A Life-science Pipedream Could Go Up In Smoke

The Age

Thursday June 16, 2005

MALCOLM MAIDEN

VICTORIA is not even close to establishing itself as a world-leading incubator of biotech companies, and while the Committee for Melbourne is proposing a comprehensive attack on the problem, there is not much room for confidence that it will succeed.

The committee's analysis is that good biotech ideas are not being developed commercially in this state because the machinery that should nurture them is faulty. It suggests a set of initiatives to foster greater depth of management talent in the industry, and greater investment fund support for biotechs. But what is really needed is better biotech ideas. Australia's investment funds are not throwing money at biotech companies because their job is to protect and grow capital on behalf of their clients - and in Victoria, only one company, CSL, has delivered. Australia's biotech sector in general has been a low-liquidity, sub-standard investment sink-hole returning 5.8 per cent a year on average between 1994 and 2003, compared with 9 per cent for shares generally.

The Committee for Melbourne tried to answer one main question: Why are superannuation funds investing so little in venture capital companies, including biotechs?

I have another. Is it possible that local biotechs are researching the wrong products?

As Melbourne-based biotech Biota discovered with its marathon and ultimately unsatisfactory campaign to develop and sell its anti-flu drug, Relenza, the global market is a minefield populated by huge and aggressive corporations.

Given that reality, it has to be asked whether the local companies should contain their ambition.

They might well have better prospects for success, and attract more capital more easily, if they focus on niche industries in which Australia already has a world-leading presence, including agriculture and resources.

© 2005 The Age

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