Abstract
The Australian biotechnology industry has performed strongly despite an unpredictable economic market. Australia continues to be a leading location for biotechnology in the Asia-Pacific region and has been ranked the fifth most innovative in the world. 1 There are currently 100 life sciences companies listed on the Australian Securities Exchange, with a total market capitalization of $31.4 billion (USD32.3 billion). 2 Australia has the largest listed biotechnology sector as a proportion of Gross Domestic Product (GDP) in the world, and is estimated to have more than 1,000 established companies. 3,4
Australia also offers a world-class science and technology base, with capacity for international partnerships, a transparent and efficient regulatory system, and industrial capabilities in application areas such as biomaterials, bio-mining, chemicals and enzymes, waste water reprocessing, and food processing.
A recent AusBiotech survey (Biotechnology Industry Position Survey 2012) of the industry's CEOs and senior managers on three topics—sentiment, funding, and public policy—shows that confidence in the industry's future continues, but the operating environment, particularly in terms of economic and public policy, is a concern. 5 The vast majority (82%) of respondents expected their business to grow in the coming year, while 68% characterized last year as a good or excellent year. An expansionary approach to employment persists, with a majority of companies (58%) indicating that they will increase staffing numbers in the coming year.
Within Australia, biotechnology has traditionally been associated with the medical and pharmaceutical sectors. However, Australia has broad capabilities in industrial biotechnology with both research and commercial activities across several key areas. Since Australia's government issued its first Industrial Biotechnology Strategy in 2007, the opportunities and barriers specific to the industrial sector of the biotechnology industry have remained fairly consistent. Australia's opportunities and focus for development can be categorized into three areas: • biocatalysis, using biologically derived enzymes to replace industrial chemical catalysts; • bioprocessing, in which conventional chemical processes are being replaced with biological processes in applications as diverse as organic synthesis of pharmaceuticals and microbial desulfurization of diesel fuels; • production of materials from renewable nonpetroleum feedstocks and development of new bioprocesses, such as using corn starch to produce biodegradable plastic.
The Australian biofuels sector has made significant advances in developing alternative fuels from waste, representing an immense growth area that will have an important role to play in displacing the current, non-renewable fuels. The Australian airline Qantas launched its first commercial flight using biofuels in April 2012. Qantas' CEO, Alan Joyce, said that finding a sustainably produced biofuel is an important step in confronting the major challenge of high fuel prices, but Qantas also supports the aviation industry's goal of being carbon neutral by 2020.
New technologies being developed in Australia do not use food crops, but instead focus on deriving sugars from the fibrous woody parts of plants such as lignocellulose, or from algae. These types of technologies can create biofuels from feedstocks such as garden waste, or forest and sawmill waste, or be deployed at plantations dedicated to energy production. The Mackay Renewable Biocommodities Pilot Plant was recently opened at Queensland University of Technology (Mackay, Australia) to help position Australia as a leading player in the development of bioproducts, including fuels, plastics, and chemicals. The $10-million (USD10.3-million) plant was established with funding from the Queensland state government and federal government funding under the AusBiotech-managed National Collaborative Research Infrastructure Strategy (NCRIS) and the Federal Super Science Initiative. In addition to sugarcane bagasse and trash, the plant is capable of processing alternative biomass feedstocks sourced from partners throughout Australia to produce ethanol and high-value commodities at semi-industrial scale.
Public Policy
In the past two years, AusBiotech has worked on two significant public policy issues with the potential to make-or-break the Australian industry: the introduction of a refundable tax incentive to boost innovation; and a fight against two gene patent bills before the Australian Parliament that sought to ban the patentability of all “biological materials…whether isolated or purified or not and however made, which are identical or substantially identical to such materials as they exist in nature.”
After more than two years of campaigning and consultation, the Research and Development (R&D) Tax Incentive legislation was delivered through the Australian Parliament in late 2011. Start-up companies, especially biotechnology companies operating at a loss, will be the biggest beneficiaries from the Tax Incentive's 45% refundable component. For biotech companies with a turnover of less than $20 million (USD20.7 million), the legislation is a significant tailwind for R&D programs. The legislation will also benefit innovation efforts at larger companies by reducing the cost of conducting eligible R&D activities in Australia by up to 10%, making Australia a more competitive location for conducting R&D. It will also inject substantial new funds into the Australian industry by stimulating new investment.
The fight against the proposed gene patent bills was fueled by the industry's belief that prohibiting patents on genes and biological materials will not address any of the expressed concerns about grower and researcher access, but would instead lead to a lack of innovation and of novel, potentially life-altering products. In Australia today, naturally occurring entities such as genes are already considered discoveries, not inventions, and therefore are not patentable subject matter. The existing law requires patent applicants to provide substantive evidence about their technology in support of its novelty, utility, and inventiveness.
AusBiotech is in favor of the rigorous and consistent application of the existing law, in relation to all technologies, to ensure the continued distinction between discovery and invention, and supports ongoing review and legislative amendment to ensure that Australian industry and researchers have a set of clear rules to guide them as they strive to innovate. AusBiotech campaigned for the Raising the Bar Bill, which passed into law in the Australian Parliament in early 2012. The Bill heralds an improvement in Intellectual Property (IP) management in Australia by providing more certainty for researchers and harmonizing patent management with international standards. The reforms are expected to support new technology in areas such as healthcare, food, and the environment, while ensuring that IP rights are protected overseas and, if challenged, will be upheld in court.
The Australian biotech industry has also welcomed the initiation of Commercialisation Australia, a merit-based competitive assistance program that provides support for companies bringing a product or service to market. It offers a range of tailored assistance measures for specialist advice and services, proof of concept, and early stage commercialisation activities Commercialisation Australia has funding of $278 million (USD287 million) over the five years to 2014, with ongoing funding of $82 (USD84.86USD million) annually. Specific program components include grants from $50,000 (USD51,688) to $2 million (USD2.1 million), some on a 50:50 matching basis.
Funds are also available through the federal government's long-running Innovation Investment Fund (IIF), a venture capital program open to private venture capital firms that provide early-stage funding for start-up companies commercializing applications of Australian research. Allocation of the final tranche of funding under round three was recently announced, with the government announcing plans to commit an extra $100 million (USD103.4 million) to support venture capital investments in biotech and other innovation-focused Australian companies. VC firms must commit to match the government's allocation at least 1:1 with private sector capital.
Challenges
Despite a number of programs supporting industrial biotechnology, Australia's economic and public policy environment remains a concern. According to AusBiotech's poll, two in five companies (38%) said that the operating environment was working against their growth. When asked what federal measures could best support growth, executives named investment incentives, a larger percentage of targeted funding support, and predictability in relation to policy and programs.
Access to significant tranches of capital remains the biggest issue for the biotechnology industry. While programs such as the R&D Tax Incentive, IIF, and Commercialisation Australia grants provide some support, there remains a gap in terms of incentives for investors. Investor tax breaks could help incentivize funding for innovation-based companies, and a larger allocation of targeted funding support would provide access to federal grants needed for expensive commercialization activities and clinical trials. Such incentives would also need to be kept stable. Stability and certainty were recurring themes in the survey responses, with CEOs commenting that keeping current policies would help them make reliable forecasts, and changing “goal posts” amid government programs is disruptive.
AusBiotech's Agricultural, Environment and Industrial Advisory Group unanimously agrees that overregulation of genetically modified crops and the inability of state governments in Australia to override decisions made by the federal Office of the Gene Technology Regulator (OGTR) is an intractable problem for the industry. Australia is not alone; this is a growing concern in other countries as well, most recently in India. Nevertheless genetically modified crops are grown in Australia, and the barrier to entry is lower than in Europe.
The Future
The outlook for Australia's industrial biotechnology industry is a positive one. With the initiation of a federal carbon tax expected in July 2012, the Australian Government is making a strong push into cleantech. The Clean Energy Legislative Package, which includes the carbon pricing mechanism and delivers support for jobs, national competitiveness, and economic growth, looks to reduce pollution and find alternatives to conventional energy sources. The legislation also earmarks over $13 ($13.4USD) billion for cleantech projects, including biofuels, and creates the Clean Energy Finance Corporation to manage $10 billion (USD10.3 billion) in loans, loan guarantees, and equity investments in cleantech. Meanwhile, AusBiotech will continue working to improve incentives for investors and to stimulate policy changes that will improve the business environment in Australia.