AusBiotech Evolves




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Video title: AusBiotech Evolves
Released on: November 27, 2008. © PharmaVentures Ltd
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Despite the economic outlook in October 2008, Anna Lavelle describes the positive buzz that surrounded this year’s conference in Melbourne; the talk was not of negativity and gloom but of partnerships and collaborations. The biotech industry in Australia is used to challenges and has proved itself resilient, but as Dr Lavelle looks to the future she explains the importance of the role that Asia will play and why next year the conference will be for the AsiaPacific region instead.
Opportunities in Australia and growth of biotech industry.
Fintan Walton:
Hello and welcome to PharmaVentures business review in the special edition with Anna Lavelle, the CEO of AusBiotech here we are in Melbourne, Australia in October 2008. Welcome to the show.
Anna Lavelle:
Thanks Fintan. Pleasure to be here as always.
Fintan Walton:
Good. Anna Lavelle, this year AusBiotech is here in Melbourne and what's it like this year for AusBiotech?
Anna Lavelle:
It's fantastic you know we are really very pleased we thought with the economic environment there may be some difficulty really in getting the activity and the interest and the motivation. I was a bit interested to see what the buzz would be like, but I have to say I am pleasantly surprised. I think that it just shows how resilient the biotech industry are, the people here they've never known a free kick I suppose and they are a bit toughened to the environment and so I can see that it all goes well for the future, no one is throwing in the tale they all seem to be talking about the future, talking about partnerships. They've got about 1500 business matching - meetings already worked out as I speak. And then probably will be more before the end of the conference. So it shows to me that the activity hasn't diminished in anyway.
Fintan Walton:
Well clearly Anna, one of the things that we've noticed is that there is a even a greater presence with a pharmaceutical companies clearly coming here looking for opportunities in Australia?
Anna Lavelle:
That's absolutely right. And last night of the function I was talking to Barbara Dalton, she's Head of Ventures for Pfizer. And absolutely saying how, absolutely important and partnering with biotech industry is, she was very, very clear about their intention in doing that and also very clear that's not going to shut the change if anything accelerate. So that's good news for biotech, there are companies there looking for partnerships not only research partnerships but also looking to purchase licensing technologies and purchase all companies if appropriate. So there are a lot of exit strategies still there available.
Fintan Walton:
Right. So clearly I mean with the biotech industry here in Australia it's still trying to gather momentum, it's had tough, it's had a tough few years and - but as you say they're out there and they're still routing and doing well against tough competition, against tough financial markets. So how do we take a biotech industry like the one we have in Australia and move it on?
Anna Lavelle:
Look if only - I could answer that question in two seconds. I think there are a number of features that we have to focus on. It's clear that we don't have a sophisticated private equity market here and so it is also extremely clear that Australia does have to look Internationally for its capital and we've known that for a while, but I think it's become technically clear and how. So a lot of the companies are searching aggressively overseas for financial partners as they should do and quite often that happens in a VC market at least with co-investment with local VC's which is appropriate, so that is one way, the other thing is that we have put together the BioNet Asia Pacific Network which you should be aware of, the MIU is with 10 countries - 10 member counties and that include India, South Korea, Taiwan, Singapore, Japan, New Zealand, Malaysia, Thailand, United Arab Emirates and Australia of course. And Australia is taking the lead put that together and we do the secretariat. And why we have done that because we really see that our companies need to focus on the region perhaps more than they have in the past and look at some of the opportunities there, there is money there, there is some science there, there is some small companies there, there is an increasing evidence that there is a lot of opportunities there that may really lead us to the next decade. And we have to look at Asia as well as Europe and North America.
Partnerships, M&A's in biotech Australia, strategies of funding and capital raisings.
Fintan Walton:
Right. But clearly with the biotech industry emerging here in Australia we talk about partnerships, partnerships between biotech companies in Australia is that working at all?
Anna Lavelle:
M&A you mean mergers and acquisition?
Fintan Walton:
Mergers and acquisition but just pure collaboration?
Anna Lavelle:
Yes, there have been collaborations, there also have been formal mergers and acquisitions and quite a long now people have been talking about the number of very small companies and now they are even smaller with the loss of some of their share price and some of their care and there is a need obviously for those companies to be looking for sympathetic technologies to see if they can build up a viable hole now it's absolutely more complicated then after sit and understand that, that everything is got to fit and including the ego's of the respective CEO's which is often very, very important. But certainly there is something that Australian companies are going to have to look very seriously at over the next 12 months I'd imagine.
Fintan Walton:
Right. Because there are companies - biotech companies here that are cash rich, that have managed to raise money at the right time?
Anna Lavelle:
Exactly.
Fintan Walton:
And they are in the much more profit position but there are other companies that have as you said their market caps low, they are going to find it very difficult to raise further money possibly, so what's going to happen to the landscape of biotech?
Anna Lavelle:
Yeah, it's a good question you absolutely spot on. PWC just did their latest report and there were 27 capital raisings this year, this time last year there were about a 120 capital raisings and the average is only $1.4 million, so really chicken feed compared to what it was last year and also what the market needs. I think that, that's says that there is going to be some companies that will not survive the next 18 months are these very small ones. But it also right in saying there are numbers - there is a big color coat of companies that are cashed up, (indiscernable) is for example has a $167 million in the bank at the moment, they are actively building a manufacturing facility also a lot of the medical device companies are manufacturing they in fact have sales and the reduced dollars a good thing for them in terms of their export process where value for money at the moment with the dollar and also some of the cap [Indiscernable 00:06:38] and so on, so I can see that for those that are purchasing technologies there is a lot of opportunity here, but you are right that is going to be rough for small companies that are cash poor that have perhaps just six months of cash burn left they are the ones that are vulnerable.
Fintan Walton:
There is a temptation for some of the these companies which are cash poor to hibernate to stop and just hang around till next around of finance they can come back in again when the market turns, which it will or they have the other strategy which is to say right we are - where - it's not worth continuing let's sell up?
Anna Lavelle:
Well there is a third - there is a third strategy which is attack is the best form of defense the one I prefer. And I would say that I agree with you, I think that some of them do hibernate they become a big startled don't quite know what to do where as, as I see all the small companies I would have the opposite approach I think that's the time when you got very little to lose. you may yourself get out there and be as aggressive as you possibly can to find a partner or a way forward to thread your way through so that you can survive to the next value inflection point and then next stage of our business development, so there are always options. And I think the people that stiffen up and not able to really be flexible enough to continue with the negotiations, they are the ones that are going to be vulnerable.
Fintan Walton:
Yeah, yeah. And it's a time to, to be opportunistic as well?
Anna Lavelle:
Absolutely always is.
Response to Terry Cutler report
Fintan Walton:
Always is. Of course the other thing that's happened in the last few weeks is the Terry Cutler report has come out and AusBiotech has made its response to that, do you want to give us a summary of that response?
Anna Lavelle:
Yes. Terry Cutler and the review team really did a terrific job because they had 740 written responses, so you can imagine the power of paper they have to deal with. Plus all the informal responses they would have got it at every meeting they went to a dinner party for a few weeks. So they did a good job in putting together a comprehensive report, we would say that it's strong in some areas and lacking in others everyone I am sure has a similar criticism of just about any report that's ever been return. So the first thing is it's very strong on the academic side and very strong on talking about fully supporting research which is a good think and the number that has been quoted is $2.2 billion of investment to do that. On the industry side we think that it's a little light on talking about replacing this rep commission ready program with another program which is alliance based program is a $150 million per annum. So you can see 2.2 billion and 150 million, we think the balance isn't quite right between academic research, basic research and industry, we would like to see more investment in industry, we also would like to see more recognition of the needs of companies when they are in clinical, when they are in the clinic for big licks of money 3, $5 million and haven't matched you know mandatorily matched with the rejuvenate investor, third party investor which we think really derisk's the investment for the government. Where as at the moment there is some lose talk within the bureaucracy that the government be the last lone you know last place that we could get - we get the money.
Fintan Walton:
Sure.
Anna Lavelle:
And it's only if you couldn't get money from any other source.
Fintan Walton:
Right.
Anna Lavelle:
Well we don't say that it's being very logical, because why would you finance something that no one else has got an interest in.
Fintan Walton:
Yeah.
Anna Lavelle:
So we are trying to talk a way through that at the moment. The other thing I would say is the chapter on Tax Chapter 8 is excellent and there is one particular thing that we've been loving for a while which has been picked up and I know that in a conversation with Terry he told me that it was based on they had biotech in mind when they did this and that is moving from an R&D tax concession to an R&D tax credit which means that the companies will be getting cash back you know perhaps more than once a year which is even better rather than not being able to access the R&D and tax concession they cannot do at the moment.
Fintan Walton:
Right. Now clearly one think is to the Terry Cutler report as you say is very important document and hopefully the government is looking at that in good stead, but it still has to adopt some of these -
Anna Lavelle:
Absolutely.
Fintan Walton:
jeopardy recommendations in that report?
Anna Lavelle:
Absolutely and you are correct to pick that up. People are confused about the report, the report is just a report. Minister Carr could decide to do nothing if he wanted to, so he has to decide what to do if anything from the report and then he has to convince his colleagues in Crocus to support him, so you can see that there is going to be a while a road to go yet before we know whether cabinet will come in behind the Minister and support one of it - it is that he decides he wishes to run with. We are hoping that the tax credit for example is pushed ahead out advocacies that we are trying to get this is in the next May budget, we'd love to see that initiative taken up in the May budget. There is a Henry review which is looking at the whole of tax in Australia, it's not due to release until the end of 2009 and we don't want that to be used as an excuse for not auctioning the credit, but having spoken to the government we understand that there is an opportunity to un-couple the two so that the credit would come in earlier. And we are really excited about that prospect. That would give some short-term celebration I guess to, to some people would be very happy to see that come through. The other thing is of course the Grinch, the Grinch line, we'd prefer to see this Grinch, we feel that having in as line is an issue for Directors of companies and also for CEO's carrying it as contingent reliability on your balance sheet is not a happy thing for directors and also the detail, none of the detail is known. So if the government decides to go down that road it obviously would be at the table looking very carefully and what the detail is in how with the architecture of the package is as to whether or not it's going to truly benefit our members and constituencies this is the opposite, so there is still a pathway that we need to trade.
Fintan Walton:
Right. And then clearly changes need to happen if we want to get this biotechnology industry off the ground again?
Anna Lavelle:
Absolutely. After this scrapping of I've been scrapping of Comm Ready grant was just stunning as a decision stunning. And the reverberations throughout the industry and beyond people that have never even received a Comm Ready Grant and never applied for a Comm Ready Grant were staggered.
Fintan Walton:
These are commercial - the Commercial Ready Grants?
Anna Lavelle:
Yes.
Fintan Walton:
For our audience outside Australia. So they've the government suspended?
Anna Lavelle:
(indiscernable) and (indiscernable) without consultation, (indiscernable) before the budget came down, (indiscernable) before the Cutler review on innovation, so took a precipitates action prior to any of those processes and I guess that was the really surprising thing.
Fintan Walton:
And at a time when that sort of thing wasn't going to be welcome?
Anna Lavelle:
No at a time when life was already tough and that just made it the perfect storm.
Fintan Walton:
Yes. So and hopefully we will see some changes occurring over the next year or so?
Anna Lavelle:
We are very hopefully and we are really looking to this next budget with the Federal Government to see what's going to come out of it. We really are going to focus on this between now and that time. And we would take every opportunity to really try and impress upon the Federal Government the importance of taking some clear actions here as well.
The changes in AusBiotech conference and the inaugural of the Asia-Pacific Conference
Fintan Walton:
Right. The other thing that we would like to talk about is next year this time next year instead of the AusBiotech conference being a national conference it's changing, could you tell us about those changes and what's going to happen?
Anna Lavelle:
Yes. I think that you are aware that I've been quite keen on the regional engagement for a while and so we're going to have the inaugural Asia-Pacific Conference here in Australia next October 27 to 30 October, so it's same time of the year as this year and in Melbourne again. And why in Melbourne again? In Melbourne because there is a brand new convention centre that is near completion and with our grown this convention centre here I think we had about 20 companies on the wait list for the exhibition hall. So next year we can expand, we can have it as large as we want, we want to invite all of our colleagues from the surrounding countries to come and participate and we are currently in conversation with many of those countries here at the conference about next year. And we really want to try and generate a sense of collaboration and cooperation but also business-to-business interactions within the region, really we see this potentially third trading block for biotechnology in the world. There is North America, Europe and Asia now it's harder to get traction in Asia because there are some many counties some of them separated by water and it makes like a big challenging. But the will is there and we just had a two hour session this morning looking at global biotechnology and certainly all of the speakers were speaking as one about the need for collaboration and about the huge potential in Asia and about the ways in which they felt that they would like to collaborate with Australia in particular, so all the home acts there now we have to just pull it together and get traction.
Fintan Walton:
Right. So the Asia-Pacific Conference replaces the National Conference at AusBiotech?
Anna Lavelle:
Yes. That's right.
Fintan Walton:
Okay.
Anna Lavelle:
That's right.
Fintan Walton:
Well Anna Lavelle, we look forward to seeing that next year. And thank you very much indeed for coming on the show.
Anna Lavelle:
Thanks Fintan.
Fintan Walton:
Thank you.
Anna Lavelle
CEO
Dr Anna Lavelle was appointed inaugural Chief Executive Officer and Executive Director of AusBiotech Ltd in June 2005. AusBiotech is the peak industry body for biotechnology with over 3,000 members. AusBiotech is part of the Pharmaceutical Industry Council and Chairs the Asia/Pacific biotechnology network. Dr Lavellealso Chairs, or is a member of, various Federal and State government committees associated with biotechnology. Previously Dr Lavellewas a Senior Executive with the Australian Red Cross Blood Service (ARCBS), commencing in 1998 as Director responsible for Strategic Planning and Business Development. Prior to joining ARCBS, Dr Lavelleheld positions of Chief Executive Officer of a public health organization, Industry Lobbyist for a member organization and commenced employment as an academic at Monash University, Melbourne. Dr Lavelleholds a Doctor of Philosophy in Genetics from the University of Melbourne and is a graduate of the Australian Institute of Company Directors.
AusBiotech Ltd
AusBiotech is Australia's Biotechnology Industry Organization, which represents over 3000 members and covers the human health, agricultural, medical device, bioinformatics, environmental and industrial sectors in biotechnology. The organization is dedicated to the development, growth and prosperity of the Australian biotechnology industry by providing initiatives to drive sustainability and growth, outreach and access to markets, and representation and support for members nationally and around the world.