BIO profile: Alison Coutts, eG Capital

One of the most serendipitous moments in the recent history of Australian biobusiness occurred when Alison Coutts met Mark Fordree.

The way Coutts remembers their meeting, Fordree, then a career broker and funds manager with a long pedigree in some of Australia's top investment houses, pulled out a single sheet of paper on which he had drawn a simple diagram of how he wanted to set up a specialist biotech brokerage.

"That's interesting," Coutts said, and pulled a page from her own bag on which she had set out the same vision.

From there, the pair established their own firm, eG (for 'emerging growth') Capital, in 2002 -- a firm solely dedicated to helping to build Australia's biotech industry. It has grown steadily since its inception and recently moved into larger offices in the heart of the Sydney financial district.

"We saw a golden opportunity to give a level of support that a big investment bank would give, but just to a specific sector," Coutts explains. "Most other banks don't have specific backgrounds in science, and even if you do, you don't always get it right -- that sweet mix of science and business and strategy all coming together."

eG Capital was born of a new mood in Australian biotech which began to emerge a couple of years ago, from the ashes of the lean years caused by the dotcom bust, 9-11, the war in Iraq, a slow FDA and a raft of other reasons.

"Out of that started to arise a sentiment born of a couple of good deals in the US, and the Avastin story," Coutts says. "People had a renewed vigour that followed on in Australia."

The Australian biotech market has its own energy, for which Coutts has several explanations. "The Australian market is different to any other that I can see," she says. "There's a shortage of private equity, but we have a capital market here that's used to dealing with mining companies, that's used to dealing with that inherent risk."

In some respects, Coutts says, investing in biotech is a little similar to investing in mining, a fact not lost on the Australian Stock Exchange, which she says has helped biotechs in the same way that it helped miners.

The Australian biotechnology phenomenon is that that many companies list on the stock market at an early stage of their lives, relative to the US or Europe. That phenomenon is often criticised by market observers, who point to low market capitalisations and a lack of products in development. But Coutts takes a more even-handed approach. Our large listed biotech sector, she says, has given rise to a busy, vibrant industry.

By comparison, she recently visited Austria, where she saw about 20 biotech companies. "There's a lot of talent there, some really interesting stuff, but they're really hamstrung by the lack of money," she says. "It's nowhere near as vibrant or advanced as Australia, despite their proximity to Switzerland and Germany."

One of Australia's problems, she says, is its own self-image. "It's almost like we don't believe we're world-beaters," she says. "The general perception is: 'How can we be successful in drug development when we're so far away from the action?'

"People don't realise we have advantages in immunology, stem cells and other areas. They're often unique and very special."

It's also wonderful to see how federal and state governments have got behind biotech in recent years, Coutts says: "The bureaucrats in Canberra are at last understanding the key economic drivers for the next 50 years -- it's all about innovation."

Up to now, though, the Australian life science community has been good at doing more with less, Coutts says. As a result, "we have a very strong, pioneering spirit -- we don't mind going against the crowd," she says. "That's where the great discoveries come from. But sometimes we don't spend the money where we really need to, like a global search for a CEO or a marketing director.

"Fortunately, many experienced people are coming back to Australia. Not that we should rely on people from overseas, but it does help if they have experience of working in a good company in a global industry.

"Another good thing about Australia is that we don't have a lot of baggage about who we are. We can't enforce our values onto other nations, so we're more adaptable to other cultures."

Catalyst

A catalytic moment for eG Capital -- and, it can be argued, the biotech sector as a whole -- came in early 2003, when the firm raised AUD$10 million for its client Peptech from institutional investors. In Australian biotech circles, the amount of money alone was enough to raise eyebrows -- but even more remarkable was the fact that the deal was done in very early January, at a time when Australian business tends to join the rest of the nation on the beach.

"Abbott had just received notice that [its arthritis drug] Humira would be approved," Coutts explains. Abbott has a non-exclusive license to use Peptech's TNF-a intellectual property in Humira, so Humira's approval was expected to lead to a valuable revenue stream for the Sydney company.

January or not, "It was a perfect time to do the [Peptech] placement," Coutts says -- and the fact that it was successful illustrated that the market was becoming more savvy.

"We set up at a time when the market was really gloomy," Coutts says. "But we were ready when the wave [of growth] developed."

Coutts began working life as a chemical engineer, before turning to the financial markets. In 2000 she completed a degree in biotechnology. Her own broad experience and hands-on approach are symbolic, to many market observers, of the new dynamism in the Australian biotech sector.

"When I do things, often it's because it's 'good for the industry'," Coutts says. "I'm always happy to talk to any analyst - in other sectors, you'd see them as competitors.

"In biotech, we're often driven by other things apart from making the next dollar."