Biotech in Queensland: beautiful one day, smart the next

Queensland's biotech industry, like its population, is squeezed into the state's southeast coastal corner.

In geographic outline, the industry strongly resembles a barbell with two centres of gravity - one in Brisbane, the other on the Gold Coast - joined by a long, more thinly-populated corridor of tech parks and companies.

Inside that zone, Queensland is cooking up a thriving biotech sector by successfully blending half a dozen hard-to-find ingredients.

The mix includes astute government leadership, a large research institute population, forceful scientists-turned-businessmen pursuing large ambitions and a touch of home-grown venture capital inputs. Also in the recipe are working partnerships with big pharmas such as AstraZeneca, GlaxoSmithKline and Merck, plus a few shining examples of early bio-start-ups successfully making their way in the wider world.

Apart from the first item - government leadership - Queensland hasn't outperformed NSW or Victoria by a wide margin in any particular area. But it has managed to combine the different ingredients in the right proportions and keep their momentum from flagging.

The results are impressive. In the past two and a half years, its bioindustry R&D spend has risen more than 300 per cent to about $200 million. By late last year, the state was claiming it had more jobs in the R&D and services segment of the bioindustry sector than either Victoria or NSW.

Bionic premier

At least 18 new biotech companies have been spun out, most of them since the government embarked in 1999 on a 10-year, $270 million bioindustry development program.

The key driver in all this is Queensland's ebullient and popular premier, Peter Beattie, a biotech enthusiast both on a personal level and by political calculation.

Beattie sensed a natural confluence between Queensland's traditional agricultural interests and biodiversity, the expansion of its world-class research base into biomedicine and the promise of biotech.

A consummate political salesman, he's communicated to the Queensland public his conviction that biotech is the state's ticket to ride on the 21st century's economic train.

"I give the State government five out of five," says Garry Redlich, MD of Brisbane biomed company Peplin Biotech.

"They have done an outstanding job in providing the right climate and a high level of encouragement (for bioindustry efforts).

"They are not direct investors but they have been generous in their support of a research infrastructure - and in the end, that infrastructure makes a big difference for how small companies fare."

The man responsible for translating Beattie's championship of biotech into nuts and bolts activity is Paul Lucas, the founding minister of the state's Dept of Innovation and Information Economy.

Lucas, a lawyer by training, has been dubbed Inspector Gadget by the local media for the enthusiasm he displays in his portfolio, which includes biotechnology.

The sums being poured into bioindustry under his stewardship are not trivial. Queensland's leading medical research establishment, QIMR, received $20 million in state funding last year. At the same time, it was given another $40 million, half from the Federal government and half from a private donor.

Besides contributing to a $100 million mega-centre of biotech research rising on the University of Queensland campus, the State has pledged $77 million to meet operating costs over a 10-year period.

It committed $8 million to the Gold Coast's Centre for Biomolecular Science and Drug Design last year and has pledged up to $20 million for a Centre for Nanotechnology and Biomaterials which is just swinging into operation.

Also being tapped to support bioindustry is a $100 million "Smart State" research facility fund meant to foster high-quality R&D and commercialisation of research across all disciplines. Among the money earmarked from that fund is $15 million to support biodiscovery initiatives.

Just what does the State expect in return for the vast amounts it has been pumping into the biotech infrastructure?

Lucas compresses the answer into a short mantra: "Our ultimate goal is to grow the state, help its economy develop, create jobs of the future for Queenslanders and attract talented people from overseas."

Tapestry

From one perspective, Queensland's bio-industry might be likened to a tapestry in which research emerging from academic institutes and other privately-funded or publicly-funded centres is being braided with venture capital to produce commercial spin-offs at an accelerating rate.

A central strand in the tapestry consists of 12 Cooperative Research Centres (CRCs) which have a life sciences theme and strong Queensland involvement. Among them are the CRCs for Australian Cotton, Diagnostics, Reef Research, Vaccine Technology and Tropical Plant Protection.

Parallel with them, and sometimes overlapping, are the research complexes associated with the State's seven universities, led by the University of Queensland and including Griffith University (which supports an R&D collaboration with drug giant AstraZeneca plus the Centre for Biomolecular Science and Drug Discovery on the Gold Coast, Centre for Molecular Neurobiology, Genomics Research Centre and the Heart Foundation Research Centre), QUT (whose commercial spin-offs include AGEN Biomedical, PanBio and Farmacule), Central Queensland University in Rockhampton (Primary Industries Research Centre, which deals with contraceptive bioimplants, functional genomics, bioconservation, molecular technologies and plant diseases) and the University of Southern Queensland (Centre for Rural and Environmental Biotechnology).

A third strand is composed of research organisations strongly affiliated with hospitals. The most significant are: Queensland Institute of Medical Research (Royal Brisbane Hospital), Gene Therapy Unit (Prince Charles Hospital), Mater Medical Research Institute (Mater Hospital), Queensland Clinical Genetics Services (Royal Children's Hospital), Sir Albert Sakzewski Virus Research Centre (Royal Children's), Wesley Research Institute (Wesley Hospital), Centre for Immunology and Cancer Research (Princess Alexandra Hospital) and North Queensland Cardiac Research Institute (Townsville General Hospital).

Standing above the landscape as one of the State bioindustry's crown jewels is the Institute for Molecular Bioscience(IMB), an integrated facility for gene discovery and biomolecular research.

Born about two years ago from the merger of several existing centres into a single heavyweight structure, IMB operates at the interface of biology, computing and chemistry. Its major research areas span genomics, structural biology, molecular design and medicinal chemistry.

Its commercialisation arm, IMBcom, has already helped launch half a dozen start-ups.

IMB staff numbers, now around 300 (two thirds of them scientists), are due to nearly double after it moves into a $100 million building on the UQ campus slated for completion later this year. CSIRO, whose biotechnology efforts have been concentrated in the livestock and marine areas in Queensland, will centralise its 100-plus biotech staff in the building as will the Dept of Primary Industries with about 50 workers. Blue chips

The final strand in the State's biotech tapestry, but one on whose strength all the others ultimately depend, is the swelling group of commercial biotech ventures who call Queensland home.

At their core lies a cluster of half a dozen companies who qualify as the bioindustry's blue chip businesses. They are either private or publicly-listed entities who have cracked the world market, or have attracted significant amounts of venture capital.

In the leading group are:

• Agenix: Since 1982 its monoclonal antibody diagnostic tests for blood clots have earned more than $60 million.
• Alphapharm: Specialises in patent-expired medicines. Has 550 employees.
• Alchemia: Develops novel and scalable methods for synthesising carbohydrates for therapeutic use. Has raised $23 million in venture capital in past seven years.
• Herron Pharmaceuticals: Privately-owned company producing non-prescription drugs.
• PanBio: Nearly 15 years old, has won a world market for the infectious disease diagnostic test kits it develops and markets.
• Progen Industries: Listed on the ASX in 1995, it has a lead anti-cancer drug candidate in clinical trials.

Surrounding them is a swarm of 15 to 20 younger companies at various points of the cycle, although most are in the earlier stages of the financing pipeline. They include:

• Benitec Australia: Gene silencing technology for animal and human cells.
• BioProspect: Bioprospector with ASX-listing and an agreement to mine the state's flora and fauna for useful compounds.
• Clinical Network Services: Clinical trials management organisation.
• Coridon: Gene delivery technology.
• Peplin Biotech: Biomed developing novel proprietary compounds for treatment of cancer, particularly skin cancer.
• Polymerat: Polymer surface technology start-up.
• Promics: Developing anti-inflammatory products, has first-round funding from StartUp Australia and Rothschilds.
• ProtAgonist: Protein-to-protein interaction blockers.
• TropBio: James Cook University spin-off, develops and markets kits to detect infectious organisms and monitor immune responses.
• Vaccine Solutions: Commercial arm of CRC for Vaccine Technology.
• Xenome: Develops pain-killing molecules derived from marine toxins.

A handful of biotech start-ups recently received votes of confidence in the form of Australian Research Council grants ranging in size up to $250,000. They include:

• Vacquel: An offshoot of Queensland University Research, Vacquel is testing a system that delivers in oral form vaccines which currently require subcutaneous delivery. Vacquel hopes to be trialling products in veterinary applications within 18 months.
• Nanomics Biosystems: One of the most recent arrivals, it was spun off last December from the University of Queensland's Centre for Nanotechnology and Biomaterials. It has developed a ceramic bead and linker system to enable the production and screening of large, encoded compound libraries via combinatorial chemistry methods.
• Australian Bioactive Compounds: Virtually the only company in the group based outside the south-east area, this northern Queensland company is working on a non-toxic bio-insecticide targeted at thrip, aphid or mite as well as fungi or bacteria.
• Mimetica: Only nine months old, it is based on eight years of research into a platform technology in drug design which describes ways to make new molecules with significant potential as drugs. The project involves chemical synthesis of peptide turn mimetics to come up with active compounds for targets of interest.

The money pot

Queensland's matrix of academic facilities, public and private research institutes and start-ups has spawned a host of promising ideas.

Not all will hit the business bullseye. The winners are likely to be those who learn best the high risk process of juggling a number of research vectors rather than putting too many eggs in one basket.

"The big wide world is a much crueller place than many new spin-offs understand," says Peplin Biotech's MD Garry Redlich.

"Companies that reach a critical mass of diversified risk will always win out over those concentrating on a single piece of clever research."

The process of transforming a biomedical innovation from the lab bench into a liquid company now costs an average of $US30 million. And the venture capitalists feeding in the finance must often also supply management expertise to company founders who in most cases are scientists, not businessmen.

Queensland's pool of tempting deals is deep enough to draw the attention of southern managers of the large investment funds. But it has also prompted the formation of multiple sources of made-in-Queensland risk capital for biotech ventures.

Their investment strategies are mostly concentrated on the pre-seed to middle stage opportunities and their backers run the gamut from sophisticated individual investors to pooled funds.

The principal players are:

• CM Capital Investments: Manager of a $42 million Innovation Investment Fund, CM Capital is about to close a second, much larger one raised primarily from superannuation funds. Probably the largest bio-centric venture capitalist physically headquartered in Queensland, it invests on a national scale, usually as part of a syndicate, and has a dual focus on biotech and infotech with expertise in life sciences and telecommunications. The partner in charge of biotech for CM Capital, Dr Carrie Hillyard, has a medical diagnostics background and sits on various biotechnology advisory committees at both Federal and state levels. In its portfolio are Alchemia and Cerylid BioSciences.
• BioStart: A pre-seed and very early-stage fund, it is a $6 million, three-year cooperative venture between the State government and NSW venture capital company Start-up Australia Ventures (which has independent stakes in Alchemia and ProtAgonist). Funds are to be dispersed in tranches of no more than $250,000 with the first recipients due to be announced in May./li>
• Orbit Capital: Basically a boutique investment bank which concentrates on high net worth individuals. MD Greg Baynton was in merchant banking and spent time with the Queensland Treasury working on the State's bio-funding strategies before founding Orbit Capital several years ago. Its current portfolio includes Alchemia, QUT spin-off Farmacule Bioindustries and Polymerat.
• UniSeed: A $20 million pre-seed and seed investment fund established as a joint venture between the commercial arms of the University of Queensland and the University of Melbourne.
• Medica Holdings: An ASX-listed pooled development fund which invests in early to medium-stage biotechs. Its portfolio includes Queensland start-ups Alchemia (18.6 per cent), and venom specialist Xenome (51 per cent) plus Melbourne bioinformatics company Cytopia (88 per cent). Medica MD Dr Kevin Healey is also Cytopia's CEO.

Regional clusters

Of regional biotech clusters outside the southeast conurbation, the most prominent is centred around Townsville and dominated by the Australian Institute of Marine Science (AIMS) and James Cook University.

AIMS was established with Commonwealth funds in 1972 and its marine biotechnology group provides one of the institute's principal research thrusts.

The group is scanning marine biota for new chemical compounds that can be shaped into pharmaceutical and healthcare products, and for crop protection bioproducts.

The institute has amassed one of the world's largest libraries of marine macro and micro-organisms on which bioprospectors seeking bio-active compounds with drug and agricultural applications can draw.

A commercial spin-off from its work on assays for screening marine biota is ToxiTech, which is focused on improved toxin detection systems to increase the commercial viability of shellfish production and drinking water treatment. It is hoping to market an accurate, low-cost biosensor and a strip assay designed to help regulate drinking water and seafood quality.

The 12-month-old company, recently awarded a $165,000 Biotech Innovation Fund (BIF) grant, is jointly owned by James Cook University and the Australian Institute for Marine Science in Townsville. AIMS is also doing work in environmental biochemistry, searching for functional biomolecules for specific applications, and has discovered new sunscreen products through basic research into the tolerance of reef corals to ultra-violet radiation.

JCU and AIMS are also two years into a three-year collaborative research program on to new herbicides funded by listed Melbourne chemical company Nufarm.

The project is looking into a potential new class of natural herbicides based on reef compounds which could target nine of the world's 10 most harmful weeds. It is synthesising a number of lead candidates in lab-scale studies and Nufarm's participation gives it exclusive rights to commercialise any of the program's findings.

Personality driven

Every industry has its set of dominant individuals who exert a disproportionate influence on its directions and chance of success.

In Queensland's bioindustry sector, the alpha personalities include:

Premier Peter Beattie and DIIE Minister Paul Lucas, who qualify by virtue of the weight they have swung behind the biotech sector. Beattie would also rate a listing because of his persuasive arguing of the case for biotech with the public and for raising the profile and prestige of biomedical workers.

Prof Ian Frazer, director of the University of Queensland's Centre for Immunology and Cancer Research. Frazer leads a team that is developing a vaccine against the human papilloma virus, which leads to cervical cancer.

Prof Peter Andrews, co-director of the Institute for Molecular Bioscience and a gifted communicator with a visceral understanding of the linkages between the research community and the private sector.

Prof John Mattick, co-director of the IMB, who boasts first-class scientific credentials and worldwide contacts.

Prof Michael Good, director of the QIMR, who has fostered ties between the state's largest medical research centre and the commercial sector.

Prof Mark von Itzstein, director of the Centre for Biomolecular Science and Drug Discovery. Still in his early 40's, he is a role model for younger scientists and a proven medical researcher as one of the developers of anti-flu drug Relenza.

Prof John Hay, vice-chancellor of University of Queensland. Understands the benefits of collaboration between academic, government and private sectors. Is focused on high research standards.