Biotech 'grossly under-invested': QIC

Australia's biotechnology sector is "grossly under-invested" and attracts little interest from most funds and investors, according to a senior portfolio manager at Queensland Investment Corporation (QIC).

Neill Colledge, who is also QIC's head of research, said he hoped the corporation's new $100m Queensland BioCapital Fund, launched last week, would help to fill the investment gap.

He said QIC had been seriously investing in biotechnology companies for about 18 months.

"There is very little interest in the biotech sector from a lot of other funds and investors," said Colledge, who is QIC's head of research and senior portfolio manager.

QIC is unusual in its attention to the biotech sector, quietly and methodically working its way through the list of public biotech companies and investing in them.

According to Colledge, QIC has already significantly invested in between more than 10 companies, and plans to add more to the list.

He said a lack of adequate venture capital funding sources for promising young companies led to them listing on the ASX far too early.

The BioCapital fund would go some way to filling the gap, Colledge said.

QIC has formed a relationship with university based pre-seed fund Uniseed to assist in identifying promising biotech ventures.

Although the fund was announced last week, Colledge said that it would probably take two months to get it up and running. He said that there was already a considerable amount of interest in the fund from start-up ventures.

Although the fund contains $100 million, Colledge said that companies initially chosen would probably get around $2 million, with further funding contingent on meeting benchmarks.

Other QIC clients would be able to invest in the fund, he said, and added that he hoped other VCs would be encouraged to co-invest in the companies chosen.

"We're quite happy to co-invest with all the other VC funds in Australia," he said.

At the end of the day, QIC is looking to make money from its biotech investments.

According to Colledge, QIC is being realistic about its investments. Based on US models, 50 per cent of biotech investments will provide poor returns, 30 per cent will provide decent returns, and the remaining 20 per cent will provide returns of 50-100 per cent on the original investment.

"We didn't undertake biotech lightly," Colledge said.