Roundtable: from innovation to commercialisation - Part II: the valley of death

Continued from Part I of the roundtable discussion, which can be found here.

Panellists
(Front row)
Dr Bernie Tuch – Director – NSW Stem Cell Network
Dr Trevor Davies – Partner – Allens Arthur Robinson
Professor John Shine – Executive Director – Garvan Institute
Michael Quinn – Managing Partner – Innovation Capital
Dr Anna Lavelle – CEO – AusBiotech
(Back row)
Dr Wallace Bridge – Director, Entrepreneurs in Science Unit – University of New South Wales
Tony Gellert – Manager – PricewaterhouseCoopers
Tim Dean – Editor – Australian Life Scientist
Associate Professor Jim Patrick – Chief Scientist – Cochlear
Professor Mark Baker – Chair of Proteomics – Macquarie University

Tim Dean: What about bridging the gap between a discovery made in a university or research institute and creating a viable product and taking it to market?

Anna Lavelle: A crucial link is between the university and the having the technology be investor-ready. That’s the gap that in Australia we manage very poorly. We hear the anecdotal material about people saying they only needed another $500,000 to do a proof of concept, but they couldn’t get the university to support that, they couldn’t get government funding and they couldn’t get investor money because it was too early so the patent lapsed. There’s quite a few of those stories.

Michael Quinn: We’re really talking about taking research into a business. In terms of a business, maybe one per cent is the research, 10 per cent is getting it produced, and the rest of a whole host of business issues of how to get it to market. I have never seen any business in our portfolio, or any other business I've been involved with, fail because their technology has failed. It’s not the technology, it’s all to do with people. Where are the people to pick up a piece of technology and turn it into a business?

Tim Dean: What do venture capitalists look for before they invest?

Michael Quinn: The number one thing we look at is people. The second thing we look at is people. And that’s also the third thing. Because it’s the people that fail.

Bernie Tuch: If we can leave Australia for a minute and go to America: is the grass really greener on the other side or not? In the stem cell arena, we see the California Institute of Regenerative Medicine, headed by Alan Trounson. In the area of diabetes, with a company called Novacell, $20 million was handed out to get to a phase I trial. If that’s the sort of support they’re getting in the US, the question is: is the grass greener on the other side?

John Shine: From my perspective, what’s different about the US is the staying power and the time frames.

Michael Quinn: The sheer volume is different in the US. But there’s probably more support here from government grants than in the US. It really depends where you are and what the circumstances are. The US is a hard place to start a business these days. First you hire a corporate lawyer, second an HR expert, then a scientist if you’re lucky.

Jim Patrick: Talking about people, that’s the gap. You’ve got the ideas, you’ve got the proof of concept, but to set up the group that’s going to take it from the concept to turn it into a business... with Cochlear, it’s taken 30 years to get where we are now.

---PB---

Michael Quinn: In 2007 we looked at 20 biotechs that had publicly listed. 16 had come to us looking for money. Not a prayer, they weren’t investible. But they found a bloke looking for a quick turn on the markets.

Anna Lavelle: What should they have done?

Michael Quinn: Maybe the market was telling them the product they have shouldn’t be commercialised. I’m not necessarily saying floating on the market is wrong. But the stock market should be about businesses that make profits and pay dividends. Going for early punting with phase I products is nuts.

Mark Baker: The big difference with the US is risk aversion. In the bay area there are a lot of people who have become quite wealthy through risky things.

Michael Quinn: We shouldn’t get too over enthusiastic. After the dot-com boom, for every dollar that’s gone into venture, $0.50 has come out. The US venture industry is consolidating rapidly at the moment. It’ll get harder to raise money in the US going forward than in the last 10 years.

Tim Dean: What other countries besides the US could we learn from?

Anna Lavelle: In Israel, the office of the chief scientist has a $500 million slush fund that he or she can tip in to whatever they see as attractive. That’s the kind of flexibility we don’t have here. Given the generosity of our government, what are they doing in the ‘D’ end, it’s all in the ‘R’ end. I can’t think of anything in the ‘D’ end.

I took 10 CEOs and my board to talk to the minister and the federal department recently. One of the topics, besides R&D Tax Credit was Commercialisation Australia. The person who did the presentation for CA said three things: the money is not for start-ups; you have to be two years to market; and you can’t get money from any other source to qualify. Strange.

John Shine: Well, they’re not going to spend too much, are they.

Anna Lavelle: There are some real problems comprehending how the business works. It’s disappointing that after all the conversations that have taken place and the fantastic minds in the country, we have this situation where we’re not talking the same language, between government, academia and industry. It’s not that hard, really. People talking from their own agenda and not necessarily meeting in the middle.

Wallace Bridge: A lot of biotech companies aren’t about producing a product. It’s about reducing risk in their IP and bringing it closer to market. That final product, the IP, is what they sell on to pharma companies.