Friday 15 February 2013

The new era of financial sourcing for the Australian biomedical/biotechnology research environment


The new era of financial sourcing for the Australian biomedical/biotechnology research environment

The Australian biomedical and biotechnology research sectors are typically characterised as having long lead times in translating discoveries into successful outcomes that advance health delivery.

This characteristic can be attributed to a number of reasons. Additional experimental and preclinical studies are required prior to necessary patenting, including therapeutic and ethics regulatory approvals. Applied research and its development are costly, each requiring both state of the art infrastructure and highly skilled cross-disciplinary researchers with health practice experience. The high cost base for conducting applied research and clinical trials coupled with a diminishing supply of state and federal public funding is creating a sector on the precipice of debility.

So how did a sector move from the promises in the 1990s of growth and wealth creation to where it is now, struggling to grow?

The sector moved from a deflated pre-2000 biotechnology bubble, through some failed VC funding attempts, to a reliance on government support, VC’s, private equity and some large Pharma partnered incubations – just in time for a global financial crisis comparable with the energy crises of the 1970s and the origins of the Great Depression.

What will be the likely funding sources in the new era progressing towards 2020 that will regenerate future growth?

In the present economic environment of tightening public funding, declining global and local risk capital, enhanced requirements for regulatory approvals and reimbursement uncertainties that increase investment risk, we examine what the most plausible new sources of income are that will support the translation of R&D innovations into the market moving through this decade.

By combining an understanding of the past and current financial biotechnology landscape with that of best practice1 in biotechnology and health sector development funding in comparable regions like the US, Canada and Singapore, we see a number of emerging financial instruments that are poised to contribute significantly to this sector moving through to 2020. We propose the following working model that encompasses key financial investment sources and emerging funding pathways.

Foreshadowed emerging financial instruments into the Australian Biomedical and Biotech Sector:

  • reduced government funding, but improvements to regulatory requirements and support for industry collaborative arrangements:
  • improved capital efficiency measures sought by VC firms, such as virtual biotech firms and “lean POC” models, both of which rely heavily on outsourcing and reduced CAPEX costs
  • co-alignment of biotechnology candidates to large Pharma product profiles as a key exit strategy
  • private equity participation through stepwise licensing, VC, investment angels, superfunds and potentially crowdfunding 

 

 

About the Authors: Dr Kymberley Vickery, Samantha Perkins, Dr John Kapeleris Dr Kymberley Vickery leads the IP Commercialisation Group of the Australian Institute of Commercialisation, a Division of QMI Solutions. The AIC routinely develops technical, advisory and commercial services to the emerging technologies sector for private, industrial, research organisation and government clients. For more information, please contact Dr Kymberley Vickery at k.vickery@ausicom.com or phone (07) 3364 0700.

1 Trends in Mid-Stage Biotech Financing, Independent Study, Michael D. Hamilton, Tuck School of Business at Dartmouth, USA (2011);Non-Dilutive Financing Alternatives for Biotech Companies, News in Avance, Valuation in Life Sciences, March 2008 – N2.

 


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