Speech
Australasian Life Sciences Investment Summit
October 27, 2009, Melbourne
Introduction
I must thank the organisers of today’s event, including the State of Victoria, Ausbiotech and Austrade, for the opportunity to speak on the importance of investing in the Life Sciences.
I would also like to acknowledge Dr Anna Lavelle, CEO of Ausbiotech and the Hon. Gavin Jennings MP, Victorian Minister for the Environment, Climate Change and Innovation.
If there is anything that is transforming our lives and changing the way we live as much as the information technology revolution, it would have to be the promise of new advances in drugs, medicine and biotechnology.
The Life Sciences offer hope to people and humanity. Hope for those with incurable diseases, hope with new medical diagnostic methods, pest resistant crops, and improving general human, physical and psychological health.
That hope is a key driver of the scientific pioneering spirit. With that hope in mind, it would be hard to find a more appropriate moment to address this inaugural Australasian Life Sciences Investor Summit.
Recently an Australian scientist, Professor H. Elizabeth Blackburn, has won a share in the 2009 Nobel Prize for physiology or medicine, a remarkable achievement.
The first Australian woman ever to win a Nobel Prize, in any field, Professor Blackburn was educated right here in this city, at Melbourne University.
Professor Blackburn and her colleagues’ groundbreaking discoveries on chromosome replication have revealed new facts about cancer and ageing that will have profound implications for medicine.
Her Nobel Prize confirms the ability of Australian scientists and their research institutes to develop world class scientific ideas, particularly in human therapeutics.
Australian researchers are renowned for their practical ability to produce vital drugs, pharmaceuticals and other medical devices to solve specific problems in health and agriculture.
Some outstanding examples include CSL’s vaccine against the swine flu influenza, CSL’s anti-cancer vaccine Gardasil, Biota’s anti-influenza drug, Relenza and ResMed’s sleep apnea device.
Australia’s life sciences sector has a bright past and an even brighter future, one underpinned in this country by a stable economy, sound financial system and a Government committed to R&D.
Australia’s Life Sciences Sector
Intellectually and commercially, Australia is the Asia Pacific’s leading centre for research and development in the life sciences. Additionally its position places it at the global doorstep of one of the fastest growing economic areas in history.
Australian scientists have consistently originated innovative and exciting new drugs and devices which have been snapped up by the commercial sector.
It is noteworthy that the ASX market capitalisation for Life Sciences companies is currently in the order of $35 billion.
Of this, CSL, Sigma, Resmed and Cocklear represent $28 billion or 80% of this market capitalisation.
On top of these, there is a myriad of unlisted, small to medium sized firms showing great promise and glittering potential.
Overall in Australia there are more than 400 core biotechnology companies, half of which specialise in human therapeutics, especially pharmaceuticals.
Many of these companies are linked to Australia’s network of universities and publicly-funded research institutions. Every day, they prove the critical link between research infrastructure and commercial success.
Australia’s bio-tech sector employs more than 23,000 people, including nearly 9,000 in listed companies and more than 14,000 in public and private bio-tech companies.
The success of the biotechnology industry has been characterised by its capacity to license its original intellectual property to large, international companies.
Evidence for this lies in Australia’s $4 billion a year pharmaceutical export industry, which reflects a symbiosis between intellectual property licensing and commercial development.
One of the best examples is Merck’s contract to sell CSL’s seasonal flu vaccine, Afluria, to the US market over the next six years.
It is important to note that behind Australia’s success lie some of the world’s best medical research institutions, scientists and technologists.
The future of the industry rests with the creativity of people who can not just develop the new science, but also transform those ideas into a practical application.
Australian researchers excel at clinical trials and collaborative global marketing. And the value of their work is sustained by a solid intellectual property rights regime.
In collaboration with international pharmaceutical companies, forging alliances is exactly what Australian firms have been doing in recent years.
In 2008, for example, 255 new alliances were forged between smaller firms with a new product and bigger international counterparts, typically from the US, Europe and Asia.
Australia’s pharmaceutical testing pipeline is currently processing 159 compounds in clinical trials. A significant number are in the late trial stage and are close to commercialisation. Perhaps one of these trials will provide a cure for cancer, or for depression or schizophrenia.
But successful research faces the perennial problems of funding and commercialisation, which require venture capitalists to chance their arm in the hope that a new drug or device will be successful.
New Government Initiatives
The Rudd Government is committed to sustaining Australia as a modern, technologically advanced growth economy.
One way to do this is through targeted co-operation with the private sector that encourages investors to take that chance.
To this end, May’s Federal Budget contained a 25 per cent increase of $3.1 billion.
That boost for 2009-10 took total Budget spending on research and innovation to about $8.6 billion.
Along with a new, more straightforward R&D tax credit system, the Budget also contained a bold new initiative, Commercialisation Australia (CA).
The new tax credit system will offer A$1.4 billion annually to an estimated 5,500 firms.
It will, particularly in these more difficult global economic circumstances, benefit cash-strapped, start-up firms trying to develop new products.
There will be no limit on the level of R&D they can undertake and claim through the tax credit.
Firms with less than $20 million in annual turnover will be eligible for a 45 per cent refundable tax credit, effectively providing a reimbursement in cash.
Those firms with larger turnovers will be eligible for a 40 per cent non-refundable tax credit, which will help them with their tax liabilities.
Multinationals which hold intellectual property rights offshore will be able to claim the tax credit if they locate their R&D centres here.
A recent report from IBM’s Global Business Services puts Australia in sixth position globally in terms of the number of people working in R&D, across all sectors of the economy.
Australia may be doing better than many other nations in the competition for R&D spending, but the Rudd Government is not complacent and is looking to secure our position in the long term.
We want to build on the potential of a society which can produce a scientist with Professor Blackburn’s calibre or that of the makers of our world class vaccines and anti-cancer drugs.
We want to ensure that good ideas don’t go to waste or are ignored for lack of funding.
This is why we have decided to provide nearly $200 million to start Commercialisation Australia.
Commercialisation Australia will support research in publicly-funded institutions and universities, help firms find venture capital and commercially back good ideas based on sound R&D.
The new institute will help fill the gap between knowledge and wealth, between basic science and its commercialisation.
Life Science industry insiders are said to have a phrase for this dilemma, one typically faced by small firms that are rich in ideas, but poor in capital.
They call it the “valley of death”, a place where good ideas die from capital thirst.
I’m sure many of you have come across that expression.
Our hope is that, through Australia’s commitment to R&D, that “valley of death” does not resonate as much for Australian firms in the years ahead.
Conclusion
Professor Blackburn now joins a list of 11 Australian winners of the Nobel Prize, seven awarded in medicine or physiology.
That list includes the names of eminent scientists, such as Howard Florey and Macfarlane Burnet, whose discoveries have improved the lives of millions of people.
Australia’s comparative advantage in Life Sciences is a necessary building-block of commercial success, but as most of you would be aware, it is not sufficient.
That’s why the Government has taken steps to improve R&D funding, as well as add to the research infrastructure of Australia and its capacity to commercialise its ideas.
We recognise the critical importance of this sector, not just in pure dollar terms, but also by what it can add to human welfare, to the solution of problems such as cancer, obesity, food supply, waste and pollution.
I commend Ausbiotech for organising today’s inaugural event, and thanks to Austrade, the Australian Government’s export and investment development agency.
Austrade’s Life Sciences industry team is a valuable resource and can provide critical advice, here and abroad, to help investors keep Australia at the centre of Life Sciences R&D in the Asia Pacific.
Thank you.
ENDS