Australia sowing the seeds for global biotechnology success

There is no denying that Australia has all the right preparations in place to develop its biotechnology sector. The country has the capacity to be a significant participant in the global biotechnology community. Mazlyn Mena reports.

Today, there are approximately 250 biotechnology companies in Australia. Given country's size, self-sufficiency and vast rural environment, agribusiness accounts for a slightly larger portion of the sector compared with other Western countries, with the majority of companies focusing on human health

(50 per cent) and agriculture (14 per cent). But the question still remains: will Australia become a biotech force in the near future?

The Australian biotech market has seen an exponential growth since 1999 due to the rapid developments of the marketplace and greater access to capital, supported by the previously buoyant economic conditions locally and in the rest of the world. The growth of the industry in Australia has earned the public's confidence.

On the ASX listed biotech companies are worth approximately $5.3 billion. However, as the industry is still in its growth stage, more funding is required to grow. Hence, the government's support for the industry is crucial.

Regulation and government support

The Australian Federal Government has shown a firm commitment to secure the nation's future in this developing technology. In 1999 the federal government allocated $8.9 million for the development of a comprehensive new biotechnology strategy. This is to ensure that Australia captures the benefits of this emerging technology by providing the much needed funds and research infrastructure. The government also established Biotechnology Australia, an agency to co-ordinate biotechnology issues and provide factual information to government.

On July 3rd 2000, the minister for Industry, Science and Resources announced a $15.3 million National Biotechnology Strategy to boost Federal Biotechnology's funding of above $127.2 million annually. A key priority of this initiative is the establishment of a $10.2 million Biotechnology Innovation Fund (BIF). The purpose is to bridge the commercialisation gap between research discovery and commercial product, a problem that has constrained biotechnology in this country for so long.

Other key issues include establishing biotechnology research regulations and providing balanced information to the public on biotechnology issues.

On 29th January 2001 in his Federation Speech, the Prime Minister launched Australia' innovation action plan for the future: a series of incentives to accelerate the country's research and its commercial application, and to develop and retain Australian skills. Key points in this

$1.5 billion commitment entitled Backing Australia's Ability included doubling of Australia's Research Council Funding by 2006. Moreover, $296.7 million were allocated for research infrastructure, $89.6 million for Centres of Excellence in Biotechnology and Communications, double the funding of the Biotechnology Investment Fund, and an 80 per cent expansion of the Cooperative Research Centres Program (most engaged in developing and commercialising biotechnology). In addition, $76.9 million was also allocated for universities; priorities to science equipment, libraries and laboratories, and furthermore, $66.2 million for secondary science in government schools.

Changes to Australia's tax law regarding capital gains have also benefited biotechnology ventures. Pension fund investments from major trading partners (the UK, the US, Canada, Japan, Germany, and France) are now exempt from capital gains taxes ­ a move that mirrors the treatment of such investments in these countries' domestic jurisdictions. This incentive puts these partners' investment in Australian IP on equal footing with their domestic funding choices.

Although the government has begun to invest more aggressively in the past few years, Australia's investments in biotech are still a fraction of the those in some countries in the Asia Pacific region. Singapore recently announced investment plans of $7 billion over five years, and Korea committed $200 million for a programme to support individual biotech scientists at the rate of

$1 million a year for seven years. This shows that these two countries are ahead in terms of focus and drive to invest serious money for the industry. Thus, the Federal Government needs to continue to sharply increase the rate of investment in the years to come.

With all these initiatives in place, the neglected factors to address in Australia are the industry's direction and purpose. The most lucrative markets in the business are those addressing large and under-serviced markets, such as treatment for Alzheimer's disease. Currently, there are no effective drugs available to prevent or remedy the disease. In addition, the treatments available do not address the underlying pathology of the disease and do not stop its progression. A drug that has the ability to do so will penetrate a huge market and generate tremendous revenues.

One of the Australian biotech companies said to be on the right track is Prana Biotechnology. Granted there are many other research units around the globe in the pursuit of the cure for Alzheimer's disease, Prana Biotechnology's main advantages are their platform theory of metals and amyloid in the treatment of the disease and their scientific advisory board. The board members are prominent authorities in Alzheimer's research. Hence, this biotech company is well positioned to play a major role in bringing a treatment for the disease to the market.

The shape of the future

Against this backdrop of government support, and looking at the current trend of the industry, Australia is predicted to continue to give birth to specialty biotech companies, as opposed to large pharmaceutical firms. The goal of these companies will be to develop a product and then look for quality licensing deals for manufacture and distribution, rather than to take a drug from development through the complete production process. u

Mazlyn Mena is with the international market research organisation, Frost & Sullivan. www.frost.com

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