AusBiotech 2012 special feature: Found in translation

It has been said before, but it bears repeating: Australia is a high achieving country when it comes to churning out world class medical research, but we are not so good at translating those discoveries into marketable therapeutic outcomes.

We’re probably all too familiar with the numbers: we produce three per cent of global research output with only 0.3 per cent of the population. We rank high in terms of innovation input, but low on innovation output. We spend hundreds of millions every year on health and medical research, but only around 1.5 per cent of that goes into commercialisation.

Assuming we desire seeing our research dollars translated into new therapeutics, meaning a healthier population and a stronger economic reward garnered by home grown biotechs, then this is something that ought to change.

And change it can. Here are five ways that are currently being discussed that we could transform the commercialisation of medical research in Australia.

1) It starts with attitude

You’d be forgiven for thinking most Australians were obsessed with mining. Or perhaps manufacturing. (And, as ever, sport.) Not many people, however, wander around remarking about our prodigious scientific output or our capacity for producing world leading innovations. Least of them, politicians.

Yet things are quite different in other countries, particularly those that lack mineral resources to lean on. Take Israel. When Dr Anna Lavelle, the CEO of AusBiotech, travelled there under a National Australia Bank fellowship in 2010, she was struck by the attitude held by many Israelis in business and government.

“Their attitude was very focused,” she says. “The people there know they have nothing they can dig out of the ground; they have no resources to fall back on. As such, they see that their main resource is their own ingenuity.

“This means innovation is highly prized, so it’s backed financially and seen to be a highly valued economic driver. We don’t have that attitude and drive here in Australia, partly because we’re able to fall back on an economy driven by resources.”

Yet, Lavelle points out, Australia has just the same potential to be a nation driven by innovation. We have a strong education system, stable government, good regulatory and legal environment and a proven track record in innovation – even if it isn’t trumpeted as much as it could be.

“We’ve shown were smart. What we don’t seem to be able to do is take that smart attitude and translate it into products and services. That’s missing in part because it’s not seen to be a lynchpin to economic development in this country.”

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So the first thing to do is change our attitude and how we see ourselves as a nation. This is likely to be a long term project, but if that attitude can trickle up into government, then it might mean a substantiative change in the way we approach investment in high technology industries, such as scientific and medical research.

In contrast, the current government appears to perceive the nation more as a mine, a farm or a factory. Take the recent report by the Prime Minister’s Manufacturing Taskforce (see page 12).

While the report gives a cursory nod to advanced manufacturing in pharmaceuticals and medical devices, it proposes little to promote those industries and a lot to save existing low technology manufacturers in decline.

“That is reflective of the fact the current government is concerned about large employer groups,” says Lavelle. “Large employer groups tend not to be in high tech advanced manufacturing, but more so in lower tech manufacturing end of the spectrum. There is a concern about job retention and employment, and that is absolutely reasonable.

“But the government is probably not giving enough attention to the advanced manufacturing part of the spectrum. This is what will lead to new industries, new innovation and new employment opportunities.

“In reality, Australia is never going to compete on low cost high throughput items. We all know that. The area where we’re better able to compete with high cost low throughput items is in advanced manufacturing. Australia needs to wake up. We have the talent, but we need to reorient our thinking if we’re going to optimise the future in terms of jobs, the economy and in terms of social benefits.”

2) Reforming the NHMRC

The National Health and Medical Research Council (NHMRC) doles out over $780 million a year on medical research. Arguably, in terms of pure discovery, it gets its money’s worth.

However, there are a great many more researchers who deserve funding than receive it. With only around 20 to 25 per cent of applications receiving funding support, competition for NHMRC Project Grants and Fellowships is fierce.

Thus whatever criteria the NHMRC places on awarding funding become the goals for most medical researchers in this country. However, the NHMRC’s remit is about supporting health and medical research, not health and medical commercialisation.

As such, the metrics of success are typically academic. Any time spent knocking out patents, working with industry or spinning off a biotechnology or pharmaceutical company is time not spent publishing papers in top tier journals. And less publications means less money for researchers. Thus, indirectly, the Australian medical research funding system punishes commercialisation.

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“Academics are not rewarded for getting involved with industry, so why would they do it?” says Lavelle. “A lot of young career scientists have spoken to me about their personal frustration. They would love to get involved in the whole value chain. They’d love to be able to take what they’re doing in the lab as scientists and see how it translates into SMEs, and understand how that work will eventually reach the community.

“But academics must have a solid publication record in order to get NHMRC funding. So that is what you do. If you take time out to interact with SMEs, then that’s not going to help you when you go back to the NHMRC with patents rather than papers.”

So the second change to improve the commercialisation of medical research in Australia is to reform the NHMRC to make it more amenable to translational research, yet do so in a way that doesn’t jeopardise basic discovery.

Professor Doug Hilton, Director of the Walter and Eliza Hall Institute thinks this could be as simple as changing the metrics used by the NHMRC to identify worthy funding recipients. “If you have two researchers with a very similar academic track record, but one has gone to the trouble of a major collaboration with pharma, or spinning out a company, I’d like that effort rewarded,” he says.

“I don’t see commercial interaction or translation being something that is done instead of high quality publication. Interacting with the private sector is important. We need to have some metrics measuring that aspect of performance, like with citations and academic publications.”

This doesn’t necessarily mean wholesale changes to the way the NHMRC operates, or require explicit funding of commercialisation, but a simple change in the metrics used to evaluate funding applications could have a substantial knock-on effect in encouraging researchers to take their ideas out of the lab and into the market.

3) Proving the concept

The third step is to bridge the so-called ‘valley of death.’ This is the precipitous gap between the point a discovery is made, typically as a result of publicly funded research, and the point where it is attractive enough to receive private funding to take it down the development pathway. Currently there is little money available to fund this crucial step, meaning many potential medical breakthroughs remain gathering dust.

The trick is to get a discovery from the point where it looks good on paper to where it looks good to an investor. This can sometimes be as simple as doing one pivotal proof-of-concept experiment – the ‘killer experiment’ – that will reduce the risk of investing in a discovery to the point where an enterprising venture capitalist or angel investor might pick it up.

“I think the current system fails at this point,” says Lavelle. “We have this nonsensical situation where we’re happy to fund something right up to the point where we can find the final answer: does it in fact work or not. And at that point, everyone says ‘we’ve finished that project let’s move on to something else.’

“It just makes absolutely no sense from a logical, from an academic or from an economic point of view. So a little bit of money to finish that process, and make sure the science and the commercial concept stacks up as people think it will do, is money well spent.”

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Something as simple as a killer experiment fund could go a long way to rectifying this situation. It could be run in a similar way to current NHMRC Project Grants, which are assessed centrally by peer-review. However, that’s not the only way to do it, says Doug Hilton.

“One way of doing it would be similar to the way the NHMRC funds equipment grants,” he says. “So instead of competitive peer review, the NHMRC would say that, as a campus, if you bring in, say, X per cent of NHMRC grants, then it will allocate $Y million a year for killer funds. Then you would create a structure locally and judge which will be the best ones to receive the funding.

“Not everything has to be super centralised and go through large numbers of committees. Often the institution knows better which of these technologies are the best and where the killer experiment will be most effective. I really like the idea of distributed responsibility. And the model is there. The equipment grant model is a really good one.”

However, the NHMRC isn’t the only way to fund such killer experiments. Back in the day – i.e. before Labor axed the Commercial Ready programme in 2008 – there was a way to secure the funds to de-risk a new technology in order to attract private investors. Sydney-based Pharmaxis is one company that benefited from Commercial Ready, or R&D Start, as it was known back then.

The Start grant Pharmaxis received in the early days convinced investors to put money into the company, knowing that for each dollar they contributed, the government would be adding a little of its own. “This helped spread the money a little further,” says Pharmaxis CEO, Dr Alan Robertson.

“We were able to say to investors: ‘against this $8 million we’ll be able to raise a further $3 million from the R&D Start Grant scheme.’ That really put us on our feet. It allowed us to tackle the project with that much more confidence. It reduced the risk and made us more attractive because there was more leverage that could be applied to the money they were putting in. This was a critical feature in Pharmaxis’ success over that early period.”

However it is managed, if only a fraction of the dollars that are put into discovery research were contributed to providing proof-of-concept funding, it would enable small biotechs to reach out to investors and bridge the valley of death all the more easily.

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4) Expert critical mass

There are commercialisation outfits attached to virtually all universities and research institutions across the country. Their performance varies widely. Many are understaffed and under-resourced. Often they have to provide services to a startling array of technologies with only limited expertise in those areas. The problem is often one of never reaching critical mass of people, expertise and resources.

Once critical mass is achieved, then things can be radically different, as demonstrated by UniQuest, the commercialisation company spawned by the University of Queensland. Besides the tremendously successful Gardasil vaccine, UniQuest has been involved in sparking off the likes of QRxPharma, ImpediMed, MRI company Magnetica, a drought-resistant plant marketing company and many more.

The key, says UniQuest Managing Director David Henderson, is hitting critical mass. “It is centrally important,” he says. “Most organisations have a couple of people covering a wide spectrum of activity. The ideal person to commercialise a new development is someone who has been in that area of the science and understands it, and also has been in industry in that area and understands the industry structure and has good contacts. Then you get an efficient matching of the opportunity with the right players.”

UniQuest employs over 80 staff, most of whom have scientific and industry expertise, and it embeds people within the research institutions with which it partners, using a kind of hub-and-spoke model. From an initial $10 million in funding – and, crucially, a long term vision from its parent, the University of Queensland – it has pulled in over $320 million in revenues over the past five years.

One way to help other institutions benefit from similar critical mass is to aggregate commercialisation organisations into clusters, each of which servicing multiple research institutions. Such a notion was recommended by the Association of Australian Medical Research Institutes in its recent submission to the McKeon Review of health and medical research in Australia.

One problem to overcome would be encouraging institutions who compete over student and funding pools to lower their guard and collaborate. This is no mean feat, but it’s not the first time that competing organisations have gathered together to cooperate for mutual benefit under clearly defined guidelines through an outside institution. If this hurdle can be overcome, commercialisation outfits could be made radically more effective across the country.

5) Supercharging investment

The final way to transform translational research in Australia is a more radical suggestion that has gained increasing attention in recent months. That is tapping in to the tremendous wealth contained in Australia’s superannuation funds.

If only a tiny fraction of this money could be invested in health and medical research and biotechnology, it could give the entire industry a much needed shot in the arm, so to speak.

“This is an important idea,” says Lavelle. “It’s time has come.”

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As of 30 June 2011, Australian superannuation funds were juggling over $1.3 trillion dollars, according to the Australian Prudential Regulation Authority. However, little of that money flows to biotechs.

This is largely because superannuation companies are highly constrained in terms of where their money goes, and how much risk they’re willing to take. They also often don’t have the specialised expertise it takes to assess life science companies, or have the agility to make small investments in individual outfits.

The question is: how to best tap the super funds to the benefit of investors and the life science industry? “We have to get the right people together,” says Lavelle. “This includes the superannuation industry, the finance industry, the small innovative industries – heavily represented by the life sciences, but also others – and talk about what vehicle can be designed that will be acceptable to the trustees of super funds, that will be acceptable to superannuants, and would benefit innovation in this country.

“I believe there is an answer. I’m really passionate about this. But we really need goodwill and we need the right people in the room talking this through to make sure whatever vehicle we come up with as a group satisfies everyone’s needs.”

Start talking

These are only five of many possible ideas about how to drive innovation and commercialisation in this country. These, and likely many others, will be discussed in depth at the upcoming AusBiotech conference, held in Melbourne from 30 October to 2 November.

If only a few are implemented, we could soon see a tremendous uplift in potentially lifesaving discoveries that are brought from the lab into the market. Not only would this improve health and wellbeing, but it could boost domestic enterprise, and help drive the transition towards an innovative economy.

So much has been said in recent years about the problems with the current system. The question now is: what are we going to do about it?