Although considerable biotech research and development occurs in Australia, one of the nation’s elite investors is critical of the government for not doing enough to foster and facilitate a biotech-friendly investment environment. Declarations of aspirations to be an innovation-driven society require details. TrialSite News breaks it down for investors.
What is the Issue with investing in Australian Biotech?
Australia is “at a crossroads” when it comes to truly become an “innovation”-driven nation and economy—the government and investors need a “mind-set change.” According to Dr. George Syrmalis, founder of biotech investment firm The IQ Group Global, Australian government policy makers need to provide far more granular details as to how and what it means to become an “innovative nation.” As Syrmalis runs an elite biotech investment fund, he seeks to make that nation far more dynamic for biotech investment. With government policy changes materially rippling through society, comes a cultural shift with investors as well.
What does The IQ Group Global actually do?
The IQ Group Global is a group of companies that find, fund and develop bioscience discoveries to create life-changing medical innovations. The Group’s flagship innovation is the Saliva Glucose Biosensor, the first non-invasive replacement for finger-prick blood glucose testing for diabetes patients.
Led by Dr. Syrmalis, the group now includes a portfolio of listed and unlisted companies, including ASX-listed life sciences consultancy iQ3 and wholesale investor funds, such as a $100 million series 8 fund (now closed to new investors). With 250 professionals working under their umbrella, The Brisbane Times reported these professionals scrutinize approximately 1,000 prospective company deals before settling on an actual biotech venture for an investment—most of the time with the goal of progressing the biotech from preclinical to clinical trials phases and thereafter working with the business to take it public as it progresses toward commercialization.
Although they have traditionally focused on Down Under life science deals, they cast a global net—for example, recently they acquired the intellectual property of a University of Texas spinoff focusing on a new ovarian cancer drug.
What Challenges does Dr. Syrmalis face with Australian Investors?
Well he puts it candidly that often investors in Australia seek faster returns than are possible in the world of drug development. In traditional sectors, such as commodity resource extraction, returns can be rapid. But, the world of drug development is quite different; a world where a successful product (drug, therapy, etc.) can take a decade or more from discovery through preclinical to the extensive and expensive clinical trials on through regulatory submissions/approvals and on to commercialization including manufacturing and distribution worldwide. Although actual numbers vary, a number often shared is that an average drug can take up to $2+ billion and many years. Of course, with each successive clinical trial milestone, the risks associated with an approval go down but overall the sector is risky.
Now he has current investment horizons that can be up to 12 years and this can spook many traditional investors—they often seek turnaround in private equity in as early as five years. And perhaps in Australia and Asia, there are speculative-minded investors that got rich on commodity booms but need to invest in diversified portfolios, including life science-based drug development firms. But it will take a shift in investor mindset and culture to accept that kind of timeline and, of course, not all investors will. But the premise is that if the government does more to offer specific details of life science-focused, innovation-driven programs, this will help education classes of investors.
What are Specific Critiques of Government there?
Well, put frankly, Dr. Syrmalis wants the Australian government to roll its sleeves up and provide far more specifics about how it will transform the economy and society to an “innovation” driven one. For example, he is disappointed at the national level that government policymakers are “vague” about how to become more of an innovation-based society. He notes that “Innovation requires brutal realism and optimism at the same time. Policymakers articulate things at a top line, but fail to tell us how we’re going to do it.”
Let’s Spin out more Ventures: Faster
Dr. Syrmalis suggests that other R&D-based entrepreneurs Down Under seeks a legal and regulatory framework transformation that can foster and facilitate faster ways of spinning out Australian research into independent ventures, reports The Brisbane Times. He notes in the United States, firms can be launched in weeks to months while in Australia it can take multiple years to complete the transaction. So, perhaps government policymakers can target a range of key performance indicators (KPIs) based on competitive benchmarks (e.g. it is faster to launch a biotech start up in Australia than China or U.S. or easier (as measured in time and money) to spinout IP from a university Down Under than in Europe or U.S.), for some examples.
Government Fires Back
Meanwhile, government spokespersons remind the Australian society that in fact the government is very much prioritizing life science investment. For example, Karen Andrews with the Minister for Industry, Science and Technology notes they are active in funding in the space such as the national growth centre for medtech MTPConnect. She notes, “From the $500 million Biomedical Translation Fund through the $32 million we’ve invested in MTPConnect, which is part of the Industry Growth Centres Initiative, I don’t think anyone could reasonably suggest we’re not doing enough to support innovation in biotech.” But is this enough? Are the incentives going to the right targets? Have they identified gross bottlenecks in the way of a more dynamic and entrepreneurial tomorrow?
How Attractive is Australia for Investors?
A recent report identified some core themes, including opportunities and challenges in the biotech sector for Australia. For starters, the same demographic trends that have rivers of capital flowing into biotech in key industry sectors holds true for Australia—the markets for advanced drugs and therapies will continue to be robust with an aging population (Down Under and elsewhere); urbanization and demand in China, etc. On the China front, Australian drug developers export more and more to the world’s most populous country and second largest economy.
Increasingly mid-tier to large pharma must replace depleting chemically-synthesized pharmaceutical pipelines with biopharmaceutical pipeline to replace that value. The traditional “pharmas,” whether mid-sized or big, have a hard time internally, hence they must implement external innovation strategies via M&A and traditionally Australian biotech’s can do well here to contribute to pharma’s race for inorganic growth.
Also adding to the dynamic opportunity, a form of biotech revolution is now unfolding where dramatic breakthroughs in precision medicine, gene and cell-therapy and new advanced discovery methods powered by artificial intelligence (AI) create fertile investment opportunity Down Under and elsewhere.
Indeed, the Australian Government’s $500 million Biomedical Translation Fund, if managed properly, will undoubtedly contribute to a positive biotech investment momentum Down Under—especially if industry groups lobby to drive further reforms of the type, mentioned previously by Dr. Syrmalis.
Of course, risks and challenges abound in this world, and many investments don’t turn out positive. Some high level challenges to Australia’s’ biotech sector include first and foremost pricing challenges as the Pharmaceutical Benefits Scheme (PBS) places continuous downward pressure, which erodes firm profit margins. Moreover, Australia competes with emerging economy countries for biotech investment from China to South Korea and India. This threatens to disrupt where investment capital flows unless government policy makers help support more enticing reasons for Australia. A host of other risks from cyber security to growing protectionism introduce potential impacts on Australian biotech formation, growth, and commercialization. Finally, the competition for talent possibly could be the deciding factor. Afterall, drug development fits squarely into the knowledge capital sector—human capital represents a fundamental input to value formation, development and realization. Policies to incentivize biotech talent to locate in local clusters (e.g. Melbourne) can be one example of the nation’s commitment to an innovative culture and society.