Australian biotechs bullish despite economy and policy concerns

2011 was a good year, and 2012 ought to be even better, or so say a majority of the Australian biotechnology companies polled in the AusBiotech Biotechnology Industry Position Survey.

Sentiment remains bullish in the life sciences sector, with 82 per cent of respondents expecting to see their business grow in 2012, and 68 per cent declaring 2011 as a good or excellent year.

This is up from only 56% of those companies surveyed last year who called 2010 a good or excellent year, suggesting that post-GFC blues are continuing to subside.

Only 12 per cent of respondents expected their business to remain stable in 2012, and six per cent believed it would decrease.

A majority of companies also said they intended to increase staffing levels this year, primarily in sales and marketing and science and clinical trials staff. Only six per cent expected to decrease staffing numbers this year.

However, despite the positive outlook of many biotechs, there were still simmering concerns over the Australian operating environment, including policy and the broader economy.

Only 24 per cent of biotechs saw the operating environment as conducive to their business, with the rest split between seeing it as unfavourable or neutral to their success.

Funding is ever a concern for the life sciences industry, with 34 per cent of companies surveyed indicating they have less than 12 months cash at current burn rates. 54 per cent of companies raised capital in 2011, and 46 per cent intend to raise capital in the coming year, with 20 per cent undecided.

On the policy front, the R&D Tax Incentive was a beacon of light, with 65 per cent expecting its impact to be favourable for their business. However, only 53 per cent of companies had already sought professional advice on how to capitalise on the tax incentive.

When CEOs were asked what the government could do to aid the industry, the three main issues they flagged were improving incentives for investment, providing a suitable replacement for Commercial Ready to give targeted funding support, and greater predictability in relation to policy programmes.

One idea offered up was to emulate the UK Government’s Patent Box initiative, introduced by Labour in 2009. This reduces the corporate tax rate on income generated from domestic patents with the intention of encouraging innovative companies to develop and commercialise patents in the United Kingdom.

Biotechs are still expected to spend big on research and development this year, with respondents planning to outlay at least $610 million in R&D. This compares with the $788 million committed by the National Health and Medical Research Council for 2012-2013.

AusBiotech CEO, Dr Anna Lavelle, sees the survey as showing the strength of the biotechnology sector despite challenging conditions. “The Australian biotechnology industry has performed strongly despite an unpredictable economic market and Australia continues to be a leading location for biotechnology in the Asia-Pacific region and the world, ranked the fifth most innovative in the world,” she said.

“The Australian industry has received a major boost with the 2011 passing of the R&D Tax Incentive legislation was a significant event with 65 per cent of companies confident it will have a positive impact on their business, however the Federal Government is urged to consider: further incentives for investment; a greater quanta of targeted funding support; and provide predictability for policy and programs.”

The survey was conducted by AusBiotech and Grant Thornton and included 50 Australian biotechnology companies, including 56 per cent who were involved in therapeutics, 26 per cent in medical devices and 20 per cent in diagnostics. The Biotechnology Industry Position Survey was released today.