Biotech survey shows advanced manufacturing heading overseas

The annual Biotechnology Industry Position Survey (2014) shows a worrying trend: advanced manufacturing associated with this industry of the future is following traditional manufacturing and there has been a sharp increase in the number of companies 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), prompting calls for further tax reform to enable Australia to be internationally competitive.

The survey, conducted by AusBiotech and supported by Grant Thornton Australia, saw a slight rise from last year in the number of companies manufacturing, in addition to a clear shift to more companies manufacturing overseas, now 54% up from the 36% recorded in 2013.

Dr Anna Lavelle, CEO of AusBiotech, said: “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.”

AusBiotech believes that as Australia’s window of mining construction-driven prosperity begins to close, and car manufacturing phases out, building Australia’s capacity as a technologically innovative country is vital for our economic future.

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

Australia has a strong competitive advantage in ‘high-tech, high-cost, low-volume’ manufacturing to elaborately transform goods such as medical devices and bio-pharmaceuticals, and a burgeoning biotechnology and life sciences industry that is globally impressive.

Michael Cunningham, national head of life sciences Grant Thornton Australia, said: “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. 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.”

As R&D and patent box incentives become more commonplace around the world, a number of governments have demonstrated that to stay ahead, it is necessary to offer a competing environment. 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. Supporters recommend that the government consider adopting the structure of the UK Patent Box model and adapt the policy to suit the Australian environment.

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 intending 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.