Location, location, location: where should you build your biobusiness?

The most important concept for Australian biotechnology companies to grasp when building a nest, according to industry and property development experts, is proximity.

Whether it be understood in terms of closeness to transport, financial centres, academic centres of excellence or simply exposure to a close-knit cluster or community, the choice of location for companies in this industry is a make-or-break decision, according to biotech start-up veteran and deputy-chair of Melbourne's BioComm group, Stan Yakatan.

"The issues here are quite universal," Yakatan says. "Australian biotech companies are earlier stage as opposed to US groups, so their needs are much smaller but basically the same set of principles apply."

A former director of venture capital companies in the US and Canada and father of several successful start-ups around the world, Yakatan espouses the principle of the "three Ps" to help biotech companies find the best home:

• Proximity to academic centres of excellence.
• Proximity to other biotechnology companies.
• Proximity to financial markets and global transportation.

The first two relate to what many now believe to be the keystone without which would-be biotech hubs like Australia don't stand a chance: clusters. Australian Tech Park Innovations (ATPI) recently won a major NSW State government tender on the strength of its cluster-style proposal to develop part of the existing Redfern business park into a facility for start-up biotech companies to coexist and share valuable resources.

According to managing director Dr Mark Bradley, phase one of the park is expected to be finished this year, with the crucial phase two development of biomedical facilities anticipated for the end of 2004. "We are about trying to create a community where all of these areas come together," Bradley says. "This is about building a critical mass environment and community where people are able and willing to work together."

Tempering his enthusiasm somewhat, Bradley explains that because of the current lack of money in Australian biotech the establishment of clusters is going to take time. But, he says, the smart money is on clustering as the only way to go. A major plus for the Redfern site, and one which is common to many technology parks, is its proximity to the respected Sydney University and University of Technology, Sydney, while also enjoying a central position in metropolitan Sydney.

"These sorts of structures need to have the right sort of business people around, and the key thing is creating a sense of community while ensuring close proximity to the source of those projects," Bradley says.

So focused is the company on attracting big interest from biotech and tech start-ups that it is in the process of developing full business solutions for companies that would span office space and access to essential facilities, with a bit of good old-fashioned consultancy and general network facilitation thrown in. "I see our function as almost a halfway house for start-ups," Bradley says.

"There is a problem in Australia with too many people trying to go it alone." This doesn't make much sense in the biotech sector because setting up labs for commercial enterprise is extremely expensive. "But when companies come into these sorts of environments they see they don't have to reinvent the wheel - we are offering walk in, plug in, get to work type environments."

"It's not just about property - it's about being able to network and tap into ideas," he continues. "One thing we firmly say we are not is a real estate play - we are a commercialisation hub."

Embryonic groups

Michael Wilkinson, the founder and director of specialist biomedical facilities development company Wilkore, has been operating in roughly the same head space for some time. "Have a look around the world and you see that developments tend to spring up around universities," he says. "As these embryonic groups expand they tend to gravitate towards cheaper suburban areas which do preserve the collegiate environments they are accustomed to."

Established around 15 years ago, Wilkore fortuitously started out by developing sanitised spaces, or 'clean rooms', for companies such as Sigma, IDT and Arrow Pharmaceuticals. It is now one of the dominant players in this space. The company is currently working as part of a team of developers for a new 190 hectare industrial park planned for Melbourne's outer eastern suburbs known as Caribbean Park, near the site of the future synchrotron.

Along with many of his peers in the industry, Wilkinson has identified the need for young biotech companies to have access to quality facilities and vibrant communities, both academic and commercial, if Australia's clustering dream is to ever get off the ground. "We see within the park a big demand into the future for these sorts of shared high-tech facilities," Wilkinson says.

One of the challenges for biotechs as they go forward, he adds, is the fact that they are cash rich but credit poor, which means that they don't have especially strong balance sheets. "Most start-ups just have money to burn for what they think is a good idea," Wilkinson says. "Commercial leasing agents have trouble dealing with these companies.

"Facilities need to be more generic and modular so they are able to be reutilised by future tenants. That's what we are after so that theirs is a lower outlay." But as he rightly points out, this requires a more educated breed of developers.

"The industry is less risky but still at the high risk end of the spectrum." Wilkore is presently working with Swinburne University, DSTO and the CRC for Microtechnology to develop a new facility which aims to enable open access for biotechs to micro- and nano-machining facilities, which among other things is expected to provide cheap but clean and reliable means of lab and compound management via disposable packaging.

Such facilities are eagerly anticipated within financial circles. According to the head of Rothschild Biosciences in Australia, Dr Geoff Brooke, finding the right space for early-stage biotech operations remains a challenge in Australia. "What we don't have in Australia is space enough for promising start-ups to move into," he says.

"Usually these companies are quick to outgrow their space. Some may fail or merge with others, but people need to be able to move around fairly easily, therefore there needs to be easy passage for staff." Further, he emphasises that the last thing finance people want to have to do is travel across the country to meet with people, thus they too prefer concentrated centres.

As BioComm's Yakatan says: "There's no point in setting up in Bendigo because investors just aren't going to visit you."

Growth area

For leading breathing disorder and snoring specialists ResMed, proximity to financial markets and transport are of paramount concern, according to the company's executive vice-president Dr Chris Roberts. ResMed is in the process of moving from Sydney's North Ryde industrial precinct into the newly built Norwest industrial park at West Pennant Hills, where the company acquired 12 hectares of land for $44 million.

ResMed, which earlier this month reported stand-out financial results, decided that it was time to move on after already having had to upgrade from its original leased premises in Ryde to a new building on company-bought land. "We've been at the North Ryde industrial area for the past 12 years, but we've seen tremendous growth and we needed more space," Roberts says.

ResMed is among the elite of Australian biotech companies and has a unique and powerful global position in the market for diagnostics and treatment equipment addressing sleep disordered breathing such as snoring. And despite the company conducting less than three per cent of its business in Australia with the US accounting for the lion's share, Roberts is adamant that having established the optimum location within Sydney, the business is cheaper to run in Australia than anywhere else.

"The driver of staying in Sydney was the cost of staff much more than the cost of real estate which shows that its all about much more than the building." Transport is very important to ResMed, so its new premises are conveniently placed on the edge of Sydney's newest M2 motorway, a key plank in the anticipated Sydney Orbital which is expected to dramatically reduce existing traffic problems.

Likewise in Melbourne, industrial projects and infrastructure development are seeing a stronger interplay with the concerns of the emerging biotech industry. According to recent research by property analysts DTZ Research, Melbourne's biotechnology sector is likely to be a key driver in the Melbourne industrial market within the next few years.

The research highlighted five distinct biotech areas across the Victorian capital which it predicts will realize significant growth over the next five years, thanks to the aggressive investment programs of the Victorian State government.

BioComm's Yakatan believes that while biotech is a highly complex scientific business it is, however, a very simple business to understand, with simplicity being the operative word for start-up biotech companies looking for a place to live. "Some of the most successful biotech companies I have started have operated in 500-700 square feet labs," he said.

"Most of these people don't need much space - some of the most successful biotech companies in New York are run out of office buildings."