Consolidation needed for Australian genomics and proteomics market

The main message to come out of a survey of Australian genomics and proteomics companies, conducted by health care analysts Frost and Sullivan, was that the industry needs more collaboration between academia, companies and those providing funding, to engender investor confidence.

The survey, called Strategic Analysis of the Genomics and Proteomics Market in Australia, involved in-depth interviews with senior management in 30 companies of the 300-plus identified in the sector.

The companies surveyed included manufacturers of arrays, scanners and x-ray crystallography as well as companies developing new drugs.

"Consolidation among small, unprofitable companies, more co-operation between entrepreneurs and academics and stronger partnerships with international players are crucial to growth," said Vasudha Bal, Biotechnology and Life Sciences Industry Manager with Frost & Sullivan.

The report identified potential for growth in areas such as clinical genetics, HLA tissue typing and forensic DNA, as well as in companies developing research tools applicable to these areas.

Research into drug candidates was another area identified as having potential.

"Apart from promising companies like Biota, Prana Biotech and Bresagen, which have products in the marketplace or in late stage clinical trials -- although Prana suffered a recent setback with their Alzheimer's drug -- there a not a lot of candidate drugs in the marketplace that have been developed using genomics and proteomics."

Bal suggested that companies like CSL, Cochlear and Resmed, could start partnering with smaller biotechs and help them gain investor confidence.

"Of course the bigger player has to be choosey and needs to see potential in the smaller company," said Bal. "The main issue is ensuring collaboration. Along with government taking the initiative, which it does at its own pace, the leaders in the sector could start the process off and play a stronger role as they have a lot of clout. "But few Australian projects are even making it to the late stages of clinical trial, largely because many small players don't have the resources or even a viable R&D strategy, so investors are not sure whether to invest."

The report also identified a lack experience in patenting, intellectual property management and commercialisation in many academic institutions, an issue that Bal said government could help to address.

"Government, and this includes Austrade and AusBiotech, have a role to play in terms of consolidation of the sector," said Bal. "It has to happen in a collaborative way, in a national way."

Australian venture capital funding in 2004 stood at just $AUD38-64 million ($US30-50 million) compared to $AUD7.7 billion (US$6 billion) in the United States.

"Until biotechs can produce a portfolio of at least a few products at marketable stage and others in late trial stages, venture capitalists will remain sceptical," said Bal, citing the new drug development alliance between Sydney University, the University of Western Sydney and pharmaceutical start-up Medical Therapies as an example of the sort of collaboration that should be considered.

Bal said Frost & Sullivan plan to follow up this report with an east-west partnering strategy that will span the Asia Pacific - the plan is to see how companies in the east could partner with those in the west.

"It's not just about funding," said Bal. "It's also about marketing and promotion of products. In this region a lot of companies don't have the financial muscle like companies in the US."

The report also stated that the sector generated $AUD75 million ($US59 million) in revenue in 2004. This is forecast to hit $AUD105 million (US$82 million) by 2007.

Frost & Sullivan are also organising a free online CEO Roundtable -- The Australian Genomics and Proteomics Revolution -- to occur on Thursday 7 July at 3pm (AEST). For more information contact: rmtheodore@frost.com