Victorian feature: Investment Issues

Finance and funding issues affecting the biotechnology industry appear to be something of a chicken and egg scenario.

Across Australia, researchers blame investors for not being as generous with funds as their US counterparts, while investors claim they have the money but a dearth of credible opportunities.

Equity analysts say where a biotech business comes from has little to do with an investor wanting to grab a slice of it.

"At the end of the day, investors are concerned about the fundamentals of the company itself," said one Melbourne biotech stock analyst.

But a number of initiatives within Victoria are now making it a little easier for some companies to find their feet.

Most notable is the State government's Science, Technology and Innovation (STI) grants scheme, the second round of which currently has a short-list of 22 companies vying for a share in $60 million.

Innovation Minister John Brumby said the successful businesses would be announced in June.

Brumby said the first round of STI grants, which also comprised a pool of $60 million, helped the businesses attract further funds from private investors, industry and the Federal government so as to gear up the state injection to the tune of $350 million.

Looking elsewhere But for some very young businesses, the STI initiative, which provides funding for infrastructure projects, is not applicable, leaving the option of seeking seed funding, federal grants, venture capital or a public listing.

Starfish Ventures investment principal Michael Panaccio said there were now more players in the venture capital industry who were looking into life sciences investments, thanks to the Federal government's Innovation Investment Fund, introduced in 1997.

"This was set up to increase the number of venture capital firms, and some of those have given rise to biotech funds such as Rothschild and StartUp Australia," Panaccio said.

He said that while Starfish did not invest directly in biotech, it did so indirectly through a collaborator, JAFCO Investment.

"The size of the funds the venture capitalists are managing has increased and that increased amount of money is going into the sector, so from that perspective the scenario has improved fro biotechnology," he said.

Panaccio said that while the biotech venture capital scene in Victoria was "as good as it's ever been", there were two hurdles acting as an impediment.

"At the supply end we need to see an increase in the quality of investment propositions and in the buy side we need more venture capital firms out there writing cheques for the industry to progress," he said.

But according to government-backed biotechnology development company Biocomm International, start-ups want more than an investor with a cheque book.

Vice-president of business development Dr Anthony Filippis said Biocomm was attempting to educate researchers to think more about commercialisation and to recognise that their projects could have monetary value.

Biocomm met monthly with its member organisations - which include Austin Research Institute, the Baker, Macfarlane Burnet, Monash University, Neurosciences Victoria and St Vincent's Institute of Medical Research - to discuss projects and look for commercial potential in their research.

Filippis said representatives of Biocomm then worked with the researchers to devise a strategic plan for commercialisation.

"At Biocomm we all have biomedical qualifications as well as experience in commercialisation and management," he said.

"Being able to talk to them at the same level is very important and is easier for them than dealing with an investor who just wants to see their business plan."

Biocomm is also establishing a $15 million capital pool with the assistance of local and international investors.