Time for a leap

The Australian pharma market boasts of good infrastructure and a strong focus on biotech. What is interesting is that it has room for Indian companies to partner, Sriram Iyer writes

The land of the kangaroo has always attracted people the world over but it has never been about the kangaroos alone. The country has managed a reputation beyond the ambit of tourism, especially as a preferred destination for academics and trade, among others. Of late, the sonic biotech boom has been adding its share to the country’s clientele. “The Australian biotech sector has been tracking quite well over the last few years, although the other sectors within Australian equities markets, particularly the mining and resources sector have been so successful that the biotech sector has been kept in the shade,” points out David Blake, Industry Expert and Director of Blake Industry and Market Analysis, a biotech market research organisation. In addition, Australia ranks among the best in the world for the facilities it provides for R&D.

Government’s role

The government has been strongly committed to the industry’s development. The Australian Government provides R&D tax concessions and R&D start grants to the biotechnology sector as well as access to the COMET Program (Commercialising Emerging Technologies), and commercial ready grants. Additionally, the government provides access to venture capital through the Innovation Investment Fund and Pre-seed Fund.

The state of Victoria invested A$1.8 billion in science and technological innovation since 1999. In 2006, it further committed A$230 million to medical research leveraging projects valued at A$713 million. “Medical research is a key foundation of our biotechnology industry. Such investment will bolster the industry and ultimately translate Victoria’s excellence in medical research to benefits for patients,” says Gopi Shankar, Trade Manager from India for the State Government of Victoria.

Inevitably, these growth figures have attracted international interest. In 2006 alone, 388 alliances were announced, of which 260 involved international partners. Since July 2004, more than A$2 billion worth of deals were signed with Victorian companies. This does not include Hospira’s A$2.6 billion acquisition of Australia’s second largest life science organisation, Mayne Pharma. Almost every prominent player in the biotech world is present in Australia.

Opportunities for India

Despite its affluent infrastructure, Australia’s low population (it has just 0.3 percent of the world’s entire population, around 20 million) has been one of the major setbacks for biotech. And this is exactly where Indian players can cash in. “There is terrific opportunity to work together; to engage productively with the Indian industry. Unlike India, there is a huge shortage of private equity in Australia. The manufacturing base is not strong either,” says Anna Lavelle, Chairman, Aus Biotech.

And that is not the only leverage that Indian companies have. The most celebrated cost factor works here as well. “The Indian companies have a definite advantage in terms of cost base on clinical trials as well as in manufacturing and Australia has a strong reputation for quality and expertise,” says Amanda Caples, Director-Biotechnolgy, State Government of Victoria. “Earlier, the tendency was to go to US or Europe. That is not the best thing to do because it is costly whereas India is relatively a lot cheaper,” comments Lavelle.

On the other hand, Indian companies can partner with Australian companies to compensate for infrastructural deficiencies at home and keep the process of innovation uninterrupted, without compromising on quality. According to Blake, “Australian companies have developed links with companies and regulatory organisations in the world’s currently most significant healthcare markets, and Indian companies could tap this expertise.”

In addition, “Australia is also perceived as part of the western market. Having a presence there gives us a better stand in the global arena,” points out Dr Kiran Mazumdar Shaw, Chairman, Biocon. Biocon took the lead and announced its association with Deakin University in Victoria during the event. The MoU signed between the two organisations covers various projects, including establishment of a mammalian cell bio-processing facility at the Geelong Technology Precinct on Deakin University’s Geelong Campus at Waurn Pounds, Victoria. In India, the partnership will facilitate the establishment of a Deakin Research Institute in Bangalore. This will also involve collaborative research with Biocon. Dr K K Narayanan, MD, Metahelix and Chairman, ABLE Association of Biotechnology Led Enterprises agrees, “More than just the Australian biotech market, I think by joining hands Indian and Australian enterprises will be able to capitalise on global opportunities more efficiently.”

Past experience

A few Indian companies are present in the country, albeit on a small scale. Ranbaxy was one of the earliest to go Down Under. In August 2006, it became the first Indian pharmaceutical company to have its drugs listed for prescription subsidies in Australia under the Pharmaceutical Benefit Scheme (PBS), a scheme that provides subsidised prescription products. Patients who are prescribed a PBS-listed product do not pay the full cost of the product, they pay a flat fee and the Australian Government pays the difference.

At present, the market is largely dominated by innovative medicines that are expensive. However, the Australian Government has been keen on reducing the cost of medicines through initiatives like the PBS. Thus, generics are being promoted and are expected to play a huge role in the future. And as generics are the strong point of Indian companies, they stand to gain a lot in the Australian market.

Focus on R&D

However, as Blake puts it, “The Australian biotech sector has not been limited by good ideas for great products. It has been challenged to turn those good ideas and inventions into great products and remove the bias of a technologically oriented industry to do more research, when the main job is to make the product, be it a drug or device, and get it partnered so it can be sold.”

Likewise, the present onus of partnerships is largely on utilising the rich Australian infrastructure for innovation. “Our focus is not just on selling products but also more on sourcing innovation,” says Shaw. “The Australian market per se may not be as big as say the share of the global marker that jointly Indian and Australian companies can hope to penetrate. The strategy of companies from both these geographies should therefore be to build partnerships to leverage their synergies and make themselves more competitive in the global biotech market,” says Narayanan. The idea has surely found widespread agreement among the parties involved. According to Caples, Indian companies can engage in innovation, discovery and design. “We have seen with ICT that Indian firms use Australia (and Victoria in particular) as their design base,” she adds.

Nevertheless, the product focus has been increasing, much in line with modern business understanding. With that, understanding of the capital requirements of drug development, diagnostics and medical device development is improving as well. “While governments, both Federal and State, have played a useful role in supporting the sector, the real maturation of the sector has come through the discipline from a contestable capital market,” Blake points out. The pressure of achieving better outcomes in terms of share price performance has forced companies to learn how to communicate, structure and manage their businesses in a better way.

Limitations and opportunities

Australia has a maturing biotech capital market, which by local standards could do a lot better. The market is still highly regulated and hence growth has been quite slow. Sources at Ranbaxy said that the market is nascent and needs to open a lot more. Given the circumstances, companies like Ranbaxy are content with their limited role in the market.

The Australian industry is plagued with the shortage of accredited service delivery firms. This, in particular, is a highly competitive sector and as Caples puts it, “The key to success is having a strong track-record in meeting regulatory requirements.” In terms of sheer numbers, India does have an edge over Australia. However, it is bound to take some time for them to achieve a high level of market credibility, after which they could find themselves at ease in the foreign land. The current trend is for Australian companies to look at global partners like Pfizer and Amgen rather than to partner with smaller firms themselves. According to Caples, “This will change over time as Australian firms take their technologies further and Indian companies build their profile, track-record and networks.”

The synergies between India and Australia seem very obvious. A beginning has already been made and its only a matter of time before these partnerships translate into profits.