There's more to Australian biotech than just CSL: the opportunities to watch

Just a couple of years ago, CSL stood alone as Australia’s only profitable biotech company. Fast forward to today and the landscape has dramatically shifted, with Neuren (ASX: NEU) and Telix (ASX: TLX) delivering FDA approved products and becoming profitable. Botanix (ASX: BOT) has also recently received FDA approval and is set to launch shortly, further enhancing the sector’s credibility. 

Several other companies including Opthea (ASX: OPT), Immutep (ASX: IMM) and Dimerix (ASX: DXB) are progressing through Phase 3 trials, while Syntara (ASX: SNT) is set to potentially begin a Phase 3 trial in 2025, pending feedback from the FDA. The local ecosystem is starting to mature and is looking better and better.

Overseas macro environment

On the macroeconomic front, the picture is less clear. The US FDA may undergo significant structural changes in 2025 which could bring changes that impact drug and device development all over the world. The changes could be huge such as splitting up the agency to remove ‘Food’ and having the FDA focus exclusively on healthcare.

There are two competing schools of thought within the incoming US administration that are diametrically opposed on what direction the FDA should take. However, what remains certain is the continued need for robust drug and device development. 

We are focused on ensuring our portfolio companies are well funded, focused on high quality clinical trials that generate actionable data, while carefully managing cash reserves.

Biden’s Inflation Reduction Act (IRA) granted US Medicare the ability to negotiate drug prices directly with pharmaceutical companies – a policy strongly opposed by the Republicans who may seek to reverse it. This could deliver much needed positive sentiment in the sector.

Capital market dynamics

On the capital market front, this uncertainty around the future direction of the FDA has seen healthcare lag when compared with other sectors. 

We still have not seen a pickup in IPO activity, with the window for new offerings unlikely to reopen until greater regulatory clarity emerges. 

The market has bifurcated, favouring later stage companies securing significant capital to fund pivotal trials, while early stage firms struggle to attract funding. 

Anecdotal evidence we have seen suggests that it is easier to raise $100m for a Phase 3 trial than $10m for preclinical research.

Big Pharma continues to approach acquisitions cautiously, prioritising companies at Phase 3 stage or with FDA-approved drugs over early stage ‘platform’ technologies – a shift from the acquisition trends seen in 2020/21. With over US$150b in revenue expected to be lost to patent expirations by 2028, we anticipate sustained M&A activity focused on filling these gaps

Australia’s stable regulatory environment

In contrast to the US, Australia’s, regulatory environment is much more stable. The federal government is highly supportive of the R&D ecosystem in Australia, recently announcing a review of ‘Australia’s research and development performance,’ a signal to its commitment to fostering innovation. 

As discussed earlier, this stable environment has helped nurture our maturing biotech ecosystem and is delivering more companies reaching advanced stages of development. We are seeing more and more biotech’s at Phase 2 stage and medical device companies approaching regulatory approvals. However, Australia’s venture capital ecosystem remains underdeveloped, posing a challenge for adequately funding these later-stage opportunities.

Outlook for 2025

We remain positive about the catalysts ahead for our portfolio companies. We believe that both Syntara (ASX: SNT) and CurveBeam AI (ASX: CVB), our two listed investments, are positioned well for strong developments in 2025. Syntara’s Phase 2 trial results were announced recently and could lead to a Phase 3 trial which is an important milestone. 

Meanwhile, CurveBeam AI continues its efforts to innovate the orthopaedic imaging landscape with its HiRise bilateral weight-bearing CT system. These are good examples in the local market and we continue to work to identify other opportunities in the Australian venture capital ecosystem. 

As the local and global biotech sectors evolve, we remain focused on navigating uncertainty and capitalising on opportunities to deliver meaningful outcomes for our portfolio and stakeholders.

Managed Fund

KP Rx Healthcare Opportunities Fund

Alternative Assets

View