Committee for Melbourne report calls for action

Victoria won't meet its objective of becoming a top five global biotech location by 2010 if Victorian biotech companies fail to attract expansion capital, according to a report released today by the Committee for Melbourne (CfM).

The study, conducted by the lobby group's 'Expansion Capital for Innovation' taskforce and based on interviews with over 30 players in the venture capital, biotech and funds management sectors, found that Australian superannuation funds are brimming with money, but only a trickle -- if that -- finds its way to 'real' venture capital.

"The super funds, particularly the large ones, are major drivers of where investment goes," said CfM chairman George Pappas. "The biotech industry has huge challenge to convince super funds of the opportunities they have to offer and things they should be interested in."

According to the taskforce, super funds and their advisors raise two main obstacles to greater investment in the biotech industry -- lower than average returns (about 7 per cent in the last 10 years compared with about 12 per cent from all asset classes) and insufficient company building expertise.

"The returns from biotech venture capital haven't been as good as what super funds have made from other sources," said Pappas. "The challenge is to get [the super funds] to the same level of understanding that they have in other industries.

"The biotech industry needs to show that it has, or is developing, management expertise to have success," he said.

The taskforce sees a role for the federal or state governments in providing incentives for super funds to accelerate venture funding development.

However, Pappas said that while the government has a role to play, the biotech industry needs to play an active role in educating fund managers about the nature of its business, for example, the length of time it takes to go from a research project to a self sustaining company.