INTERVIEW: The Andrews view: hang on for a big 2003

The biotech shake-up will intensify in 2003 but the horizon looks inviting on the far side of the wave of mergers expected to roll through the sector over the next 12 to 24 months.

That's the view of Prof Peter Andrews, a leading member of the generation which has dramatically reshaped Australian bioscience in the last 15 years and a man who boasts a good track record in sculpting positive environments for young biotechs.

Andrews is one of the architects of Queensland's successful 10-year effort to graduate from bit player to starring role on the Australian bioindustry stage.

Among his other contributions, Andrews co-founded the state's premier biotech research conglomerate, the Institute for Molecular Bioscience (IMB).

He will start 2003 by formally stepping down from the IMB's helm to spend more time assessing larger trends and investing in them as a business angel heading his own company, Magic Pudding.

He sees a period marked by encouraging trends for the survivors who emerge from the current consolidation process.

Among the positive trends is the increasing reliance on small drug discovery biotechs by big pharmas to feed new drug candidates into the product pipeline.

The multinational pharmas, themselves shrinking in number through mergers, will expand their networks of alliances in line with their growing need to outsource the discovery process. That will usher in opportunities for small Australian biotechs who form the right linkages to make serious money, Andrews believes.

He sees a second region of longer-term opportunity for Australian bioindustry in the area of agricultural biotech.

In addition to its traditional research strengths in ag-biotech, Australia's natural resource base gives it a competitive advantage that it doesn't enjoy in the biomedical arena.

On a more parochial level, Andrews believes obvious opportunities exist for powerful collaborations in mammalian genomics between Queensland and New Zealand by exploiting their domestic livestock industries, for example New Zealand dairy cattle and Queensland beef.

Similar opportunities lie in plant biotechnology (New Zealand softwoods, Queensland hardwoods) and marine biotechnology.

As importantly, agbiotech successes could pave the way for public acceptance of the application of biotechnology in the energy and environmental sectors, he says: "It could well be the way the community comes to recognise the enormous potential for ending environmental degradation and energy rundown by virtue of using smart biotech."

Andrews concedes the predicted shake-up in 2003 is going to give "a lot of people practice in being out there in the cruel world... But it will all be to the good because out of it will come some seriously viable international biotech companies."

Creating swarms of young companies (a process aided by the Biotech Innovation Fund program which last year gave $250,000 to more than 80 individual start-ups) to be winnowed down by Darwinian market forces is probably the most efficient way to mould a robust bioindustry, he argues.

"We don't have the pots of money in this country which would be needed to drive large biotechs right from the start," Andrews says.

"The best an Australian start-up can hope for in terms of first-round VC money might be $2 million to $4 million. In the US, it would be five to 10 times as much.

"I think we need a lot more biotech companies, especially in areas not related to health, and the only way to get them is by starting lots of small ones, staffed by people getting out of universities and research institutes and getting their feet wet."

Andrews thinks Australia in future could "easily magnify the value of its biotech productivity by 10 to 50 times" if the nation chose to stimulate the process by investing more significant sums in the industry.

An analysis of US and Japanese figures adjusted for Australia's population suggests a target of about 150 companies with combined revenues of $AU50 billion by 2010 for Australia and 30 companies with revenues of $10 billion for New Zealand by 2010 would be a useful intermediate target, he says.

The figures takes into account the fact that the US data excludes medical devices and other industries which in Australia are included under the broad umbrella of biotechnology.

The corresponding employment target would be 30,000 core biotechnology industry jobs in Australia and 6000 in New Zealand.

"Interestingly, we already have about this number of companies in both countries, but their revenues are only a fraction of these international targets," Andrews avers (Australia's core biotechnology revenues, excluding pharmaceuticals, medical devices, food processing and so on are just over $AU1 billion).

"A key requirement thus appears to be growth in individual company revenues, though given our relative emphasis on the food and environmental industries, it seems likely that we may always have a larger number of somewhat smaller companies."