Challenger readies for Asia VC play

The Kerry Packer-backed financial services and venture capital (VC) group Challenger International is nearing the end of negotiations to form a biotech VC fund out of Singapore which will trawl for investment opportunities across Asia, Australia and New Zealand, the company revealed on Wednesday.

Called Titan BioVentures, the new entity is currently awaiting receipt of a funds management licenc from Singaporean financial regulators, co-founder and managing director Harry Karelis told Australian Biotechnology News.

"This would be one of the first non-government owned biotech funds in Singapore," he said. "We are getting in there at an early stage when competition is still relatively light on the ground."

Karelis, currently investment manager of Challenger's BioTech Capital, Australia's largest life sciences fund with major investments in Proteome Systems, Alchemia, Biocomm and Xenome, among others, will take responsibility for Titan's operational management.

Pending receipt of its licenc, Karelis said that Titan was targeting a fund of around $US50 million ($91.36 million) initially, with some 25 per cent of the money expected to be absorbed by Australian ventures.

Titan has identified several specific areas of interest including post-genomics, stem cell biology, convergence, silicon biology, nanomedicine and unique geographical opportunities which may include the development of traditional medicines across various countries.

"We are really looking at the higher-tech end of the spectrum," Karelis said. The choice of Singapore was an elementary decision in Karelis' view, given the country's central position in Asia but also its growing reputation as a genuine hub of international business.

"People laugh when I say that, but you find that most Fortune 500 CEOs will visit Singapore once a year, whereas you'd be lucky to see them once every five years in Australia," he said.

Also, tax concessions and general support of biotech groups in Singapore was extremely generous, Karelis said, and salaries available to doctorate graduates in Singapore were difficult to rival. "Postdocs are being offered $S120,000 ($122,500) plus, with around 10 per cent income tax," Karelis said.

In terms of biotech and the accompanying boom business of bioinformatics, Asia generally has been consistently identified by major accounting and research firms as the likely source of the global sector's next growth spurt.

Although Asia is still way behind the major biotech centres and is unlikely to produce any mega-companies rivalling the pharmaceutical giants of Europe and the US any time soon, there are nevertheless ample opportunities to achieve impressive returns, Karelis believes.

"I'm not saying we'll end up with multibillion dollar companies in Asia but I doubt that you would in Australia either," he said.

Boosting the appeal and potential of Asia, he said, was its largely untapped cultural and scientific diversity: "Each country has its own individual strengths, which is something we intend to capitalise on."

Karelis compared Asia's biotech industry with Australia's of about five years ago, the main exception being that Asia did not have Australia's 100-year legacy of world-class R&D, and Australia offered less than countries like Singapore in the way of diversity and government support.

But the VC business in Singapore and Asia generally was far less competitive than Australia's, he said.

Titan has assembled an impressive line-up of leading biotech figures to sit on its scientific advisory board. They include Australia's Sir Gustav Nossal, Prof David Pennington, Prof Graham Mitchell and Prof John Stocker, all of Foursight Associates, Prof Virander S Chauhan of India, and revered cancer treatment expert Prof Edison T Liu, who was recently lured back to Singapore by that country's government after a stint heading the US National Cancer Institute.

Equally impressive are Titan's business partners, which, in addition to parent company Challenger and its domestic VC subsidiary BioTech Capital, include Boston-based life sciences VC fund Bioventures Investors, UK-based global consultancy firm LEK Consulting, and V2V, a specialist investment and advisory group focused on early to mid-stage entities while delivering services designed to bridge Japan and English-speaking markets.