Victorian feature: Vic bio warns against early IPO

Had Amrad Corporation been conceived in the United States it would only now be considering a public listing, according to its managing director.

Dr Sandra Webb said such was the gap between biotech businesses in Australia and the US, where start-ups generally went through three financing rounds before considering a float.

"What I have observed with Australia and Victoria is there's this enormous pressure to go out to IPO very early, and that might only result in a small amount of money being raised compared to what is needed to get a compound up to Phase II," Webb said.

She said Amrad, which started with $15 million from the Victorian government in 1986 and listed in 1996, was more mature when it listed than many other biotechs taking that step.

The State government founded the company to commercialise a discovery out of the Walter and Eliza Hall Institute.

"If we were in the US we would only just be considering launching an IPO in the state of maturity we are currently at, with three compounds at Phase II," Webb said.

She said that while the company was proud to call itself Victorian, and would soon be waving the state flag at Bio2002, the sector could benefit from better-educated investors with realistic expectations.

Local understanding Prima Biomed CEO Marcus Clark said his company faced a similar uphill battle when trying to secure funding in 2000, describing the market at the time as "shocking".

"Venture capital seemed to be low at the time and sensitive to issues in the market so therefore it was a very slow process," he said, adding that this was despite Victoria boasting one of the most established VC environments in the country.

The situation led the company to go public earlier than it may have otherwise, creating unnecessary distractions for a business in its development stage.

Nonetheless, Clark said Prima Biomed decided to establish in Victoria because of its proximity to work coming out of the Austin Research Institute as well as the local market's understanding of the types of structure and financial arrangements needed for biotech deals.

He said today's biotech start-ups were operating in an easier environment with greater access to capital and a state government dedicated to ensuring Victoria stands in a premier position within the sector.

Genetic Technologies executive chairman Dr Mervyn Jacobson agreed, saying Victoria was benefiting from having an "enlightened government".

"Kennett built a momentum which Bracks is continuing," Jacobson said.

But Autogen COO Dr Greg Collier said the State government needed to make sure its initiatives were strategic rather than superficial.

"I think government is trying hard but we have to be careful it isn't just window dressing," Collier said.

He also said it was important to ensure support was available to all levels of biotech in the state.

"The government is now making an effort to support biotech in a lot of ways but only for early start-up companies, and we have never fit into that," he said.

"One of the things the biotech sector has to be careful about is that it doesn't just concentrate on early stage."

Collier said more needed to be done to support the purchase of large pieces of equipment and the development of new research technology, as well as educating the investment community as to the potential of biotech, helping drug developers to take the next step into local drug manufacture and facilitating early stage collaboration with big pharma to reduce cash burn rates.

Despite being based in Victoria, Metabolic Pharmaceuticals managing director Dr Chris Belyea said his company opted for contract facilities outside the state and overseas.

"It's not a geographic thing for us, it's just due to our work," he said. "In the end you want the best person in the world to do things."

Higher concentration Belyea said local science was good at generating ideas and that the state had a "higher concentration of people who know what they are doing", but said Victoria shouldn't feel compelled to build infrastructure that was easier to obtain elsewhere.

"The main thing that makes us have to spend more money overseas is the lack of toxicology here, but I'm not advocating that Australia sets up toxicology facilities," he said, explaining that it would be too difficult and expensive to set up facilities matching those available in the US and Europe.

He did, however, point to the need for more pre-clinical assay development facilities.

Cerylid Biosciences chief executive officer Dr Jackie Fairley said the government should focus more on infrastructure and facilities for small to mid-sized companies.

Fairley also said that while the state boasted top researchers, providing benefits in terms of collaborations, more assistance should be given to companies in attracting skilled people from overseas.

"This would add to the experience base in Victoria and provide a benefit to industry," she said.