GBS Venture Partners: Joshua Funder on seeing positive signs in the Australian biotech sector.




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Video title: GBS Venture Partners: Joshua Funder on seeing positive signs in the Australian biotech sector.
Released on: December 08, 2011. © PharmaTelevision Ltd
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In this episode of PharmaTelevision News Review, Fintan Walton talks to Joshua Funder, Partner at GBS Venture Partners
Joshua 's perspective: Current environment of biotech industry in Australia
Fintan Walton:
Hello and welcome to PharmaTelevision News Review here at AusBiotech's convention in Adelaide, here in Australia. On this show I have Joshua Funder, who is the Partner at GBS Venture Partners based in Melbourne, welcome to the show.
Joshua Funder:
Fintan, welcome back to Australia it's always good to have you back down under.
Fintan Walton:
Thank you very much Joshua, the biotech industry here is in obviously in an environment a new environment from an external point of view it's a tougher market out there in the US and Europe, what is it like for biotech here in Australia?
Joshua Funder:
I think the story is good and bad Fintan, Australia biotech hasn't been spared the high volatility that we've seen in global markets that's lead to uncertainty and instability and that's particularly hard in biotech where the product development time cycles are so long and the commitment required is so extensive. So Australia hasn't been spared there, Australian biotech hasn't been spared there compounding that in our sector are patent expirers as you can imagine and also volatility on the private markets for investment in terms of commitments to venture both internationally and locally, having said that though I think there are some very positive signs in the Australian biotech sector, it's maturing there are now much broader number of companies bringing products to global markets or exiting with significant exit valuations and the international interest in IPOs here, licensing here and clinical development here remains very strong throughout the last three-years of otherwise generalized market and stability, so I think as a sector we've weathered the storm pretty well.
IPO market
Fintan Walton:
Right, now one of the key thing that's been always an issue in the past is being the how the markets here in Australia follow the biotech companies that which have IPO the ones that are on the ASX, so has that changed? Is that giving a better encouragement to companies to want to IPO here?
Joshua Funder:
I think there are several factors driving the attractiveness of the Australian public sector for biotech, firstly Australia has a bigger commitment on its public markets to biotech than most other countries and any other country relative to GDP, so there is a strong commitment there. Secondly we have seen a lot of international investors coming to existing floated and listed companies and new IPOs and I think that drives the quality of analysis and interest in the sector as well as driving liquidity and the availability of capital. Thirdly we have seen existing strong Australian biotech companies with mid to late stage programs be able to recapitalize through the toughest times of the GFC and so for bunch of those reasons I think Australia and public markets have really served the Australian biotech community very well historically and we are now seeing the maturation of the products, of the companies and of the investor base with that the analysis.
Funding and availability of capital
Fintan Walton:
Right, okay. The other criticism sometimes used in the past about Australia biotech funding was that the funding rounds were small wasn't sufficient amount of capital going into these companies it was a drip feeding of capital into the companies is that still the case or has that changed?
Joshua Funder:
Broadly I would say that is still the case. Australia has superb biomedical technology, superb clinical development opportunities, but in a generalized way you could identify a porosity of human capital in management teams and also a lack of deep pockets around the table, but lot of companies and there is a panel tomorrow that I am chairing will address this have addressed that challenge in a series of different ways, creative ways successfully ourselves and others have syndicated broadly and internationally with the venture community to provide an equity capital for private development companies, as I mentioned before investments has been flowing into the Australian market from private institutional investors into public companies in Australia and also there has been a growing range of partnerships by which Australian companies have raised capital and expertise. So I think good companies have been not progressive but it remains an overall challenge for Australian companies the availability capital and like any company in biotech around the world, industry in biotech around the world the valley of death from the University out to early clinical development is as big for us a challenge as it is for anybody else.
Impact and benefits of new tax credit system
Fintan Walton:
Right, now the other thing that's happened recently is these tax credits, this new tax credits that's come in from the Australian government, tell us a little bit about that and what impact do you think that will have on the sector here?
Joshua Funder:
Look I think it's a significant move and a very positive one and AusBiotech is gonna work to make sure that those tax credits work for the biotech sector as it develops.
Fintan Walton:
Sure, because it is for across the boards not just for biotech?
Joshua Funder:
Yes, it's for the whole of the Australian economy in terms of promoting research innovation and so what it will enable is for smaller companies it will enable up to 45 cents in the dollar to be refunded to the company in cash as a tax credit and it also for larger companies it's up to 40 cents in the dollar as a tax offset for future, and so for small companies in our sector that will have a big impact on the relative cost of the R&D and their ability to invest in R&D. I think it will have a benefit for Australia in that for preclinical work but also clinical work the Australian sector will be up skilled and the volumes and the scale will be enhanced, for local companies it will mean that they have a big opportunity to make there probably go further and to take additional risks. So I think Australia stands to benefit from that Australian biotech companies both preclinically and clinically will be attractive, an important thing to note about the R&D tax credit is it is also available to foreign companies conducting majority of their clinical work preclinical work in Australia and so I think it will add further incentive for companies to come and undertake that sort of work in Australia.
Fintan Walton:
Right, from your perspective as an investor in biotech companies here in Australia is that gonna change the way you are gonna invest, I mean are you because obviously one of the benefits is that Australian company or Australian biotech companies can take the products further they can get they can get in further down the clinical development pipeline for their dollar effectively so that must mean that the overall value that these companies can create with one dollar is far greater than it could in the past?
Joshua Funder:
That's right, it happens in a couple of ways one of which is it's attractive for both us as investors and international syndicate partners to undertake R&D here in Australia not on each type products further down the track because it cost you less and you've got more bank for your buck but up to another way were probably has even more impact on early stage companies and that is if you are an early stage company with a small management team and a single product and you are trying to get to proof of concept in one indication, one disease area the opportunity to try a second clinical study at the same time in parallel have two shots on a goal changes the risk profile substantially, so it's either one of those clinical trials were successful the company might flourish that's a very different approach in terms of putting all your money and managing the company, building the product, taking at the IP and only having one clinical trial is a make or break clinical trial, so it will change the risk profile for investment and for success in Australian biotech companies by enabling two or more shots on goal as well as companies to get further downstream.
Fintan Walton:
Right, if a pharma company is doing a collaboration with an Australian biotech company now in the future and they are co-funding some of that research does the pharma company get some of the benefits of that tax credit?
Joshua Funder:
Look I can't predict the details we had that work for an Australian company undertaking a majority of its R&D on a particular program in Australia my understanding is that the tax credit will benefit that company regardless whether that company's ultimate funding is from us as a local venture investor from a US venture investor or from a partner program so you need to go into the details of that. My understanding is that the program is broadly available for R&D work conducted in Australia and so for most different types of partnerships and collaborations will also benefit them.
GBS Venture 's current portfolio and types of investments
Fintan Walton:
Okay, so let's look at your portfolio you've got you've been one of the longest players in funding here in Australia, could you just give us a quick summary of where your portfolio is at? What type of investments you are doing with the companies that you are investee companies so give us a synopsis of where GBS Venture is in its current portfolio with its current portfolio?
Joshua Funder:
Our mandate and our strategies remain very unchanged over the 12 or more years now that we've been investing as a team over five funds now. So we invest in the highest quality Australia and New Zealand biotech opportunities that we can seek way that is placed is has been we have a portfolio about 30 companies now about half are in drugs or biologics and about half are in human therapeutic devices, across that whole portfolio of 30 companies at least half of those companies are syndicated international to make sure we had adequate capital. They are in range of indication areas from CNS , through to cancer , through to inflammation , through to ophthalmology and wound care so a broad range of indications and increasingly we are able to invest in clinical stage or mature assets, some assets we're even investing in when the device is on market but needs capital to further expand it's opportunities, so we are seeing a broader range of stages early on in our investment history most of them were preclinical opportunities coming out of the universities and we are, we have been able to benefit from the maturation of the Australian sector in terms of the opportunities.
Fintan Walton:
So you follow those, you've been following the companies through rounds of investments?
Joshua Funder:
Absolutely, and many companies that we are ultimately investing we've known for many years before that so we follow companies along the way and some other companies we are founding members often and involved at the ground floor, so it's a variety and that model hasn't changed much over the years.
Fintan Walton:
And for you the best exit is what an IPO or a trade sale?
Joshua Funder:
A high multiple on cash, the means of exits we've had exits from NASDAQ IPOs, from ASX IPOs, from trade sales internationally, so we have invested broadly in companies that have activities in Australia and operations in Australia that we can support these investors and their exits have come similarly from a broad range of resources. The best exits have been fund making, talk to your investments and we've just actually concluded our first fund which was a global top quartile biotech fund and we are very proud of the results that have been able to be generated across that portfolio at the same times we continue to manage the funds and the portfolio companies from our remaining funds.
Joshua 's views: Australian biotech sector over the next year
Fintan Walton:
Right, so next year while I am here interviewing you what do you think will have changed over the next year?
Joshua Funder:
In our portfolio or in the Australian market?
Fintan Walton:
Both.
Joshua Funder:
I think in both, we know we've got a lot of companies which have pivotal data coming through in the middle of next year so we are very excited by the whole series of companies that are effectively executing clinical studies that we think have significant value to address global diseases, so that's what gets us excited by the middle of next year many of our companies will be reaching those milestones. Likewise I think by the middle of next year as an industry I am hoping things will settle down, I am hoping pharma companies have realized their patents are coming off and they have started to buy biotech companies like us and others for significant valuations that really reflect the innovation and the risk that's been undertaken. I think in the Australian sector you will see an even great maturation of those dozen or so companies that have products on market and people will really get to see what it looks like and feels like to have high margin global products and the revenue streams from those come back to small listed companies and I hope we see some recapitalizations and even more biotech companies in the ASX 200 index.
Fintan Walton:
Joshua Funder, thank you very much indeed for coming on the show.
Joshua Funder:
Fintan, it's a pleasure thank you.
Fintan Walton
Dr Fintan Walton is the Founder and CEO of PharmaVentures . After completing his doctoral research on the genetics of cell proliferation at the University of Michigan(US)and Trinity College (Dublin, Ireland), Dr Walton gained broad commercial experience in biotechnology in management positions at Bass and Celltech plc (1982-1992).
Joshua Funder
Partner
At the time of recording this PTV interview Joshua Funder works as Partner at GBS Venture Partners. Joshua Funder joined GBS in 2004 with experience in biotechnology management, business strategy and the international pharmaceutical industry. Before joining GBS Joshua worked in corporate strategy and development at Infinity Pharmaceuticals in Boston and the Boston Consulting Group in San Francisco. In addition he worked with the Clinton Foundation HIV/AIDS Initiative to successfully negotiate reduced prices for anti-retrovirals and initiate pharmaceutical supplies across eastern and southern Africa. Joshua served as interim CEO of Proacta Inc following GBS investment and is on the board of directors of GBS portfolio companies OPAL Inc, Spinifex Pharmaceuticals Pty Ltd, Pathway Therapeutics Inc and Nuon Therapeutics Inc. Joshua was director of GBS investee company Peplin Inc (ASX:PLI) which won the AVCAL award for the best early stage investment in 2010. Joshua earned his Bachelor of Science (Honours) and Bachelor of Laws (Honours) degrees at Melbourne University and his Master of Laws degree at the London School of Economics. He holds a D.Phil in intellectual property for biotechnology from Oxford University where he studied as a Rhodes Scholar.
PharmaVentures
PharmaVentures is a corporate finance and transactions advisory firm that has served hundreds of clients worldwide in relation to their strategic deal making in the pharmaceutical, life science and healthcare sectors. Our key offerings include: Transactions / deal negotiations; Product / technology valuations; Deal term advice; Due diligence & expert reports; Strategy formulation; Alliance management; and Expert opinion for litigation/arbitration cases. PharmaVentures provides the global expertise to ensure our clients generate the highest possible return on investment from all their deal making activities. We have experience of all therapeutic areas and can offer advice on both product and technology commercialisation.
GBS Venture Partners
GBS Venture Partners (GBS) is a leading life science venture capital firm. Founded in 1996, GBS invests in young businesses developing and commercializing products which, when combined with the right management and finance, will make a significant difference to patients' lives and deliver financial returns for our investors. GBS's areas of particular interest and expertise include human healthcare, biotechnology product development and life science start-ups. In particular, recent investments have included biological or small moleculetherapeutics, medical devices and diagnostics. GBS invests in private or public companies whether at start-up or later stages of company development and investors include major Australian superannuation funds.