Investment opportunities: The next big thing

In every biotechnology boom period there are technologies that receive a lot of attention, from venture capitalists, from the wider investment community, and invariably from the media. These technologies are usually touted as the 'next big thing', and often end up disappointing the market because they take much longer to develop into products than anticipated.

Among some of the biggest of the next big things that have made appearances in the last few years are monoclonal antibody therapeutics, gene therapy, antisense therapy, genomics, and genetically modified organisms. But often, it seems that while these technologies go out of favour with investors for a while after the hysteria dies down, researchers continue to refine and improve the technology and eventually a more realistic recognition of the value is apparent.

Think about monoclonal antibodies for a minute. In the early to mid-1990's, monoclonal antibodies were predicted to be the next big thing for combating a variety of diseases. But it is really only in the last couple of years that the promise of the technology has come through -- early attempts were plagued by problems of humanising the molecules to avoid immune system problems. Now of course, there are a couple of high-profile monoclonal antibody drugs on the market (Glivec, anyone?) with more on the way.

Genomics was another over-hyped technology. From the reports flying around the world in the late 1990s, genomics would rapidly lead to new drugs and on that basis, a whole new sector was born. But it's now widely recognised that while genomics has a critical place as a tool for learning more about diseases and identifying targets for drug discovery, new drugs still require a 5-10 year development period. On the other hand, the knowledge being gathered about how tiny genetic differences can have big effects on disease mechanisms is leading to a new focus on personalised medicine undreamed of a decade ago.

So what is shaping up to be the hot science for biotechnology in the next few years? With the current upswing in the market, the time is almost right for the next big thing to take off.

According to GBS Venture Partners principal Dr Geoff Brooke, while the last wild go-around of biotechnology VC investment in the late 1990s to 2000 focused on platform technologies, especially genomics and companies developing tools, this time investors are likely to be more product-focussed.

"VCs in the United States and here are looking for products either already in humans or close to human [trials]," Brooke says. "But the markets are taking off again, so products early in development will get funded again."

And he predicts that platform technologies will come back as soon as someone discovers the "new, new thing."

"If it is timed with a hot IPO market, investors will go bananas again," Brooke says.

As far as areas of research that are popular, cancer and immunology still rule the roost, according to Brooke, who says most of the big dollar collaborations around the world are in these areas. Neuroscience is also increasing in popularity, especially in Australia -- in part because of the strengths of the research in this country.

And RNAi might be a platform to watch too. "It's certainly the hottest technology at the moment in world biotechnology markets. But while RNAi driven products are a long way away, using it as a tool is very hot," Brooke says, noting that several companies in the US have reinvented themselves as RNAi companies, most notably Ribozyme Pharmaceuticals, which earlier this year became Sirna Therapeutics.

David Evans, formerly at Uniseed and now in the process of setting up a $250 million venture fund to be known as ScientiaUS, targeted toward larger multi-technology biotechnology ventures, says he and his fund colleagues have identified a number of emerging opportunities.

Among them, he says, are medical imaging in neurosciences, agricultural biotechnology using plants as a means of producing biomaterials including polymers, and medical devices, in addition to human therapeutics.

In the wider investor community, attention to biotechnology is beginning to build, with a number of recent placements and growing interest in the sector. CitiGroup Smith Barney analyst Andrew Goodsall says that medical devices are definitely popular at the moment.

But Goodsall says there are a number of interesting companies out there with technology that warrants interest.

"We think there is a lot of good science out there at the moment," he says. But while he won't play favourites, Goodsall notes that Bionomics, Agenix and Sirtex are some of several he is watching closely.

Bioshares analyst David Blake believes drug enhancement and drug delivery technologies are worthy of attention, particularly with the ever-looming issue of generics. "It's not so much a hot area but it's really important, especially for generics, which will be a hot area," he says. "There are a lot of ways to improve existing drugs."

Blake says RNAi is shaping up to be a hot technology platform, and he expects a lot of activity in that space. On the disease front, he says angiogenesis is looking like an area that will get a lot of attention, particularly since Genentech received fast-track status for its anti-VEGF therapeutic Avastin.

"Australia's Progen should ride on the back of that," he says.

Hit predictions

While the next big thing hasn't made itself known to us quite yet, there are plenty of options. With that in mind, here are some predictions from Australian Biotechnology News.

Older technology now hitting its stride

Monoclonal antibodies While this technology is more than a decade old, the release of Herceptin and Glivec a couple of years ago heralded the beginning of the age of monoclonal antibody therapeutics. The ability to humanise the antibodies to avoid adverse immune system problems has opened the doors for the technology and a suite of monoclonal therapeutics is on the cards. Australian companies to watch in this space include Prima Biomed subsidiary Oncomab, which is collaborating with US monoclonal company Medarex, and Amrad, collaborating with Cambridge Antibody Technology.

Antisense technology It has taken a while to get off the ground, but antisense drugs are slowly building up momentum. Antisense pioneer Isis Pharmaceuticals has one drug on the market, 11 in its pipeline and 21 partnerships with small and large biopharmaceutical companies. In Australia, Antisense Therapeutics is developing two antisense products for multiple sclerosis and psoriasis, which it licensed from Isis.

Genomics While it is now obvious that genomics does not lead directly to new wonder drugs, it has become increasingly clear that it plays a very important role in drug development, particularly in providing validated druggable targets to pharma and biotech companies. And interest is strong in the development of therapeutics targeted at specific genetic variations involved in disease -- so-called personalised medicine. Bionomics and AGT Biosciences are two Australian companies to keep an eye on in this space.

Another use of genomics specifically in agriculture is its application to breeding. Using genetic information from plant and animal genomes, the rapid identification of specific combinations of genes in breeding programs dramatically speeds up the development of new and useful varieties without resorting to the more controversial techniques of genetic modification. While little is going on in the sector within smaller biotechnology companies, quite a few public sector research organisations including CSIRO and other government research institutes, various CRCs and universities are working on a pipeline of new plant varieties.

New technology platforms

RNAi Over the past year the phenomenon of RNA interference (RNAi) has received increasing attention. Already showing its worth as a research tool in a broad range of biological settings, the jury is still out on the use of RNAi in human therapeutics. But a recent deal between pharma giant Merck & Co., and Alnylam Holding to develop RNAi-based technologies and therapeutics may be just the beginning. Australia has two players in the RNAi space: CSIRO, which originally discovered RNA interference mechanisms in plants, and Benitec, which claims to have an extensive patent portfolio and is in the process of forming collaborations and partnerships to make the most of its IP.

Biopharming Increased interest in the use of biological organisms to produce useful molecules, preferably without the need for extensive processing, has led to the development of a new biotechnology sector -- biopharming. Although the term primarily refers to the use of plants to produce useful molecules, ranging from petrochemicals and plastics in sugarcane to vaccines in tobacco and lettuce, of equal interest is the production of useful molecules, such as nutraceutical products or even spider's silk fibres in milk. Australia's Farmacule is working with both the tobacco and sugarcane industries in Australia to develop engineered crops to produce high value proteins and other bioproducts. And the CRC for Innovative Dairy Products is looking at commercialisation of novel products in milk.

Stem cells and tissue engineering This is an area of biotechnology that is still very much in the research phase, although there is a lot of promise evident. There are many different technologies in the works, spanning the use of stem cells to regenerate damaged tissue or even organs, to developing new techniques for growing organs for transplant. Australia has had its own debates on the merits of stem cell technology, but the establishment of Australia's biotechnology centre of excellence, the National Stem Cell Centre, along with private companies Stem Cell Sciences and ES Cell International, and Australian-owned but soon to be US-based BresaGen, has put Australia firmly at the forefront of stem cell commercialisation activities. On the tissue engineering front, Perth's Clinical Cell Culture is leading the way with new technology to improve skin grafts.

Nanotechnology As a technology nanotechnology is in its infancy, but is garnering increased interest around the world not just in pharmaceuticals but in a variety of other industrial applications. Australian players in the field include Starpharma with its polyvalent dendrimer compounds, pSivida with BioSilicon suitable for drug delivery and tissue engineering applications and Ambri's diagnostic sensor technology.