Shared from the 8/20/2019 Financial Review eEdition

Shift in focus delivers global success


Australia’s $100 billion biotechnology – or life sciences – sector enjoys an international reputation, making its mark in key segments such as medical technology, agritech and foodtech, therapeutics and regenerative medicine.

In 2016, Scientific American Worldview ranked Australia No. 5 for biotechnology innovation behind New Zealand, Denmark, Singapore and the United States at No. 1.

According to the industry’s peak body, AusBiotech, the ASX-listed Australian life sciences industry is valued at $100 billion. The industry employs 48,000 Australians and is expected to reach an aggregate revenue of $8.67 billion by 2021.

Such figures are a far cry from the uncertainty of Australia’s fledgling biotechnology sector at the turn of the century.

An investment sheet from 2001 noted the difficulties facing potential investors in blue-sky biotech stocks with “intellectual property based on complicated science, no current earnings, no products on the market in the immediate future and long-term projections of sales in the regularly mentioned ‘billion-dollar’ markets”.

The science is still complicated but Australia’s biotechnology industry is no longer a novelty investment and biotechs such as Kazia Therapeutics, Sirtex Medical, Viralytics, Mesoblast and Starpharma are leading players on the world life-sciences stage.

Capital markets partner at MinterEllison, James Hutton, says there are “clear opportunities” for Australian biotechnology companies looking to secure overseas investors for funding and collaboration partners for research and commercialisation, particularly in Asia.

Investors and trade players are attracted by the quality of Australia’s scientific research and potential clinical outcomes, according to Hutton. As a result, Chinese and other regional players are actively courting Australian biotech companies.

Deals struck in 2018 include the $1.87 billion acquisition of liver cancer treatment company Sirtex Medical by Chinese private equity house CDH Investments and China Grand Pharmaceutical & Healthcare and the $29.6 million investment in oncolytic immunotherapies company Viralytics by China’s Lepu Medical Technology.

Hutton also cites two recent ASX-listed players with late-stage products securing offshore investors: regenerative medicine company Mesoblast has partnerships with China pharmaceutical company Tasly and Japan’s JCR Pharmaceuticals and dendrimer product maker Starpharma has partnerships with diversified Chinese group Shenyang Sky & Land Latex Co and Japan’s Okamoto Industries.

Deloitte’s Global 2019 Life Sciences Outlook notes “accelerating change in life sciences” as biotechs adopt new business models to remain competitive.

“Trends in the life sciences industry typically take place over decades rather than years, but the pace of change now feels like it is moving faster than ever,” the report states.

The continuous search for the next generation of market-leading medicines and decreasing returns on R&D make external deals attractive sources of innovation for biotechs, either through licensing, M&A and/or joint ventures, according to Deloitte.

Over the next few years, major pharmaceutical companies are expected to shift from transactional outsourcing relationships to more strategic, relationship-based models with lifescience companies.

For biotechs this means new business models, transforming from a product-only focus to also include services.

Sydney-based ASX- and NASDAQ-listed oncology-focused biotechnology company Kazia Therapeutics is an example of the new breed of biotechs.

In 2017, well established biotech Novogen adopted the name Kazia to reflect a new operating model, becoming a more “innovative, focused and agile company” that partners with “big pharma” to bring drugs to market.

Kazia CEO Dr James Garner says few companies now do end-to-end drug development from discovery to patient delivery, which is normally a 15-year process.

“This is an industry that benefits enormously from networks, interrelationships and collaborations and that’s what we have based our business model on,” he says.

Garner says Kazia focuses on structuring and managing the approvals and trials stage of drug development – the critical middle part between discovery and commercialisation – which it does under the strict oversight of the US Food and Drug Administration.

“We consider that a more viable business model. We focus on the things we do well, which includes working closely with a very rich network of partners and collaborators,” he says.

“We don’t aspire to the commercialisation side of the business. The actual implementation, execution and funding of bringing a product to market is what the big pharmas do best.”

Kazia’s pipeline includes its lead GDC-0084 program, which is being developed to treat glioblastoma multiforme, the most common and most aggressive form of primary brain cancer in adults.

Kazia licensed GDC-0084 from US biotechnology company Genentech in 2016 after a successful Phase 1 trial. The drug entered a phase II clinical trial in 2018. (New drugs must pass through various stages of regulatory approval and three main phases of clinical research before making it to commercialisation.)

In July, Kazia announced that one of the world’s leading cancer treatment hospitals, Memorial Sloan Kettering Cancer Centre (MSK) in New York, will investigate the potential use of GDC-0084 in combination with radiotherapy in a clinical trial for cancer that has spread to the brain.

The MSK study will investigate whether GDC-0084 has the potential to enhance the effects of radiotherapy, which remains the current standard of care in most cases.

The two-year study is one of five ongoing clinical studies involving GDC-0084.

“We focus on the things we do well, which includes working closely with a very rich network of partners and collaborators.”

James Garner

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