Biotechnology: Industry position survey 2012 GT Australia


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Biotechnology: Industry position survey 2012 GT Australia

  1. 1. Industry Position Survey April 2012Biotechnology
  2. 2. The Biotechnology Industry Position Surveyprovides us with a comprehensive annualindustry snapshot, direct from the industry’sleaders, based on experience, business knowledgeand political insights.Dr Anna LavelleCEO AusBiotech Ltd We are proud to support the Australian biotechnology industry with this survey. The survey is an important tool to understand the issues and assist in laying a foundation to secure greater support for the industry. Michael Cunningham National Head of Life Sciences Grant Thornton Australia LtdContentsKey findings of the survey 02 Demographics 10Background 03 Survey participants 11Survey findings - Sentiment 04 About AusBiotech 12Survey findings - Funding 06 About Grant Thornton 13Survey findings - Government policy 08 Biotechnology Industry Position Survey 01
  3. 3. Key findings of the survey Welcome to the annual Biotechnology Industry Position Survey. This research has been conducted as part of both AusBiotech and Grant Thornton’s ongoing commitment to the biotechnology industry.• The bullish sentiment reported in 2011 • The passage of the Research and Development continues with 82% (75%: 2011) of respondents (R&D) Tax Incentive legislation was a expecting their business to grow in the coming significant event with the majority (65%) of year, while 68% characterised 2011 as a good or companies indicating they are confident it will excellent year, up from 56%. have a positive impact on their business. This• The expansionary approach to employment is particularly significant as the delay to its which emerged during 2009 persists with a passage through Parliament was a major area of majority of companies indicating they will frustration last year. Despite the Tax Incentive’s increase staffing numbers in the coming year. The significantly changed provisions and the first new positions will be predominately in ‘sales and claiming cycle already being well underway, marketing’, ‘scientists and clinical trial staff’. 53% of companies had not yet sought professional advice.• Despite 54% of respondents raising capital during 2011, funding remains a significant industry • The majority of responding companies issue with 34% indicating they have less than 12 (62%) are manufacturing. 46% of the overall months cash on hand at current burn rates. 46% respondents are manufacturing in Australia intend to raise capital in the coming year and a and a further 34% are manufacturing overseas. further 20% are undecided. There is a crossover of 18% of companies manufacturing both overseas and in Australia.• The Australian operating environment (economic and public policy) remains a concern, with only • Collectively the responding companies plan 24% of respondents identifying the environment to spend at least $610 million on research and as conducive to growing a biotechnology development in 2012. company, while 38% felt the environment was neutral and 38% thought it was working against the growth of companies.02 April 2012
  4. 4. BackgroundAt a glance Industry snap shotAusBiotech’s representation and Australia continues to be a leadingpromotion of the biotechnology location for biotechnology in The surveyindustry continues to influence on the Asia-Pacific region and The survey results provide ancritical issues. the world, with the Australian independent perspective of the biotech industry ranked the fifth impact of the current economic While input on public policy and regulatory environment onis a year-round and core part of most innovative in the world, by Scientific American World View the biotechnology industry.AusBiotech’s work, it’s vital toformally seek views from the magazine (July 2011). With more Issues investigated include:industry to get a comprehensive, than 400 biotechnology companies • Sentimentupdated picture of the Australian and 600 medtech companies, the • Fundingbiotechnology industry from its Australian biotechnology industry has performed strongly despite an • Government policyleaders. unpredictable economic market. AusBiotech and Grant The annual Biotechnology Thornton would like to expressIndustry Position Survey, The industry is characterised by many small to medium private appreciation to those whoproudly supported by Grant participated in the survey inThornton, sought the views and public companies. There are currently in-excess of 100 ASX- support of the industry.of CEOs on the operatingenvironment, the industry, and listed life sciences companies:how their companies are faring. almost 40 in medtech and more than 60 in biotechnology. The results enable evidence-based statements about the The Australian industry hasmagnitude of issues and trends and received a major boost withwhat should be done in response the 2011 passing of the R&Dto them. Tax Incentive legislation. This will inject significant new funds At any given time there are a for innovative biotechnologyraft of biotech-related issues and companies and deliver spill-overdevelopments, where policy is benefits for the community fromvital to the industry’s progression biotechnologies.and future. Biotechnology Industry Position Survey 03
  5. 5. Survey findings - SentimentA number of good news items and sizeable dealsin the Australian biotechnology industry havekept spirits high amid and despite the economicgloom that has gripped the world.Amongst the recent highlights, Acrux paid a $100 Optimistic outlookmillion special dividend to its shareholders, after Optimism grew stronger with 82% (75%: 2011)receiving its milestone payments from Axiron of respondents expect their business to grow in thelicensee Eli Lilly & Co. This dividend is without coming year.precedent in Australian biotech. TB diagnostics This continues the positive sentiment ofcompany, Cellestis was acquired by Dutch firm respondents when reflecting on 2011. 68% ofQiagen for $370 million. respondents identified 2011 (56%: 2010) as a good Less than a week into the New Year, Bionomics or excellent year.was able to announce a collaboration, research,and licensing agreement with US-based Ironwood During 2012 do you expect your business to grow, remainPharmaceuticals, potentially worth up to US$345 stable or decrease?million, to develop and commercialise its anti-anxiety compound, BNC210. Grow The annual capital raising figures for theindustry (BioShares 30 Dec 2011), saw $630 6% Remain stablemillion raised in 2011, a 14% increase on 2010 Decreasewhen $554 million was raised. Notable capitalraisings were made by Pharmaxis, Starpharma andPhosphagenics. 12% 82%04 April 2012
  6. 6. Expansionary employment strategiesDespite a recent spate of high-profile redundancies in the Employment intentions?broader Australian economy, the overall employmentconditions remain strong. Expansionary sentiment from 4% 6%the 2010 and 2011 surveys continued into 2012 with 58%of companies expecting to increase staff numbers. The new 30%positions will be in ‘sales and marketing,’ and ‘scientists and 36%clinical trial staff’. 44% 48%Economic and public policy environmentThe Australian operating environment (economic andpublic policy) remains a concern, with only 24% ofrespondents identifying the environment as conducive to 70%growing a biotechnology company and 38% indicating the 52% 52% 58%environment was working against the industry. Despite thispoor result, this is an improvement on the previous yearwhen 13% felt the environment was conducive to growthand 52% felt it was working against the industry. 2009 2010 2011 2012Research and Development tax incentive Hire Remain stable DecreaseThe passage of the R&D Tax Incentive was well received with65% of respondents expecting it to have a positive impact ontheir business. Despite the significantly changed provisions and the first How would you describe the Australian operating environment?claiming cycle being well underway, 53% of companies hadnot yet sought professional advice. Of those companies, 50%plan to get advice soon, 39% feel they don’t need it and 11%were undecided. 2012 24% 38% 38% Collectively the responding companies plan to spend atleast $610 million on research and development in 2012. To putthis into context, the national budget for medical research forthe NHMRC’s (National Health and Medical Research Centre) 2011 13% 52% 35%Medical Research Endowment Account Australia’s largestsource of public medical research funding, is almost $750million in 2011-121. Conducive Unfavourable Neutral Impact of the R&D tax legislation? 13% 22% 65% Favourable Negligible Undecided1 Source: BioShares Edition 439 (30 Dec 2011) Biotechnology Industry Position Survey 05
  7. 7. Survey findings - FundingHigh profile commercial deals and industryreturns provided significant momentum aswe entered 2011. The reality was a year fullof extreme financial turbulence and marketvolatility.From an overall market perspective capital raised Sources of fundingfrom IPOs was significantly lower than the Our previous survey reported that 24% ofprevious year despite a relatively good March companies were holding less than 12 months cashquarter. The second half of 2011 was littered with and 58% were planning to raise capital duringaborted floats. The vast majority of new listings 2011. We are pleased to report, that despite whatended the year below listing price. ultimately turned out to be a very difficult year, However on a more positive note, the respective 54% of respondents were able to raise capital.listings and raisings of international companies The majority of funding was raised via theBioniche Life Sciences (raising $12.5 million) and issuance of equity. Other sources of funding suchGI Dynamics (raising $80 million) provide further as debt instruments and government grants andevidence of Australia’s ever-increasing international concessions were also significant.biotechnology presence. The industry also provided two of the top fourbest performing S&P/ASX 200 companies; Sigma Did you raise capital during 2011?Pharmaceuticals (1st) and Mesoblast (4th). 46% 54% Yes No06 April 2012
  8. 8. Funding requirementsThe appetite and competition for capital in 2012 will again behigh with 34% of respondents indicating they have less than12 months cash and 46% anticipating raising capital during thecurrent year. Whilst there is no escaping the significant macro risks stillprevalent, the industry appears well placed to leverage thebenefits associated with a maturing profile.Do you plan on raising capital during 2012? 34% 20% 46% Yes No Potentially 46% Biotechnology Industry Position Survey 07
  9. 9. Survey findings - Government policy associated with the development, manufacture Federal concerns and exploitation of patents in the UK – and CEOs were asked which issues concern them enhance the UK’s competitiveness globally. most at a federal level and to name the thing they want most from the Federal Government, to assist Greater quanta of targeted funding support the industry. Among the major industry concerns Almost four years after the demise of the and desired assistance, the themes of note were: Commercial Ready program, the industry is still • Incentives for investment; seeking a replacement that would provide access • A greater quanta of targeted funding to adequate-sized grants for commercialisation support; and activities and clinical trials. • Predictability in relation to policy and Despite the recent improved provisions for programs. CA grants, industry CEOs feel “the quanta applied to CA grants is still too small for fast outcomes,” and needs to be raised to a more realistic level, such as $5 million.Incentives for investmentAccess to capital remains the biggest issue forthe biotechnology industry. While programs Lack of a consistent and appropriatesuch as the R&D Tax Incentive, the Innovation grant and assistance program specific for the biotech sector.Investment Fund (IIF) and CommercialisationAustralia (CA) grants all assist, there remains a gapin terms of incentives for investors. Bring back a co-investment scheme similar to the axed Commercial Ready. Provide tax incentives for investors in biotechnology to hold their investment for 12+ months. More predictability A major theme in CEOs’ comments was theThe industry (and innovation more generally) notion of stability, certainty and a plea to keepwould benefit greatly from incentives for investors support programs, and keep them the form of tax breaks. An incentive for Respondents asked for the maintenance ofinvestors in innovation-based companies to hold current policies, as the changing of “goal posts”their investment for a minimum period would is disruptive, and disables companies fromhave a beneficial impact. making reliable forecasts. The Australian industry is also keen to emulatea new UK Government initiative, known as thePatent Box. It provides a preferential regime for Uncertainty around policy is disruptiveprofits arising from patents, allowing companies and hinders fund-raising apply a 10% corporation tax rate to profitsattributed to UK patents. The Patent Box is expected to encourage More certainty. More transparency.companies to locate high-value jobs and activity Longer term policy horizons.08 April 2012
  10. 10. Employee remunerationThe majority of respondents use share options Do you manufacture and if so where?and shares in addition to cash to remunerate theiremployees. Only 16% of companies remuneratedwith cash alone. Not surprisingly, the tax treatment of share 62%options and shares was repeatedly cited as a barrierto biotechnology companies in competing for andretaining highly-skilled talent. 34%ManufacturingThe majority of responding companies (62%) 18%are manufacturing. 46% of overall respondentsare manufacturing in Australia and 34% are 46%manufacturing overseas. There is a crossover of18% where companies manufacture both overseasand in Australia. AusBiotech believes there is a serious lackof understanding, at a policy level, about thecontribution that biotechnology and medical devicecompanies are making and can further make tomanufacturing in Australia, or what their needs orbarriers are – and in what ways they differ from the 38% Don’t manufacture Manufacturemanufacturers of commoditised items, such as cars. Manufacture in Australia Biotechnology is one of the so-called ‘sunrise Manufacture overseasindustries’ and fits neatly with the Government’sdesire to move to advanced manufacturing, Manufacture bothproviding high value-added products, with highly-skilled labour and global production chains, forniche markets. AusBiotech sees an opportunity formanufacturers of medicines, medical devices anddiagnostics to become the rule not the exception.Policy must support a future manufacturingindustry that will provide highly-skilled jobs andexcellent returns to the economy. Biotechnology Industry Position Survey 09
  11. 11. DemographicsAbout the survey Analysis of respondentsThis is the second joint Biotechnology Companies were asked to submitIndustry Position Survey by AusBiotech information regarding their financialand Grant Thornton. The survey was status, issues impacting their business,conducted via mail and email during their current outlook and expected plansJanuary 2012. It was open to all ASX- for the future.listed life sciences companies and Responses were received from 50AusBiotech member biotechnology companies; the major identified areacompanies, including unlisted of business was Therapeutics (56%)companies. with medical devices and diagnostics Issues explored by the Biotechnology representing 26% and 20% respectively.Industry Position Survey were identifiedby AusBiotech and Grant Thornton’sLife Sciences team. Enquiries regardingthis survey may be directed to:Dr Anna Lavelle For additional copies of the survey, please contactT + 61 3 9828 1404E AusBiotech or Grant Thornton at ChiroiuT + 61 3 9828 1414E lchiroiu@ausbiotech.orgMichael CunninghamT + 61 3 8663 6000E MackenzieT + 61 3 8663 6273E April 2012
  12. 12. Survey participantsSincere thanks goes to thefollowing participations, whoagreed to be named.• Acrux • Grey Innovation• AIMEDICS • Hatchtech• AMGEN • Hunter Immunology• ASDM • Immune System Therapeutics• AstraZeneca • ImpediMed• Atomo Diagnostics • iNova Pharmaceuticals• BioDiem • Invetech• Bioplatforms Australia • Lipotek• Bluechiip • Minomic International• Broadvector • MyGene• Cellmid • Neural Diagnostics• Cell Therapies • Photonz Corporation• Clinical Genomics • PolyActiva• CSL • Prana Biotechnology• Cyclopharm • Progen Pharmaceuticals• Devro • Shire Australia• Genera Biosystems • Sienna Cancer Diagnostics• Genetic Technologies • Tissue Therapies• Given Imaging • Viralytics• GlaxoSmithKline AusBiotech and Grant Thornton wish to thank the remaining survey participants who did not wish to be named here. Biotechnology Industry Position Survey 11
  13. 13. About AusBiotechAusBiotech is Australia’s biotechnologyindustry organisation, which represents over3,000 members, covering the human health,agricultural, medical devices and diagnostics,functional foods, environmental and industrialindustries in biotechnology.AusBiotech is dedicated to the development, growth and prosperity ofthe Australian biotechnology industry, by providing initiatives to drivesustainability and growth, outreach and access to markets, and representation If you want to knowand support for members nationally and around the world. more, please contact AusBiotech is a not-for-profit organisation, which has representation in each AusBiotech’s nationalAustralian state and in various special interest sectors. Active state committeesand advisory groups provide a national network to support members and office...promote the commercialisation of Australian bioscience in the global AusBiotechmarketplace. 1/322 Glenferrie Road, Malvern, VIC 3144 AusBiotech has been working on behalf of members for more than 25 years, T +61 3 9828 1400since it was established as the Australian Biotechnology Association and 15 years E admin@ausbiotech.orglater changed its name to AusBiotech. W AusBiotech’s membership base includes biotechnology companies, rangingfrom start-ups to mature multinationals, research institutes and universities,specialist service professionals, corporate, institutional, individual and studentmembers from Australia and overseas.12 April 2012
  14. 14. About Grant Thornton AustraliaGrant Thornton is one of the world’s leadingorganisations of independent assurance, taxand advisory firms.We help dynamic organisations unlock their potential for growth by providingspecialist services, business advice and growth solutions. In Australia, we have If you want to knowmore than 900 staff across five offices in Adelaide, Brisbane, Melbourne, Perthand Sydney. We combine service breadth, depth of expertise and industry more, please contact us…insight with an approachable “client first” mindset and a broad commercialperspective. Adelaide Perth Simon Gray Jeff Vibert We are a member of Grant Thornton International which comprises firms T +61 8 8372 6666 T +61 8 9480 2000 E E in more than 100 countries worldwide. Through this membership,we access global resources and methodologies that enable us to deliver consistently Brisbane Sydneyhigh quality outcomes for owners and key executives in our clients. Cameron Smith Nicole Bradley T +61 7 3222 0200 T 61 2 8297 2400 E E Matt Bell T +61 7 3222 0266 E Melbourne Michael Cunningham T +61 3 8663 6000 E Brock Mackenzie T +61 3 8663 6273 E Biotechnology Industry Position Survey 13
  15. 15. Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and themember firms are not a worldwide partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, deliversits services independently in Australia. Liability limited by a scheme approved under Professional Standards legislation.