Biotech innovation the southern way

South Australia doesn't bother trying to compete with larger states in volume terms in the biotech game - it just does things a little differently, writes Kate McDonald.

Earlier this year, Bio Innovation SA, the South Australian government-funded biotech industry development body, announced a novel agreement to establish a $35 million venture capital fund. Good news for all but nothing that unusual, until you discover that the partner in the venture is an industry superannuation fund looking to invest some of its $3.9 billion in funds under management.

The South Australian Life Science Venture Capital fund, an agreement between Bio Innovation SA and the Motor Trades Association of Australia (MTAA) Superannuation Fund, is a landmark deal in Australia, one of the largest for the state and probably the only of its kind in the country.

The question of why a super fund for the motor trades would be interested in the biotech industry is easy enough to answer, Bio Innovation SA chief executive officer, Dr Jurgen Michaelis, says.

"They did their due diligence, they have been advised by Access Economics on the viability of the industry and they liked what they saw," he says. "Adelaide has one of the fastest-growing biotechnology industry clusters in Australia. I believe the outlook for the biotechnology industry is now brighter than ever and I expect a strong response to this new fund."

Bio Innovation SA was established in 2001 by the South Australian government to assist company formation and to create the commercial and financial environment to facilitate growth in the SA bioscience community. It provides business mentoring for companies, grant allocations and infrastructure development.

The hub of the industry is the suburb of Thebarton, where 90 biotech companies are currently located, employing about 750 staff. Bio Innovation SA is also managing about five hectares of land at Thebarton to build a business incubator, which will open at the end of next year.

"The building will consist of shared tenancies where companies can rent their own offices and laboratories," Michaelis says. "They will get their company name on the door and that's where they'll start off and get going."

The wheel of fortune

Assistance with infrastructure is one of four elements to what Michaelis calls 'the wheel of fortune' in developing a long-term and viable local sector.

"One is intellectual property, to assist researchers and universities with transferring intellectual property from the public sector to the private. This is a free service as our costs are covered by the state government.

"The second part is access to finance. We provide grants through a very simple process. Industry and researchers can apply for grants for projects, for management or for infrastructure. We have six different grants and no grant rounds. This means that each grant is awarded on an as-needed basis.

"We also provide assistance in obtaining federal grants and we sometimes provide help in writing grant applications. And we help to provide access to venture capital."

Michaelis does not believe that attracting venture capital is as difficult as many in the industry are wont to complain.

"It's not difficult at all. We work on the premise here in SA that if you create the deal flow - the opportunities for others to invest - venture capitalists and private equity will come. Good quality companies will always attract interest. So far, we have assisted our companies to attract close to $60 million in private equity."

The third aspect of his wheel of fortune is infrastructure, hence the development of the Thebarton precinct and the new business incubator. And the fourth area is management, long a difficult proposition for life scientists looking to commercialise their research. This is where Michaelis hopes to have the biggest effect.

"The management expertise of this organisation is available to anyone in SA. We can assist with raising capital, running companies, listing companies on the stock exchange ... We also have programs in place to attract more senior management into SA."

The management

One of these programs is the soon to be established Entrepreneur-in-Residence program, in which an international bioscience entrepreneur will be invited for a fixed period to assist start-up companies, even to the extent of acting as an interim CEO.

Competing against powerhouses like NSW and the two big movers and shakers in biotechnology investment, Victoria and Queensland, is not part of South Australia's plans, Michaelis says. Again, SA has to look at doing things a little differently.

"The other states have enormous funding programs to underpin research outcomes, long-term strategies to build a bioscience community, whereas Bio Innovation SA is very much focused on translating research outcomes to industry.

"It's a different situation because we don't have the financial power as we are a smaller state in terms of population. However, biotechnology clusters have never been built in big cities: Cambridge, for instance, or San Francisco 40 years ago. There are things you can do in a smaller city, like networks and relationships, that you can't do in a big city. If resources are tight you come up with other ways of doing things."

One example of doing things a little differently is vivoPharm, which started about three years ago as a pre-clinical service provider to the pharmaceutical and biotechnology industries in toxicology and cancer drug testing.

"This is an interesting case study in which an entrepreneur, from Adelaide, through his business expertise and drive and our support is now getting the majority of business from overseas, particularly North America and Europe," Michaelis says. "Within 18 months of starting it is a profitable business and now employs about 20 staff."

The South Australian Life Science Venture Capital Fund will be managed by an independent fund management company, Terra Rossa Capital. It is expected to make its first investment later this year.