New report paints picture of an industry growing up

Fewer biotechnology companies are being formed in Australia, but the companies that are being formed are more robust than their predecessors, consultancy Innovation Dynamics has found as part of its annual pulse-taking of the local biotechnology sector

Innovation Dynamics released its annual Bioindustry Review yesterday evening at the Australian Technology Park in Sydney's Redfern. The firm's executive chairman Kelvin Hopper, a seasoned industry observer, said he believed the sector was advancing. "I think we're seeing some strengthening of some of the companies in the sector, although some are not doing well," he said.

"There are some holes, particularly in funding. It's a peculiarity of the Australian sector which means the go to the stock market to raise mid-range capital."

Hopper and managing director Lyndal Thorburn noted in their review that there had been a further slowdown in the number of biotech and device firms formed through 2003 and 2004 and fewer spin-offs from research institutions. "We are aware of only 30 new core biotech firms in this period, of which 15 have been spun out from research institutions," they said.

But they cautioned that this was not necessarily gloomy news. "There was an increase in biotechnology sector employment overall," they wrote.

They speculated that a greater level of sophistication in research institutes and pre-spin-off market analysis and planning may mean that marginal projects were now less likely to be packaged into companies.

Overall, the number of biotechnology companies in Australia grew to 398, up 7 per cent from last year.

Venture capital invested in biotech companies in 2004 grew 172 per cent to AUD$250 million, but although at least 4 new funds were launched, only Starfish Ventures was able to raise new money under the Venture Capital Limited Liability scheme, banking AUD$123 million for a fund which covers all technologies.

Sixteen new biotech firms and 11 device firms listed on the ASX between July 2003 and December 2004, the report said, bringing the total market cap of the biotechnology firms to $3.8 billion, up from $2.8 billion last year (excluding CSL).

"Something that came out [in our analysis] was that almost half of the biotechnology products being developed were synthetic chemicals," said Thorburn. This, she said, would mean increased demand in the future for fermentation facilities

The number of employees in unlisted biotechs grew 7 per cent to 3600, and the number in listed firms was up 10 per cent to 2500. Of these, 28 per cent were R&D staff, and 375 new researchers were employed in 2004.

Victoria continues to dominate, both in number of biotech firms and in the amount of National Health and medical Research Council funding, followed by NSW and Queensland.

Puzzlingly, there has been a fall in the number of US biotech patents granted to Australian biotech companies in the last four years. The high water mark was in 2001, when 39 patents were granted. The low was in 2003, with 16 granted. In 2004, 29 US biotech patents were granted to Australian inventors with companies named as assignees and 14 US biotech patents were granted to research institutions.

Hopper speculated that research institutes were becoming wiser in choosing what to patent, because of the high cost of the process.

The report also noted that government-initiated pre-seed funds had struck some difficulty finding projects in which to invest. "With limited working capital and a narrow focus to source good projects, the funds have not been able to build portfolios," it said.