Biotechnology Market in Australia - New Zealand Trade and Enterprise

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Exporter guide

BIOTECHNOLOGY
MARKET IN
AUSTRALIA

Market profile
September 2010



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CONTENTS

1

MARKET STRUCTURE 3

1.1

Market overview 3

1.2

Growth rate 5

1.3

Market drivers 6

1.4

Market sectors 6

1.5

Key players in the market 7

1.6

Regulatory 8

1.7

Sustainability 9

2

MARKET ENTRY AND DEVELOPMENT 10

2.1

Market entry strategies 10

2.2

Points of differentiation 10

2.3

Long term strategic issues for exporters to consider 11

3

MARKET RESOURCES AND CONTACTS 11




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1 MARKET STRUCTURE
1.1 Market overview
Australia is a world leader in biotechnology and Australia ranks as the world’s sixth largest
biotechnology centre after the United States, Canada, Germany, United Kingdom and
France
i
. Australia’s proximity to the fast growing Asian region makes it an important
market for New Zealand biotechnology firms.

Australia ranks third after the United States and Singapore in the promotion of domestic
biotechnology start-ups and support for foreign companies wishing to establish facilities
within Australia
ii
.

Australia offers the New Zealand biotechnology industry:

 economies of scale – for New Zealand companies looking at expanding their feasibility
and development projects
 potential alliances for expansion into third markets and for investment partners
 a sizeable market for companies with commercial products or devices
 generous government support for overseas firms looking to set up within Australia
 global licensing opportunities through the major pharmaceutical companies with
regional offices in Australia.

The Australian biotechnology industry has built strong international alliances with a focus
on partnering for both primary research and commercialisation. The 2008 BioIndustry
Review: Australia and New Zealand, reports that international alliances with Australian
firms made up over 70 percent of all biotechnology alliances announced. Major
international partners were North American organisations (101), followed by Europe (100)
and Asia (57)
iii
. Currently, New Zealand accounts for only 2 percent of this figure, which
indicates there is still significant scope for New Zealand biotechnology companies to
engage in strategic alliances with Australian biotechnology firms.

To encourage further collaboration, the New Zealand government has established the
Australia New Zealand Biotechnology Partnership Fund (ANZBPF) managed by New
Zealand Trade and Enterprise (NZTE). The fund is designed to facilitate and accelerate
Trans-Tasman biotechnology industry partnerships in order to develop greater regional
critical mass, and to give Australian and New Zealand biotech companies better access to
global market opportunities.

Also, the New Zealand Government and Australian State Governments have formed the
Australia New Zealand Biotechnology Alliance (ANZBA) to ensure a coordinated front at
international industry events such as BIO in the United States and to share R&D
infrastructure. As part of the alliance, the two countries have collaborated on an online


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clinical trial and research providers’ directory. The directory aims to assist companies
wanting to access Australian and New Zealand clinical trial sites and service providers
engaged in pharmaceutical, biotechnology and medical device development markets.

The New Zealand and Queensland biotechnology industries have an informal alliance
called New Zealand and Queensland Biotechnology (NZAQB). The group has organised
several successful “Directors Forum” events at the NZBio and AusBiotech national
conferences. These forums explore opportunities for New Zealand businesses in the
Australian and world markets.

The New Zealand government is also in partnership with the Victorian government in a
Synchrotron facility in Melbourne for use in new drug development, micro manufacturing
and photonics.

Market size

According to the IBISWorld industry report “Biotechnology in Australia, 2009”, industry
revenue was A$1.6 billion for the 2008/09 financial year, representing revenue growth of
0.9 percent compared with 2007/08. The industry directly employs approximately 7,000
people and is made up of more than 500 companies. Market capitalisation of the 85
publicly listed Pharma/Bitoech sector companies as at 19 March 2010 was A$26.6 billion.

Australia has 510 companies whose core business is biotechnology (up from an estimated
200 in 2001).

Product/service breakdown by sector:

• Human therapeutics 49%
• Agribiotech 16%
• Diagnostics 13%
• Chemical/environmental 9%
• Supply of reagents/molecules 8%
• Food/beverage 4%
• Bioinformatics 1%
Total 100%











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Distribution by state (number of companies):

• Victoria 32% (163)
• New South Wales 40% (204)
• Queensland 11% (56)
• South Australia 8% (41)
• Western Australia 7% (36)
• Tasmania 1% (5)
• Australian Capital Territory 1% (5)
• Northern Territory 0% (0)
Total 100% 510
1.2 Growth rate
Industry growth slowed during 2009 due to the global credit crisis, which put significant
downward pressure on global demand for biotechnology products/services and research
funding. IBISWorld estimates that industry growth for the five year period between
2005/06 and 2009/10 was 2.4 percent. This dramatic slow down in growth is in
comparison to strong growth rates experienced in the five year period to 2004/05.

The global credit crisis placed increasing pressure on biotechnology companies seeking
funding as investors sought lower risk opportunities. During this period, companies
became divided into publicly listed companies with solid financing, followed by companies
that raised venture capital early (typically before the global credit crisis) and continued to
enjoy investor support. The third type refers to companies that were forced to list early
due to a lack of venture capital (typically after the global credit crisis) and struggle to
attract funding
iv
. Consolidation or market exit is likely amongst the smaller companies as
funding becomes more difficult to obtain.

Financing totals for 2009 were below previous years with only one biotechnology IPO
listing compared with four in 2008 and six in 2007. IPO capital raisings totalled only A$24
million in 2009, compared with A$112 in 2008 and A$176 million in 2007
v
. Secondary
market capital raisings were A$2.08 billion in 2009, with the majority of this figure related
to Commonwealth Serum Laboratories (CSL) capital raising of A$1.75 billion. This
compares with A$274 million raised in 2008 and A$438 million in 2007. Excluding the
large CSL capital raising, biotech sector capital raising has been falling since 2007.

In May 2008 the Australian Federal Government terminated the Commercial Ready Grant
Scheme (estimated funding A$300 million between 1996 and 2008) which provided direct
financial assistance to both private and public biotech companies. This has placed extra
pressure on the struggling biotech sector.


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1.3 Market drivers
According to IBISWorld, demand for biotechnology products/services is driven by the
following factors.

• An ageing population. The Australian population is ageing rapidly and greater life
expectancy has increased the incidence of age-related illnesses, which will increase
the demand for medical treatments. Moreover, as the resources available to the public
sector fall governments will seek to reduce the cost of treatment by utilising more
effective drugs and preventative treatments developed by the industry.

• Improving the quality of life. Increasing demand for not only curative treatments, but
also for preventive treatments for diseases and ailments. Also, increasing demand for
elective surgeries and treatments is spurring demand for safer and less invasive
medical technologies. This demand has lead to increased research into better
methods for medical procedures.

• A growing public acceptance of biotechnology including therapeutic cloning and
genetically modified food crops. Research conducted by Biotechnology Australia in
2007 into attitudes to biotech found a substantial increase in the level of support for the
use of gene technology in both medical and agricultural applications. Positive public
perception will have a huge impact on demand for the industries products and services.
New Zealand is viewed as clean and green country and this should assist New Zealand
firms engaged in biotechnology.
1.4 Market sectors
Australia has key biotechnology capabilities in agricultural biotechnology, marine,
environmental, food production and processing, forest products, human health, industrial
and nanotechnology.

Other growth areas for the Australian biotech industry include intensive agriculture for
biofuels, food and aquaculture, biosecurity (vaccines and diagnostics), therapeutics
targeting the aging population, and issues such as obesity, regenerative medicine and
wellness (bioactives etc).

The following information regarding sectors is based on the IBISWorld report:
Biotechnology in Australia, February 2010.

Human therapeutics and diagnositcs

This product segment includes human therapeutics including: biopharmaceuticals such as
biotechnology-derived proteins, antibodies and enzymes, genetic therapies and
diagnostics. Therapeutics is a focus for the largest group of listed biotechnology
companies in Australia. There is also a growing number of public biotechnology
companies that highlight Australia’s emerging capabilities in cell and tissue reengineering
including stem cells, cell based vaccines, tissue replacement and regeneration of organs.


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Agricultural biotechnology

This is the second largest group of industry products and it includes research into plant
and animal genomics and health. Agriculture is one of Australia’s key industries with
gross annual production in excess of A$30 billion. Australia is also facing significant
environmental challenges including climate change, droughts and land degradation. This
is placing pressure on the agricultural sector to improve productivity.

Environmental biotechnology

Environmental and natural resource recovery technologies often involve the application of
life science tools such as genomics, proteomics, and gene shuffling to conventional
manufacturing and waste management in order to discover new or improved methods to
make industrial raw materials, intermediate and consumer goods or to manage waste.
The CSIRO is the leading national institution in this sector. Australian companies are
subject to strict environmental regulations which driven research and development in the
industry.

Food processing

The application of biotechnology to industrial and agricultural processes works by applying
natural or engineered microbes to other products in order to extend shelf life, enhance
nutritional characteristics, and preserve or create foods or industrial products. Company
activities are focused on food processing, specialty chemicals such as amino acids (the
largest product segment), or other commodity chemicals and applications. Australia is a
major food exporter and improving food manufacturing techniques remains an important
focus for the biotechnology industry.
1.5 Key players in the market
The Australian biotechnology industry is dominated by CSL Ltd. It currently represents
over 80 percent of Australian biotech industry market capitalisation and 35 percent of total
industry revenue. Despite CSL’s dominance, there is a thriving number of smaller
companies such as Biota Holdings Ltd and Unilife Medical Solutions Ltd who are
extremely successful in their own right.

CSL is Australia’s largest biotechnology company, with a market capitalisation of A$20.9
billion as at 19 March 2010. CSL reported annual revenue of A$5 billion and net profit
after tax of A$1.1 billion in the financial year ending 30 June 2009. CSL has made
multiple acquisitions to expand its activities. CSL’s latest deal to acquire US competitor
Talecris Biotherapeutics for US$3.1 billion was rejected by the US Federal Trade
Commission due to competition concerns.

The Commonwealth Scientific and Industrial Research Organisation (CSIRO) is the major
government funded scientific research organisation in Australia. Established as an


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independent statutory authority, it operates under the provisions of the Science and
Industry Research Act 1949. Annual revenue was A$1.3 billion as at 30 June 2009.

An Australian Stock Exchange (ASX) list of eleven Pharma/Biotech companies with a
market capitalisation of more than A$100 million as at 19 March 2010 includes:

• CSL Ltd (CSL) A$20,902 million
• Biota Holdings Ltd (BTA) A$422 million
• Acrux Ltd (ACR) A$396 million
• Sirtek Medical Ltd (SRX) A$342 million
• Cellestis Ltd (CST) A$288 million
• Mesoblast Ltd (MSB) A$288 million
• Chemgenex Pharmaceuticals Ltd (CXS) A$197 million
• Starpharma Holdings Ltd (SPL) A$166 million
• Alchemia Ltd (ACL) A$127 million
• Avexa Ltd (AVX) A$114 million
• Bionomics Ltd (BNO) A$103 million
1.6 Regulatory
Overall, Australia provides a relatively open and transparent business environment
encouraging the development of biotechnology innovation as indicated by Australia’s 3rd
ranking in the world for biotechnology “business friendliness”. However, the regulatory
impact of any particular New Zealand biotechnology exports would need to be assessed
on a case-by-case basis depending on the nature of the activity.

All therapeutic products and medical equipment imported into Australia must be approved
by the Therapeutic Goods Administration (TGA). If the product is wholly or partially of
human or animal origin, approval must also be obtained from the Australian Quarantine
Inspection Service (AQIS).

The Australian Pesticides and Veterinary Medicine Authority (APVMA) operates the
national system that evaluates, registers and regulates agricultural and veterinary
chemicals including those for use on genetically modified crops.

The Commonwealth Gene Technology Act 2000 prohibits anyone dealing with a
genetically modified organism (GMO) i.e. companies engaged in research, manufacture,
production, commercial release and import of GMO’s, unless the dealing meets certain
requirements. This law aims to 'protect the health and safety of people, and to protect the
environment, by identifying risks posed by or as a result of gene technology, and by
managing those risks through regulating certain dealings with GMO’s. The Office of the
Gene Technology Regulator administers the Gene Technology Act.



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The Prohibition of Human Cloning Act 2002 prohibits human cloning, reproductive and
therapeutic cloning, by both SCNT and embryo splitting methods, and trade in human
eggs, sperm and embryos. The Research Involving Human Embryos Act 2002 allows for
regulated use of a small number of unwanted IVF embryos in approved research
programs.

Up until 2007, moratoriums on commercial genetically modified crops existed in all States
except Queensland and the Northern Territory. However in 2008, both NSW and Victoria
lifted the ban, although South Australia still continues to ban genetically modified crops.
Following reports that the Federal Government would reject the Lockhart review, the
Premier of Victoria announced in June 2006 that the Victorian government would go it
alone and lift restrictions on stem cell research if the Federal Government decided not to
act (provided the State received 'assurances and support' from the government that it
would not override State law). In November 2006, the Federal Senate narrowly passed a
Bill on therapeutic cloning, which was viewed as a first step towards ending the ban on
this type of research. In 2007, WA and NSW overturned their bans on therapeutic
cloning. The Victorian State Government has also announced it will support this
technology.
1.7 Sustainability
Australia is heavily reliant on fossil fuels for electricity generation and transport and will
need improved technologies to develop alternative fuel resources to meet green house
gas emissions reduction targets.

The Australian Government has set a biofuels target of 350 million litres by 2010. This
equates to approximately one percent of current transport fuel demand. There are
concerns about an increase in land being used for growing biofuels as water is already in
short supply and diverting water for the irrigation of biofuel crops will create food
sustainability issues.

Australia is strengthening its capability in industrial biotechnology because of the
increasing need to reduce the environmental impact of industry, to use resources
sustainably and to remain competitive in export markets. There is a strong focus on
creating new industrial biotechnology which replaces traditional chemical processes with
more sustainable and environmentally friendly biological processes.


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2 MARKET ENTRY AND DEVELOPMENT

2.1 Market entry strategies

New Zealand biotechnology organisations and businesses should:

• consider partnering with an Australian company. This could include identifying
potential partners for R&D, financing and/or distribution
• ensure adequate intellectual property protection
• understand and comply with Australia’s regulatory requirements.

Opportunities exist across a wide range of areas – from supplying inputs to the sector e.g.
blood products and plasma, to highly specialised products for sectors such as medical
devices, environment (e.g. waste management), agribusiness and veterinary.

Enabling technologies are also in demand such as diagnostic equipment, along with
industry related products such as edible coatings, novel foods and packaging and
foodstuffs with added therapeutic value.
2.2 Points of differentiation

For companies with commercial products, market entry strategies, distribution channels
and pricing would need to be assessed on a case-by-case basis depending on the type of
activity.

New Zealand companies need to have a clear value proposition. They need to undertake
comprehensive market research including an analysis of competitors and potential
partners. From this a solid marketing and risk management plan can be developed.

New Zealand biotechnology companies generally have a positive reputation in the
Australian market. However, there is limited awareness of the full extent of New
Zealand’s capability and Australian companies tend to be focused on seeking partners in
the US, Europe and Asia.

Areas of potential collaboration include:

- Cleantech
- Bio-prospecting
- Bio-security
- Environment
- Human therapeutics and devices
- Regenerative medicine


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2.3 Long term strategic issues for exporters to consider
There are a number of strategic issues for New Zealand biotechnology exporters to
Australia to consider. These include:

• raising awareness of New Zealand’s capability
• developing a joint strategy with Australian companies and biotechnology organisations
to promote the region and attract offshore investment
• building alliances for marketing and distribution to third markets.

3 MARKET RESOURCES AND CONTACTS
ASSOCIATIONS
WEBSITE
AusBiotech www.ausbiotech.org

Australian Venture Capital Association Ltd www.avcal.com.au

Australia New Zealand Biotechnology Alliance (ANZBA) www.biotechalliance.org

BioMelbourne www.biomelbourne.org

INDUSTRY REPORTS

 2008 BioIndustry Review: Australia and New Zealand Hopper, Kelvin and
Thorburn, Lyndal
 BioInnovationSA Annual Report 2007/08.
 Biotechnology Sector Action Plan 2007: Queensland Government
 Ernst & Young: Beyond Borders Global Biotechnology Report 2009.
 IBISWorld Industry Report: Biotechnology in Australia, 2009
 Investing in Canberra, Australia’s Capital: Doing Business and Living in Canberra
2009/10
 PricewaterhouseCoopers: BioForum July – September 2009
 Scientific American Worldview: A Global Biotechnology Perspective, 2009
 Victorian Biotechnology Strategic Development Plan 2007, Towards 2010: Year 2
Progress Report
 Western Australia Brilliant Biotechnology Capabilities, 2009





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i

Ernst & Young: Beyond Borders Global Biotechnology report 2009.

ii

Scientific American Worldview: A Global Biotechnology Perspective, 2009.

iii

2008 BioIndustry Review: Australia and New Zealand. Hopper, Kelvin and Thorburn, Lyndal.

iv

Ernst & Young: Beyond Borders Global Biotechnology report 2009.

v

PricewaterhouseCoopers: BioForum July – September 2009.

GOVERNMENT
WEBSITE
Austrade www.austrade.gov.au

Australian Pesticides and Veterinary Medicines Authority www.apvma.gov.au

Australian Quarantine and Inspection Service www.daff.gov.au/aqis

BioRegs Online www.bioregs.gov.au

Department of Innovation, Industry, Science and Research www.innovation.gov.au

National Health and Medical Research Council www.nhmrc.gov.au

Office of the Gene Technology Regulator www.ogtr.gov.au

The Commonwealth Scientific and Industrial Research
Organisation
www.csiro.au

Therapeutic Goods Agency www.tga.gov.au