboration. As noted above, licensing deals are now being made in both directions -- Acrux, EvoGenix, Prima BioMed, and other Australian biotechs are using IP in-licensed from overseas as part of their development programs.

The financial details of most partnerships are not disclosed, even in 'biobucks', the notional amount to be paid if everything goes exactly according to plan. Bionomics announced a US $50 million agreement with Johnson & Johnson in 2002, and Amrad reported a US $112 million deal with Merck the following year, but no partnership of a similar size has been announced since. Among more recent disclosures are Genetic Technologies' (GTG) US$7.5 million license to Genzyme and the AUD$2.0 million arrangement between ChemGenex and UK biotech Vernalis. The era of the megadeal may have ended, or at least paused until the overall biotechnology investment climate improves.

The list of partnerships between 2002 and 2005 contains some poignant entries, such as Biota's September 2000 agreement with GlaxoSmithKline and Amrad's January 2000 deal with Serono. The latter was cancelled abruptly last year, and the former is now the subject of a lawsuit between the two companies. It is likely that at least a few of the other reported partnerships have come apart as well, albeit less publicly.

Amid continuing conversation about the need for consolidation in the Australian biotechnology sector -- conversation that has gone on for years, while the number of biotechnology companies has increased steadily and the number of domestic mergers has been very close to zero -- it may be appropriate to pay more attention to overseas partnering. Although potentially challenging to create and maintain, overseas partnerships can bring many of the same benefits that are touted for mergers, without the expense or the drama. As the number of partnerships grows, so does the base of experienced advisors and service providers who can help structure such arrangements. Australian biotechs would be well advised to consider overseas partnering as an integral part of their strategic plans.

Michael R Vitale is a professor at the Australian Graduate School of Management in Sydney, and a regular contributor to Australian Biotechnology News. He can be contacted at michaelv@agsm.edu.au