What it will take to create the next CSL or Telix Pharmaceuticals

The Australian market is an incubator pool for biotech start-ups. So, where are we going wrong that so few are reaching brand-name status? This was the question that a panel of experts sought to answer at the UBS Australasia Conference 2024 on Monday.

Moderated by UBS’ Laura Sutcliffe, the panellists included:

• Andrew Adamovich, Chief Executive Officer, AdvanCell
• Anthony Liveris, Chief Executive Officer, Proto Axiom
• Christopher Alma, Director, External Innovation, Biopharmaceutical Product Development, R&D, CSL
• Kathy Connell, Senior Client Partner and Head of Healthcare and Life Sciences, Korn Ferry Australasia

The panellists agreed that the answer has nothing to do with the quality of the science, that Australian biotech is at an inflection point, and the right capital will be critical.

Australia has high quality breeding grounds for research

“Australia is a superpower. We produce the most research per capita of any country in the world,” says Liveris.

It’s a good place to develop, with generous government incentives, including a Research & Development (R&D) rebate. There are also a range of organisations, such as universities and AusBiotech which offer incubator and accelerator programs.

We also have a diverse population, meaning clinical trials can easily be equated to global populations.

Cornell points out that big healthcare companies like Merck (NYSE: MRK) had scouts employed in Australia specifically to identify investment opportunities – a testament to the quality.

But times have changed, and it is far harder for start-ups akin to Telix to find funding.

“A lot of the big pharmaceutical companies have pulled out of Australia. There are a thousand reasons why, but the short version is we’re a long way from the centre of gravity. They have some serious patent cliff issues that they need to solve and so they are focusing centrally,” Cornell says.

One side of the problem

With funding difficult, the other end of the challenge is the ability to commercialise.

As Liveris puts it, “we have the starkest research to commercialisation gap of any country in the world.”

That is, start-up biotechs need access to teams with experience in commercialising the science. It’s something they also miss with the big pharmaceutical companies leaving Australia is the ability to partner on this activity.

Of course, this all creates opportunity too – and Cornell believes it is a unique opportunity for private investors to get in before the big companies return – and they inevitably will.

Is there room for another CSL or Telix?

Given Australia is a small market, the question naturally arises. Can Australia even support more companies with the quality of a Telix or CSL?

Cornell argues the answer is yes, but there are challenges ahead. The ability to commercialise, garner sufficient capital, and scale is part of this.

Alma also believes there is space, but points out this is also due to the global nature of biotechnology.

“It’s the beauty of biotech, it’s such a global industry constantly looking for global health problems,” Alma says.

For many companies, the answer is not listing or staying in Australia though. There is bigger capital overseas. After all, private capital is going to be the driver for the inflection point of Australian biotech.

For example, Adamovich who is also involved in radionuclide therapy through AdvanCell – but a different technology to Telix, discusses that he had to go global to raise sufficient capital. The only external investor in Advancell is US-based Morningside Technological Ventures. To get the deal over the line, Adamovich and his team spent a considerable amount of time overseas and used his personal connection with Dr Gerald Chan (the co-founder of Morningside) to help promote AdvanCell.

It's not just about how much capital either. It’s about ‘who’ as well. Cornell and Liveris describe this as ‘smart capital’, that is investments that have been deployed in the right way and don’t disrupt the actual progress of the science.

When should Australian biotechs go overseas?

Cornell suggests the optimal approach would be for companies to do their commercialisation overseas – particularly in the US, while maintaining their R&D back in Australia.

That said, Liveris argues we should be leveraging our dominance in this space better, developing a sovereign capability and bringing Australian talent back locally.

How to identify the best opportunities

Liveris, Cornell and Alma all have expertise in identifying early biotechs to invest in. There are always thousands of opportunities – it can be hard to find the one that stands out.

“One of my litmus tests was, aside from an unmet need on strategy, a disruptive market, was when you look at the team and the team was not just the scientists with the PhD and lab coats, but it was also about the advisory team that had come on board. 

Had they been able to sell their story within an academic or clinical environment and how were those circles of influence going to help accelerate and move that technology amongst the key opinion leaders within the space,” Cornell says.

The next step was considering the ability to scale, what the regulatory environment might look like for that biotech firm and what prices the product might be able to garner.

Each generally prefers pre-listed companies because there is more flexibility to raise more capital compared with the ASX.

If you consider Telix as an example of this in practice:

“Telix engaged very well with investors, with the stock markets, with firms. They acquired great assets which didn’t require too much scientific risk, they got it approved and then they executed,” says Adamovich.

Lessons from CSL, Telix or Neuren

While the experts positioned these as lessons for biotechs with ambitions to climb big, they can also be useful for investors thinking about where to put their money.

• Alma: “Focus on being the best in your niche area of biotech.” – aka the CSL model.
• Cornell: As per Telix, “Choose a disruptive therapeutic opportunity for the market,” and have “a laser-sharp focus on development and commercialisation.”
• Adamovich: “Execution and think big” and “focus on the US market”.
• Liveris: “Really good science, foundational science” and remember, “a lot of the noise in fundraising can be resolved by actually having something unique.”