BioCouncils AllianceMApping the Life CyCLe of BioteChnoLogy CoMpAnies

how to create local jobs and investment from Victoria’s biotechnology company activities.

september 2005

Acknowledgements

This report was developed on behalf of the BioCouncils Alliance. The Alliance has six member councils, each is interested in economic development opportunities for their municipalities. The steering committee has a member of each of the councils as follows;

Council SteeringCommitteeRepresentativeCity of Hume Tim Mills City of Knox Randal Harkin City of Melbourne Russ Wood City of Monash Jeff McAlpine City of Whittlesea John Francis City of Wyndham Greg Aplin

The project was led by Jim Murray. Jim is CEO of Atholl Business Consulting Pty Ltd, a Victorian management consulting firm. Jim is also Deputy Chairman of the BioMelbourne Network, Victoria’s biotechnology industry development organisation.

The Scientific Advisor to the Project was Dr John Bates of BTM Services Pty Ltd.

We are grateful for the assistance given by Tim Murphy, the Executive Director of the BioMelbourne Network. We are also grateful for the participation of the fifty biotechnology companies, industry experts, university and government staff who contributed their time and insights into this report.

The BioCouncils Alliance recognise the invaluable contribution provided towards this project by the Victorian State Government and the Minister for State and Regional Development, The Hon John Brumby MP.

The authors have based this report on information acquired from a variety of sources including personal interviews and third party reports. Any claims made have been taken in good faith and the information has not necessarily been verified at its source. The information is used to present a view from the marketplace and to inform the recommendations of this report. Atholl Pty Ltd does not make any representations or warranties (express or implied) as to the accuracy or completeness of the information contained in this report. Atholl Pty Ltd does not accept any liability for the use of information that is presented in this report.

The project was conducted between July 2005 and September 2005.

ContactAtholl Business Consulting Level 8, 350 Collins Street Melbourne Victoria 3000 Telephone 9574 7551 Email: jmurray@atholl.com.au

BioCouncils AllianceMApping the Life CyCLe of BioteChnoLogy CoMpAnies

how to create local jobs and investment from Victoria’s biotechnology company activities.

september 2005

1 ExecutiveSummary 5

2 ObjectivesandMethodology 112.1 TheBrief 112.2 AreasofInvestigation 112.3 InterviewsConducted 12

3 UnderstandingBiotechnologyCompanies 133.1 SnapshotofVictorianBiotechnologyCompanies 133.2 TheChallengeofJoblessGrowth 153.3 TheDrugDevelopmentandRegulatoryApprovalProcess 163.3.1 TheRewardstoBiotechnologyCompanies 173.3.2 TheRisksofDrugDevelopment 183.3.3 TheCostofDrugDevelopment 19

4 LifeCycleAnalysisofBiotechnologyCompanies 214.1 HighLevelLifeCycleModel 214.2 DrugDiscoveryandDevelopment 234.3 MedicalDiagnosticProducts 284.3.1 PharmacogenomicsandTargetedDiagnostics 294.4 AgriculturalBiotechnologyProducts 304.5 BioActiveProducts 324.6 BioFuels 344.6.1 ProductionandProcessingofBioActives 354.6.2 BarrierstoBioActivesIndustryDevelopment 354.7 ComplementaryMedicines 374.7.1 BarrierstoComplementaryMedicinesIndustryDevelopment 39

5 ExpansionSpaceForVictorianBiotechnologyCompanies 415.1 LocationConsiderations 415.2 FutureSpaceRequirements 425.3 AttributesofFacilities 435.4 OccupancyCostsandLocationDecisions 445.5 CapitalEfficiency 465.6 PrecinctDevelopment 475.7 DesignOfExpansionSpace 48

6 DiscussionandRecommendations 496.1 IndustryFeedbackontheRoleofLocalGovernment 496.2 TheRationaleForLocalGovernmentIntervention 506.2.1 ExistingBiotechnologyCompaniesandtheRoleofLocalGovernment 506.2.2 EmergingBiotechnologyCompaniesandtheRoleofLocalGovernment 516.3 TheRoleoftheBioCouncilsAlliance 526.4 OverviewoftheCapabilitiesandInterestsofSpecificMunicipalities 546.4.1 CityofMelbourne 546.4.2 CitiesofHumeandWhittlesea 556.4.3 CitiesofMonashandKnox 566.4.4 CityofWyndham 576.5 FrameworkForAction 58

7 Appendix1.SpecificInterestsofCouncils 61

8 Appendix2.DefinitionsandTypesofCompaniesInterviewed 63

9 Appendix3.CostingModelsForExpansionSpace 75

tABLe of Contents

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BiotechnologyisanindustryofthefutureandVictoriahasagoaltobecomeoneofthetopfivebiotechnologylocationsinternationally.Thisreportexaminesthevaluechainofthebiotechnologysectorandthelifecycleofbiotechnologycompanies.Itdoessobecausethissectorhassomeveryuniquecharacteristics.Attheheartofthematterliesasimplequestion;‘How do we create local jobs and investment from Victoria’s emerging biotechnology company sector?’

ThisreportfindsthatthereareopportunitiesforlocalgovernmentinterventionandtheBioCouncilsAlliancecan;

• HelpincreasethesizeanddepthofexistingVictorianbiotechnologycompaniesengagedindrugdiscoveryanddevelopment;and

• Stimulatecompanyactivityinemergingbiotechnologyareas(BioActiveplants,BioFuels,TargetedDiagnosticsandComplementaryMedicines).ThesenewfieldshavethepotentialtoattractarangeofnewjobsandinvestmentatmanypointsinthevaluechainandtheyalignwithVictoria’straditionaleconomicstrengths.

Individualcouncilshavelongbeensupportersofbiotechnologyindustrydevelopmentandeachhascertaincapabilitiesandlocationadvantages.ThisreportexploresthepossibilitiesofworkinginacooperativewaythroughtheBioCouncilsAlliance.Thismodelofcollaboratingtocompetewouldenablecouncilstopoolresourcesforoveralleconomicdevelopmentadvocacywhilespecialisinginspecificindustryniches,suchasmedical,agricultural,environmentalorindustrialbiotechnology.

ThisreportwascommissionedbecauseBioCouncilsAlliancememberswerekeentounderstandtherealneedsofbiotechnologycompaniesbylearningmoreabouttheirgrowthpatternstodeterminewheresupportshouldbetargetedtoassistinattractingandretainingthesecompanies.Thisprojectwasrequiredtocharttherequirementsofabiotechnologyorganisationthroughitsentirelifecycle,effectivelymappingitsvaluechain(includingallaspectsofitsgrowth,itsoperations,supplyanddistribution).Thisreport;

• Identifiesgapsinlevelsofsupportandinfrastructure;

• Analysestrendsacrossthepoolofbusinessesreviewed;and

• Highlightsopportunitiesforcouncilinvolvementasorganisationsmightseethem.

Atotaloffiftyorganisationsorpersonswereinterviewedforthisreport.Thereweresixteenoperatingbiotechnologycompanies,eightcompaniesdirectlyinvolvedinthesupplychain,threeventurecapitalinvestors,nineindustryexperts,sixuniversityexperts(RMIT,LaTrobe,Monash,Melbourne)andeightinterviewswithgovernmentagenciesincludingtheDepartmentofIndustry,InnovationandRegionalDevelopment(DIIRD)andtheDepartmentofPrimaryIndustries(DPI).

1 eXeCUtiVe sUMMARy

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LifeCycleAnalysisofExistingBiotechnologyCompaniesWeanalysedthelifecycleofVictoria’sexistingbiotechnologycompaniesandfoundthatthemajorityareinvolvedinthediscoveryandearlystagecommercialdevelopmentofdrugs,vaccinesanddiagnostics.Thesecompaniestypicallyaimtotakeproductcandidatesfromthediscovery/pre-clinicalphasetolatePhaseIIregulatoryapproval(thesephasesareexplainedinSection3.3).VeryfewcompaniesinterviewedforthisreporthaveintentionsoftakingproductsintoPhaseIIIorbeyond.ThatsteprequiresaresourcebasethatisgenerallybeyondthereachofbiotechnologycompaniesbasedinAustralia.

ThereisawidelyheldviewbythesecompaniesthatVictoriaisanexcellentplaceforcommercialproductdevelopmentaswellasscienceand,ifatallpossible,wouldpreferthattheircoreactivitiesremainhere.Thisprojectvalidatedthatthereisaclearandstrongdemandforexpansionspacefromthesebiotechnologycompanies.Ithasalsovalidatedthatmanyofthesecompanieswouldprefertobeco-locatedandthatthepreferredlocationisParkvilleorsurroundingareas.WefoundthattheCity of Melbourneiswellplacedasalocationfortheconsolidationofcommercialactivityrelatedtodrugdiscoveryanddevelopment.

Biotechnologycompaniesareveryintensiveusersofhighlyskilledknowledgeworkersandusecapitalintensivefacilitiesandequipment.Astheygrowtheyarelikelytoreinvestintoexpandingtheirproductrangebytakingmoreproductcandidatesthroughtheirdevelopmentpipeline.Thisgrowthwillattractjobsandinvestmentintechnicalstaffandtechnicalsupplies.Itwillalsohaveabeneficialeffectontheuniversityandresearchinstitutesasasourceofproductcandidates,contractresearch,theuseofhighlyspecialisedequipment,andthesupplyofgraduates(typicallyMastersandPhDlevel)inchemistryandlifesciencesdisciplines.Therewillalsobeaflowoneffecttosuppliersandadviceproviders.

Thesecompanieswillnotnecessarilycreatedownstreammanufacturingjobsonalargescale.Thatisduetomanyfactors,includingtheglobalstructureofthepharmaceuticalmanufacturinganddistributionsystem,andthelackofdepthofAustraliancapitalmarkets.

AsubsetofthesecompanieswillalsobegintoexploredirectopportunitiesforexpansioninAsia,withaparticularinterestinChina.ThatmayprovideameansforthemtograduallymovedownthevaluechainandestablishthemselvesasproductdevelopmentandmarketingcentresfortheAsiaPacificregion.

Wedevelopedthefollowinglifecyclemodelthatidentifiesthemajorinputsinthevaluechainrelatingtoemploymentandinvestment.

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Wefoundthatmanyoftheinputsinthevaluechainarescaleable,orthebarrierstogrowthareknownandbeingaddressedbyotherlevelsofgovernmentandindustry.Theredoremainbarriersintheprovisionofspecialisedlaboratoryspaceforgrowingcompaniesandintwofundamentalinputs;peopleandcapital.

Oneinterestingissueemergingfromourresearchistherelativedifferenceincapital efficiencybetweeneconomieswithestablishedbiotechnologycompanysectors(suchastheUSA)andeconomieswithemergingbiotechnologycompanysectors(suchasAustralia).

WefoundthatemergingVictoriancompaniesneedtoexpendscarcecashforinfrastructurepaymentssuchaswetlaboratoryfitout,specialisedresources,servicesandequipment,whereascompaniesinestablishedbiotechnologysectorscandevotemoreoftheirscarcecashtopeopleandproductdevelopment.Thatisbecausetheestablishedbiotechnologyeconomieshavespecialisedrealestatedevelopmentsandprecinctincentivesthatenablegrowingcompaniestodeferup-frontcashpaymentsbyusingequityarrangements,pay-asyougomodels,sharedservices,governmentincentivesandloanguarantees.

What can local government do?Localgovernmentcanhelpalleviatethisimbalancebybeinganadvocateandfacilitatorofspecialisedbiotechnologyprecinctdevelopmentsthatareattunedtotheneedsofemerging,cashconstrainedbiotechnologycompanies.Localgovernmentcanbriefdevelopersontheappropriateselectionoflandandlocation,thedesignofbuildings,thewaythefacilitiesarefinanced,andhowbusinessmodelscanbeattunedtotheneedsofemergingcompanies.TheycanhelpcoordinatepotentialtenantstoexploretheuseofsharedservicesandexplorethepotentialforinfrastructuresupportbyStateorFederalGovernments.Localgovernmentcanalsohelpwithzoningandpermitassistanceandassistingcompaniestomakethetransitionintoprecincts.

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LifeCycleAnalysisofEmergingBiotechnologyCompaniesTheglobalbiotechnologyindustryischangingshapedramaticallyasitevolves.Aswellasmedicalbiotechnologythereisthepotentialforindustrydevelopmentinvolvingagricultural,industrialandenvironmentalbiotechnology.

• The Cities of Monash and Knoxarewellplacedasthenaturallocationfortheconvergenceofthefieldsofinformationtechnology,medicalimaging,advancedmanufacturingandnanotechnologyastheyapplytobiotechnology.

• The Cities of Hume and Whittleseaarewellplacedasabaseforprimaryproductionandprocessingofnew,highvalueagriculturalproductsinvolvingbioactivepropertiesandmedicinalherbs(ChineseMedicine/ComplementaryMedicine).

• The City of Wyndhamhastheopportunitytocreateanindustrialbasefortheprocessingandextractionofbiologicalmaterialsthatbecomebiofuelsandbioplastics.

• Therearealsoopportunitiesinfermentationandextractionofactivepropertiesandpilotscaledemonstrationsitesinfoodprocessing.ThatmaybeofinteresttomanyoftheBioCouncilsAlliancememberswhohaveexistingfoodprocessingindustrialbases.

Thejobcreationandinvestmentattractionprospectsoftheseemergingareasarefundamentallydifferenttothatofdrugdiscoveryanddevelopment.Thereisthepotentialtoengagemoreoftheeconomicvalueaddedactivitywithinthisstate.Thiseconomicactivitycanspanfurtherdownthevaluechain,fromdiscoveryanddevelopmentthroughtomanufacturing.Theemploymentbaseispotentiallybroader,fromhighlyqualifiedscientists,engineersandinformationtechnologyprofessionalsthroughtomediumskilledjobsinadvancedmanufacturingaswellasmediumskilledjobsinprimaryproductionandprocessing.

What can local government do?Localgovernmentcanplayastrongadvocacyroleforeconomicdevelopmentinrelationto:

• Drawingattentiontothepossibilitiesoftheseemergingareas,facilitatingtheinteractionofscientists,companies,farmers,investors,customersaswellasStateandFederalGovernmenteconomicdevelopmentagencies.

• Highlightingtheadvantagesofcertainmunicipalitiesashubsforindustrydevelopmentinspecificniches.

• Toensurethatasthesenichesdevelop,thecouncilsareastrongvoicetoensurethatattentionremainsonconvertingscientificoutcomestoactivitiesthatgeneratelocaljobsandinvestment.

RecommendationsAframeworkforactionisdetailedinSection6.5.Therecommendationsspanbothexistingandemergingareasofcommercialactivityrelatedtobiotechnology.Thekeypointsarelistedasfollows;

1. Cooperate in areas of mutual interest

• WorktogetherundertheBioCouncilsAlliancebannertopromotecommoneconomicdevelopmentinterests.

• Specificactivitiesarerecommendedunderthefollowingheadings;economicdevelopmentandindustryadvocacy;collaboratingtocompete;promotingVictoria’scapabilities;hostinginternationaltradeandinvestmentdelegations;engagingalllevelsofGovernment;andremainingengagedwithindustryasitdevelops.

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2. Play an active role in biotechnology precinct and industry hub developments

• Facilitatethedevelopmentofexpansionspaceforbiotechnologycompaniesthroughattractingdevelopers,creatingtherightbusinessmodel,advisingonsiteselection,assistingwithzoning,planningandpermits,andcoordinatingincentives.

• Provideinputtothebuildingdesignofexpansionfacilitiesbyinvestigatingthefeasibilityofshareduseofvideoconferencingandtelecommunications,marketintelligence,informationtechnologysupportandemployeeservices.

• WorkwithGovernmenttostimulatethegrowthofthecomplementarymedicinessectorandpayparticularinteresttoconvertingscientificinterestintolocalinvestmentandjobcreationalongthevaluechain.Remaininvolvedintrialprogramswithgrowers,farminggroups,andotherstocontinuallyencouragecommercialinterestinthissector.

• Takealeadroleincreatingalocalscientific,primaryproductionandindustrialbasefrombiofuelsandbioplastics.AssessthefeasibilityandcompetitivenessofaVictorianbiofuelsandbioplasticsindustrybase.Coordinatethosewithinterestsinthesupplychain.

• Furtherevaluatethepotentialofvalueaddedprocessingofcropswithbioactivepropertiesandthepotentialusesofnewbioreactors.Identifyandengagelocalcompaniesorinvestorstoencouragetheirparticipation.

• Attractcommercialinterestintargeteddiagnostics(pharmacogenomics)byencouragingtheinteractionofcompanies,researchersandinvestorsfrominformationtechnology,medicalimaging,advancedmanufacturingtechnologyandnanotechnologydisciplines.RemainengagedintheSouthEastRegionalDevelopmentplanandtheMonashprecinctplansbeingdevelopedbyDIIRD.

3. Assist with specialist planning permits

• Developoracquireachecklistofplanningpermissions(forexampleGMO,animalhousing)anditemsrequiredfortheestablishmentofaprecinctandforthetransitionofcompaniesintoaprecinct.

4. Work with community attitudes

• Developspecialisationsinparticularniches(forexampledrugdiscovery,diagnostics,agriculturalorindustrialbiotechnology)tobetterunderstandandadviseonindustrymatters.

• Helptochangetheattitudesofexistingindustryparticipantstoadoptnewtechniquesorproducts.

• Providecommunicationsandadvicetolocalcommunitiesregardinganypotentialconcerns.

• Developoracquirecommunicationsmaterialsrelevanttoindustrydevelopmentandcommunityconcerns.

5. Provide information on suitable premises

• Councilsmaydecidetolimittheiradviceonlytonichesaligningwiththeirspecificinterests.

Theaboveactionswillhelptoensuresufficientattentionispaidtopracticalmeasuresthatattractandretainthetypeofcompaniesthatarebestplacedtoinvestlocallyandemploylocally.Aswellasdirectbenefitstomunicipalities,therearebroaderbenefitstotheState.ThecollaborativeapproachoftheBioCouncilsAlliancewillcontributetobuildingadiversifiedeconomicbasefromtheState’sbiotechnologycapabilities,balanceitseconomicrisksandgaingreaterleveragefromitsscienceandtechnologyinfrastructure.

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2 oBjeCtiVes And MethodoLogy

2.1TheBriefThebriefstatedthatthereiswidespreadanecdotalevidenceofgapsintheprovisionofinfrastructureandsupportservicesforgrowingbiotechcompaniesintheMelbourneregion.ThemembersoftheBioCouncilsAlliancewerekeentounderstandtherealneedsofthesecompaniesbylearningmoreaboutthegrowthpatternsofbiotechorganisationswithintheirmunicipalitiestodeterminewheresupportshouldbetargetedtoassistinattractingandretainingthesecompanieswithinthemunicipalitiesoftheBioCouncilsAlliance.

Alliancememberswereconcernedthatsuchbarrierstogrowthmaycauseorganisationstofailtoreachtheirpotentialwithintheirdesiredtimeframes,forcingthemtorelocatefromtheirmunicipalities,fromthestateorfromthecountryentirely,ortofailasabusiness.

Thisprojectwasrequiredtocharttherequirementsofabiotechnologyorganisationthroughitsentirelifecycle,basedprimarilyoncompaniesinmunicipalitiescoveredbytheBioCouncilsAlliance,effectivelymappingitsvaluechain(includingallaspectsofitsgrowth,itsoperations,supplyanddistribution).

Theproject:

• Identifiesgapsinlevelsofsupportandinfrastructure,

• Analysestrendsacrossthepoolofbusinessesreviewed,and

• Highlightsopportunitiesforcouncilinvolvementasorganisationsmightseethem.

TheprojectisbasedoncasestudysamplesofMelbourne’sbiotechnologyorganisationsthatweresurveyed,withtheirneedsandrequirementsdetailedandanalysed.

2.2AreasofInvestigationTheprimaryfocusofthisreportistoinvestigatethepotentialforjobcreationandinvestmentattraction.Forthatreasonwehaveadoptedaflexibleapproachtodefiningbiotechnology.InthisreportweexploredthefollowingareasbasedontheirrelevancetotheBioCouncilAlliancemembers.

• Wesoughttointerviewcompaniesorexpertsinthemedicalsector,primarilythoseindrugdiscoveryanddevelopment,butalsothoseinvolvedindiagnosticsandvaccines.

• Wesoughttointerviewcompaniesorexpertsintheagriculturalandindustrialfieldsassociatedwithbiotechnology.Thatincludedcropproduction(bothusinggeneticallymodifiedorganismsandusingtraditionalselectivebreeding),andthoseinvolvedingrowingplantsfortheextractionofspecificproperties,includingpharmaceuticals,nutraceuticals(foodsthatactasmedicines),plastics,renewablefuels,andchemicalsforindustrialandfoodprocessing.

• WesoughtexpertsinthefieldofMedicinalHerbs,whichisalsoknownasChineseMedicineorComplementaryMedicine.Thisfieldrelatestoboththemedicalsector(becauseoftheirpotentialtherapeuticapplications)butalsototheagriculturalsector(becauseofthepotentialforlocalcropproduction,processingandformulationofherbaltreatments).

• Wealsoexploredmanyofthekeyinputsofthevaluechain,thatincludesthesupplyoffinance,skills,informationtechnology,diagnosticdevices,chemicalsandreagents,laboratoryfacilities,short-runmanufacturingofdrugsandcelltherapiesfortrialpurposes,andarangeofexpertservices.

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2.3InterviewsConductedThebriefcalledforbetween40-45interviewsforthisproject.Intheendatotalof50organisationsorpersonswereinterviewed,aswellasindividualinterviewswitheachofthesixparticipatingcouncils.Theresponseratewasveryhighat96%.Onlytwoorganisationsthatwereoriginallyapproacheddeclinedtocomment.Themajorityoftheseinterviewswerefacetoface,withfivebeingtelephoneinterviews.ThefollowinginterviewswerecompletedandfulldetailsoftheintervieweescanbefoundinAppendix2.

• Thereweresixteenoperatingbiotechnologycompaniesinterviewed.Companieswereselectedforinterviewbecausetheywereidentifiedtohaveactivelyexpandingbusinesses.

• Therewereeightoperatingcompaniesthataredirectlyinvolvedinthesupplychainforbiotechnologycompanies.Theyincludepharmaceuticalmanufacturingattheproductdevelopmentstageandtheon-marketstage,anorganisationinvolvedinsupportinghumanclinicaltrials,anorganisationthathasthepotentialtosupportfieldtrialsforcrops,acompanywithsignificantexpertiseandinterestsindevelopingfacilitiesforbiotechnologycompanies,andtwocompaniesinvolvedinhighvaluemedicaldevices.

• Therewerenineindustryexpertsinterviewed,eachprovidingaspecificperspectiveonthelifecycleofbiotechnologycompanies.

• Therewerethreeventurecapitalorganisationsinterviewed,eacharerecognisedleadersinthebiotechnologysector.

• Sixinterviewswereconductedwithuniversities,exploringareasoffutureresearchthathaveindustrydevelopmentpotential,andtoidentifytheircurrentinterestsinwetlabspaceandbiotechnologyprecinctdevelopment.

• Therewereeightinterviewswithgovernmentagencies.TheinterviewsrangedfromlongtermindustrydevelopmentpolicythroughtothedirectionofparticularscientificprojectsconductedwithinGovernmentdepartments.

SixcompanieshadoriginallybeeninterviewedbytheBioMelbourneNetworkforarelatedprojectthatisbeingconductedonbehalfoftheCityofMelbourne.Theexpansionspacerequirementsofthesecompanieswereaddedtothisproject’sdatapool.Thesecompanieswerethenaskedfollowupquestionsrelatingtotheirlifecycle,locationchoice,futureopportunitiesandviewsonCouncilservices,whichwerespecifictothisproject.

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Thissectionprovidesthereaderwithanunderstandingofthecommercialdynamicsofthebiotechnologyindustry.ThefirstpartcharacterisesVictorianbiotechnologycompanies.Thenextpartdescribestheproductdevelopmentandregulatoryapprovalprocessesthatbiotechnologycompaniesfollow.Ithighlightssomeofthekeyconsiderationsfacingindividualcompaniesandtheindustryasawhole.Itisbasedondeskresearchusinggenerallyknownindustrymodels.Thefinalpartoutlineswherebiotechnologycompaniesfitinthevaluechain.Itillustratesvaluechainsfordifferentproductcategories(drugdevelopment,diagnostic,foodproduction,animalproduction,bioactives,andcomplementarymedicines).Itthenshowsthesimilaritiesanddifferencesforeachvaluechain.Thesevaluechainmodelsweredevelopedspecificallyforthisprojectandvalidatedduringtheindustryinterviews.

3.1SnapshotofVictorianBiotechnologyCompaniesAustraliaisthe5thlargestbiotechnologycentre(basedonthenumberofcompanies)aftertheUSA,Canada,GermanyandtheUK,with233companies1.Thisisupfrom6thin2004.

VictoriaistheleadingbiotechnologycentreinAustralia,ithosts;

• 39%ofallAustralianbiotechcompaniesincludingCSL(withthelargestmarketcapitalisation)

• 54%ofAustralia’stopASXlistedhealthcareandbiotechcompanies

• 60%ofallbiomedicalresearch(companiesandinstitutes)

• 30%ofCSIRO’sbiotechnologyactivity

• MajorscientificinfrastructureincludingBio21,theSynchrotronandtheAustralianStemCellCentre

ThemajorityofexistingVictorianbiotechnologycompaniesareinvolvedinthediscoveryanddevelopmentofdrugs,diagnosticsandvaccines.

Australianbiotechnologycompaniesaresmallenterprises2

• 115withlessthan6employees

• 50with6-10employees

• 55with10-20employees

Australianbiotechnologycompaniesareyouthfulenterprises3

• 47%arelessthanthreeyearsold(asofmid2003)

Asanexampleofthetypeofemployees,oneCEOcharacterisedhisworkforceasfollows:“Wehaveahighlyeducatedworkforce.Weemployover40people,allbutthreehaveauniversitydegree.Therearemorethan20scientists,mainlychemistsandpharmacists,oftheseatleast10havePhD’s.”

AlthoughAustraliahasalargenumberofcompanies,theyaresmallincomparisontocompaniesintheUSAandEurope.AcomparisonbytheAustralianGraduateSchoolofManagement4ofinitialpublicofferings(IPO)highlightsthesizedifference.

3 UndeRstAnding BioteChnoLogy CoMpAnies

1 Source:BioMelbourneNetwork2 Source:Ausbiotech3 Source:Ausbiotech4 “NewBiotechsfacemixedfuture.”ProfMichaelVitaleandDavidSpurling.AGSMSeptember2003

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Table 1: Characteristics of Australian Biotech IPO

Characteristics at IPO (in $AU Millions)

ASX Non-biotech IPO

ASX Biotech IPO

U.S. Biotech IPO5

Amountraised 28.3 10.5 113

MarketCapitalisation 69.1 39.2 500

%ofthefirmsold 41.8% 31.7% 22.7%

ThetablehighlightstheissuethatAustralianfirmsraisefarsmalleramountsofcapital,arevaluedlessandneedtosellmoreoftheirequitytoattractinvestorfunding.ThecomparisonwasdoneonbiotechnologyIPObetween1998and2002.Themarketdoesfluctuateconsiderablyyear-on-year,and$20M+IPOhavebecomemorecommonsincethen.

ThefollowingtableillustratestherelativedifferencesinsizeoffinancingroundsbetweenanAustralianandaUSbiotechnologycompany.Ithighlightsthedifferenceinthescaleoffinancingavailableforlocalcompanies.

5 Thetablewasoriginallypublishedin$US,convertedto$AUat0.75foralike-for-likecomparison.6 Reproducedfrom“SustainingtheVirtuousCycle”.InvestmentReviewofHealthandMedical

Research.2004P123

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3.2TheChallengeofJoblessGrowthVictoriahasaverystrongscienceandtechnologyinfrastructurebasebecauseofitsleadinguniversitiesandresearchinstitutions.Wehavealsowitnessedadramaticgrowthinthenumberofsmallbiotechnologycompaniescreatedoverthepastdecade.Thedilemmaisthatitispossibletocreateanoutwardlysuccessfulbiotechnologysector,butnotmaximisetheopportunitiesforlocaleconomicactivity.Thechallengeforlocalgovernmentistoidentifyandcreatetheconditionsthatencouragelocaljobsandinvestments.

Victoria’sbiotechnologysectorispartofalarge,highriskandexpensiveproductdevelopmentprocessthatisconductedonaglobalscale.Thevaluechains,whetherinagriculture,foodormedicine,fitwithinrecognisedregulatoryregimes,(forexampletheUSFoodandDrugAdministrationortheAustralianTherapeuticGoodsAdministration).Standardisationmeansthatindividualactivitiesinthevaluechaincanbecarriedoutalmostanywhereintheworldandcombinedintoasinglefinishedproduct.Abiotechnologycompanycan,attheextreme,behighlyvirtual,operatefromasmallcorporateofficeandcontract-inbestofbreedscientificandcommercialservicesfromaroundtheworld.

TheimplicationisthatdownstreamjobsandinvestmentswillnotautomaticallyflowfromVictoria’sscienceandtechnologyinfrastructure.Ithelpsifweunderstandthattheprimarymotivationsofourresearchersandcompaniesarenotdirectedtowardjobsandinvestmentfurtherdownthevaluechain.

• Alocalcancerpatientdoesnotknoworperhapscarewhereanewdrugwasdeveloped,providedthatitworksanditisthebestavailableintheworld.

• Alocalcancerresearchercaresmostaboutfindingwaystocombatcancer.Ifanewdiscoveryismade,theresearcherismoreconcernedaboutthemosteffectivesequenceinthevaluechaintotakethisdiscoverythroughregulatoryapprovalandintopracticalapplication.Theinvolvementoflocalcompaniesispreferred,butitisnottheprimarymotivationofacancerresearcher.

• Theprimarymotivationofalocalbiotechnologycompanyistocreateshareholdervalue.Theirpurposeisoftentocreatecapitalgainthroughthedevelopmentandaccumulationofintellectualproperty.Theycancreatevaluethroughgeneratingroyaltyincomes,notnecessarilyfromthemanufactureandsaleoffinishedproduct.ThedownstreameconomicactivitiesthatleadtogreaterjobsandinvestmentmaynotnecessarilyhappeninAustralia,andtheydonotneedtohappentocreateshareholdervalue.

Thisisaveryimportantprojectbecause,beinginterestedonlyinlocaljobsandinvestmentitprovidesaverypowerfullenswithwhichtoviewourbiotechnologysector.Outoftheentirebiotechnologysector(thatincludesgenetic,traditional,medical,foodandindustrial)wewanttoknowwhataspectsaremostlikelytogeneratelocaljobsandinvestment.Wearetheninterestedtoknowiflocalgovernmentcanassistinattractingandretainingthecompaniesthatwillmakethishappen.

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3.3TheDrugDevelopmentandRegulatoryApprovalProcessThefollowinggraphichighlightsthestepsinvolvedfromdiscoverytoapprovedmarketingofanewdrug.Itintroducestheconceptofdevelopmentphases,whichisusedextensivelythroughoutthisreport.Themainpointsofnoteare;

• Ittakesaverylongtimefromdiscoveryuntilaproductisonthemarket;

• Itisastandardised,regulatedprocess.Complianceisveryimportanttoensuresuccessandalsotoattractinvestment;

• Thedrugdevelopmentprocesscanbebrokenintodiscretephasesandmorethanonecompanycanbeinvolvedinthepathfromdiscoverytomarket.

Acompoundisfirstdiscoveredthroughscientificresearchthatoftenoccursinauniversityoraresearchinstitution.Ifthereiscommercialpotentialitwillthenbepatentedandthecandidatetakenthroughthepre-clinicalphase.Acompanytypicallybecomesinvolvedatthisstage,itiseitherastart-upcompanyoranexistingcompanyworkinginalliancewiththeresearchers.Duringthepre-clinicalstagesofdrugdevelopment,investigatorshavetoproduceacomprehensivesetofdataregardingdrugsafety(toxicology)andactivity(efficacy).Thisisachievedbytestingtheeffectofthedruginlivingorganisms(invivo)andincellsinthetesttube(invitro).Resultsofalltestingmustbeprovidedtoregulatoryagenciesforreview.

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Thenextphasesaretheclinical trials.Movingdrugdevelopmenttothehumantrialstagerepresentsaseriesofmajormilestonesforadrugdeveloper.ClinicaltestingusuallyconsistsofPhaseI,PhaseIIandPhaseIIIclinicalstudies.

• PhaseIClinicalStudies:Theseareshorttermstudiesdesignedtoverifysafetyandtolerabilityofthecandidatedruginhumans.Theprimaryfocusissafety.

• PhaseIIClinicalStudies:Theydeterminetheeffectivenessofthedrugandfurtherstudyitssafetyinhumans.Atthispointworkisdonetotestdosagerangesandrelativeeffectiveness.

• PhaseIIIClinicalStudies:PhaseIIIstudiesprovidelongtermtestingofeffectivenessandsafetyofthedrug,preferablyusingthedrugasitwillbepreparedinthefinalmanufacturingprocess.Testingisusuallyconductedoveratleastayearwithseveralhundredpatientstoprovideconclusivestatisticalconfirmationofthequalityofthedataandisthereforeexpensive.Marketingproposals,largescalemanufactureandalltheotherelementsneededformarketreleaseareusuallyorganisedatthesametimePhaseIIIstudiesareunderway.

• Post-marketstudies:Inaddition,hospitalbasedclinicalresearchfrequentlystudiesdrugsthatarealreadyapproved,butfornewindications,ornewcombinationsofdrugstoprovidebettertreatmentsfordisease.

3.3.1TheRewardstoBiotechnologyCompanies

Thefollowinggraphicillustratestherewardstobiotechnologycompaniesastheyreachvariousmilestonestages.ItshowsthataVictoriancompanycanearnimmediatemilestonepaymentsofmanymillions,plusfutureroyaltiesonsalesiftheproductreachesthemarket.

7 Basedon2003dealsforsmallmoleculepharmaceuticals.

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Thekeypointsarethat;

• Giventhattheproductsareaimedatglobalmarkets,theworldwidesalesrevenuescanbeinthebillionsandtheroyaltystreamsinthehundreds of millions;

• Tocreatevalue,aVictorianbiotechnologycompanydoesnotneedtomanufactureandselladrugitself,norevenearnanysalesrevenuesdirectly;

• Ateachmilestoneitispossibletolicensetheintellectualpropertytoalargeinternationalpharmaceuticalorbiopharmaceuticalcompany(providedthatthecandidatehascommercialpotential);

• AformallyannouncedlicensingdealhasthepotentialtohaveadramaticimpactonthevaluationoftheVictorianbiotechnologycompany;theirrewardiscapitalgain,notearningsonproductsales;

• Thefurtherdownthedevelopmentpaththegreatertherewardacompanycanearn.Victoriancompanieswillattempttofundthedevelopmentofdrugsasfardowntheapprovalphasesastheycanafford.Victoriancompaniescan,atbest,affordtofundacandidatetolatePhaseIIdevelopmentbeforeexhaustinglocalsourcesofcapital;

• ThisprojectvalidatedthelocalmarketviewthatthepreferredpointoflicensingisatlatePhaseII,priortoenteringPhaseIIItrials.Licensingdealscanalsobedoneatearlierphasesifthecandidateisofparticularinteresttoalicensee,howeverthetermsmaybelessattractive.

3.3.2TheRisksofDrugDevelopment

Thefollowinggraphicillustratestherisksinvolvedindrugdevelopment.Thekeypointsare:

• Thereisaveryhighfailurerate;withonlyonesuccessfuldrugforevery10,000compoundsidentified.

• Failureratescontinuethroughouttheregulatoryapprovalstages.

• Manybiotechnologycompaniesstartwithsmallportfoliosofdrugcandidates;somehaveonecompound,manyhavelessthanfivecompounds.Giventhefailureratesof250compoundsenteringthepre-clinicalphaseforeveryonesuccess,itmeansthatasignificantproportionofthesecompanieswillfail.Thatdefinesthedynamicsofthebiotechnologycompanysector.Atanypointintime,newcompaniesarebeingformedwhileothersaremerging,disbandingorrestructuring.

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8 Thepriceofinnovation:newestimatesofdrugdevelopmentcosts.JosephADiMasi,RonaldWHansen,HenryGGrabowski.JournalofHealthEconomics.2003Mar;22(2):325-30

3.3.3TheCostofDrugDevelopment

Drugdevelopmentisaveryexpensiveprocess.AlandmarkstudybymembersoftheTuftsCentrefortheStudyofDrugDevelopment8concludedthatin2001adrugcompanytypicallyspent$US802Millionover10to15yearstogetasuccessfulproducttomarket.The$US802M($AU1,070M)takesintoaccountthecapitalisedcostoffailuresalongtheway,aswellasthecostofthesuccessfulcandidate.Thedevelopmentcostofeachindividualcandidatemayrangebetween$US96M($AU128M)to$US130M($AU173M).However,itisimportanttorealisethat,insimplifiedterms,companieswilloftenmanageaportfoliooffourorfiveofthesecandidatesinordertohaveonesuccess.

ThefollowinggraphicillustratestheresultsoftheTuftsstudyandcomparesittoearlierstudies,showingthedramaticincreaseincostsfrom1979to1991to2003.Thecostsofclinicaldevelopmenthavebeenamajorcontributingfactortothisincrease.

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Thecostsofdrugdevelopmenthavecontinuedtoescalatesincethis2003studywaspublished.AtthemostrecentinternationalBio2005conferenceinPhiladelphiaUSAitwasnotedbymanyspeakersthatthecostestimatesnowtypicallyexceed$US1Billion.

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Inthissectionweexpandthelifecyclemodelindifferentcontexts,showingthesimilaritiesanddifferencesbetweendrugdevelopment,diagnosticdevelopment,agriculturalbiotechfoodproduction,bioactivepropertiesandcomplementarymedicines.Wewillalsoexplorethebroadsupplychainissuesassociatedwiththelifecycleandwhetherthereareanymajorgapsorbarriersinthesupportinginfrastructurethatneedtobeaddressed.

4.1HighLevelLifeCycleModelThefollowinglifecyclemodelwasdevelopedforuseininterviewsrelatingtothisproject.Itpresentsasimplifiedseriesofstepsinthelifecycleofabiotechnologycompany,whichisessentiallyaverylongproductdevelopmentandapprovalprocess.Oneimportantfeatureofthebiotechnologysectoristhatitisrareforallofthesestepstobeconductedentirelywithinonecompany;itisactuallyaseriesofstepspassedonfromonecompanytothenext.

TherearemanyexceptionstothefollowingscenariobuttheoverallpatternishighlytypicalofthelifecycleofaVictorianbiotechnologycompany.ItisconsistentwiththebusinessprofilesofthecompaniesasoutlinedinAppendix2andwasvalidatedintheinterviewswithlocalcompanyCEOs.

1. Discovery.Thebasicresearchistypicallycarriedoutinauniversityorresearchinstitute.Therearealsocaseswheretheresearchisconductedinprivatecompaniesand/orlicensedin.Inthetransitiontothecommercialstagetheintellectualpropertyistransferredintoacorporateentity.Itisnotuncommonfortheoriginalresearcherstotakeanactiveroleinthecompanyandfollowtheresearchthroughitsearlycommercialdevelopmentstages,asboardmembers(mainboardorscientificadvisoryboard),asR&DDirectorsorasCEOs.

2. Product Development.Thecommercialisationentitycouldbeasinglepurposestart-upcompanyoranexistingcompanyaddingtoitsproductrange.Someofthecompaniesinterviewedwereoriginallyspin-offcompaniesfromuniversities, researchorganisationsandcooperativeresearchcentres.Therearealsoinvestmentcompaniesthathaveaninvestmentvehicle,suchasapooleddevelopmentfund,andtheydevelopaportfolioofoperatingcompanies(forexampleAvexaPDF,StarpharmaPDFandMedicaPDF,whichnoweffectivelyoperatesCytopia).

4 Life CyCLe AnALysis of BioteChnoLogy CoMpAnies

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Thesecompaniesthengothroughaseriesofstagesintheirdevelopmentasacorporateentity.Theymaybeginasprivatecompaniesbackedbyprofessionalinvestorsorventurecapitalists,andtheymaythenlistontheAustralianStockExchangetoaccessmorecapital.Somecompaniesexplorelistingoninternationalstockexchangestopursuemorecapital(forexampleGeneticTechnologieshasrecentlylistedontheUSNASDAQStockExchange).AUSlistingprovidesaccesstoadeepercapitalpool,accesstosophisticatedinvestorsandhighercompanyvaluations.Howeveritdoesnotnecessarilymeanthatthecompanywilltransferitsoperationsoverseas.AcommonmodelisforacompanytoretainitsresearchandproductdevelopmentactivitiesinAustraliaandopenanofficeintheUSAand/orEuropeforbusinessdevelopmentpurposes.

3. Partnerships.Thenextstageofthelifecycleistypicallyanalliancewithalargercompanythathasgreaterresourcesandglobalreach.Thatistraditionallythroughproductlicensingwithalargepharmaceuticalcompany(‘BigPharma’–e.g.Merck,GSK,Pfizer,BMS,EliLilly).HoweverBiotech-to-BiotechdealsarebecomingmoreprevalentassomeoftheoriginalUSbiotechnologycompaniesarenowaslargeasthetraditional‘BigPharma’companies(forexampleGenentechandAmgen).Thislargercompanymaytaketheproductallthewaytothemarket,oritmayfundthePhaseIIIstageandthenon-licensetoyetanothercompany.Thismulti-stagemodelhasbeenusedpreviouslyinAustralia,whereCSLlicensedtherightstoaHPVvaccinefromtheUniversityofQueenslandandsubsequentlyon-licensedthevaccinetoMerck.

ThefollowinggraphicsummarisesthelifecycleofatypicalVictorianbiotechnologycompanyinvolvedindrugdiscoveryanddevelopment.ThegreenshadedareasindicatewhereeconomicactivityismorelikelytooccurinVictoria,theredshadedareasindicatewhereeconomicactivityismorelikelytooccuroffshore.

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AsoutlinedintheExecutiveSummary,companiesthatbecomesuccessfulwiththeirfirstproductcandidateswillnotnecessarilycontinuetodeveloptheircompaniesfurtherdownthevaluechain.Insteadthesecompaniesaremorelikelytoreinvestintoexpandingtheirproductrangebytakingmoreproductsthroughtheirdevelopmentpipeline.Thesecompaniesareveryintensiveusersofhighlyskilledknowledgeworkersanduseverycapitalintensivefacilitiesandequipment.Theirgrowthwillattractjobsandinvestmentintechnicalstaffandtechnicalsupplies.Itwillalsohaveabeneficialeffectontheuniversitiesandresearchinstitutes,andtherewillalsobeaflowoneffecttosuppliersandadviceproviders.

AsubsetofthesecompanieswillalsobegintoexploredirectopportunitiesforexpansioninAsia,withaparticularinterestinChina.ThatmayprovideameansforthemtograduallymovedownthevaluechainandestablishthemselvesasproductdevelopmentandmarketingcentresfortheAsiaPacificregion.

4.2DrugDiscoveryandDevelopmentThefollowinglifecyclemodeloutlinesthesequenceofeventsinthevaluechainandidentifiesthemajorinputsinthevaluechain.

Themodelhasmanydimensions,asseeninthefollowingfigure.Whiletherearestepsinplacefortheclinicaltesting,therearealsoparallelstepsbeingconductedintheindustrialisationoftheproduct;inotherwordshowitwillbedeliveredinthebodyandhowitwillbemanufacturedasaproduct.

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Earlystageclinicaltrials,whilsttheymayenrolasmallnumberofpatientsstillrequiresubstantialmanufacturingrunstoproduceallofthematerialrequiredtosatisfythetrialandregulatoryrequirements.Forexample,astudyinvolving40patientsmayrequireatleast400lotsofproductintheirfinalcontainertosatisfyalloftherequirementsfortestingofproductafterproduction,forthetrialitself,forstabilitystudiesandforretentionsamples(samplesretainedincaseadditionaltestingisrequiredtoaddressproblemsorifnewanalyticaltestsaredeveloped).

PhaseIIItrialsrequiredifferentinfrastructure.Atthispointthedrugsarepreferablytestedinthesameformastheywillbemanufactured.Inmanycases,thismeansthatphaseIIItrialmaterialispreferablymanufacturedinthefacilityinwhichtheywillbecommerciallyproduced.Theyalsorequireaccesstolargescalepatienttrials.

Thefinalphaseinthelifecycleinvolvesmanufacturingtheproductincommercialscale.Thebiotechnologyvaluechainisadirectinputintothepharmaceuticalvaluechain.Biotechnologyisessentiallyanewapproachtodevelopinganexistingproductclass(drugs).Themanufacturing,salesanddistributionnetworksarealreadyinplace,havingbeenbuiltbyglobalpharmaceuticalcompaniesovermanydecades.Victoriancompaniesarelikelytouseoffshoremarketing,salesanddistributionnetworks.

Therearesomeexceptions,somecompaniesdointendtolicense-outtheUSAandEuropeanrightsoftheirproductsbutwillretaintheAsiaPacificorChinarightsforthemselves.Thatwillallowthemtoprogressivelybuilddeeperinfrastructureoverthelongterm.

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Thefollowingtabletakeseachofthemajorinputsinthevaluechain,describestheircharacteristicsanddiscussesanypotentialbarrierstogrowth.

Table 2: Analysis of Elements of the Supply Chain

Element Characteristic Barrierstogrowth

UniversitiesandResearchCentres

Biotechnologycompaniesrelyonuniversitiesandresearchcentresassourcesofnewproductcandidatesandmanybiotechnologycompaniesarespunoutofsuchorganisations.

TherehasbeensignificantfundingofthescienceandtechnologyinfrastructurecapabilitiestosupportbiotechnologyindustrydevelopmentfrombothStateandFederalsources.ForexampletherecentlyopenedBio21Institutehasfacilitiesandresearchprogramsintendedtosupportdrugdiscovery.Althoughtherearealwayscallsformoreresources,theavailabilityofS&Tresearchinfrastructurewasnotidentifiedasamajorbarriertogrowthduringourinterviews.Someuniversitiesarenowcreatingspecialistresearch“Centres”toprovidebettersolutionsforcompanieslookingtotapintouniversitycapabilities.ForexampleRMITDrugDiscoveryTechnologies.

Bioinformatics Theuseofinformationtechnologyhasrisendramaticallyinthebiotechnologysector.Sincethemappingofthehumangenome,therehasbeenawealthofdatathatcanbeanalysedtoaidindrugdevelopmentanddelivery.Therearealsoinformationtechnologycompanieswhoworkonthecollectionandanalysisofgeneticdataandprovideimportantinputsintothedrugdevelopmentprocess.

Thereisaneedforexpansionspaceforbiotechnologycompaniesand,ifsuchspaceistobedesignedproperly,thensufficientconsiderationmustbegiventoinformationtechnologyaspects.Inamodernbiotechnologybuildingorprecinct,informationtechnologyintensivecompanieswillworkbesidewetlabintensivecompanies.Theinfrastructureneedsofeacharequitedifferent,butaprecinctmustbedesignedtocaterforboth.

Animaltestingfacilities

Thesupplyofanimalsforresearchpurposesandanimaltestingfacilitiesisveryimportantinthepre-clinicalphase.Companiesdonotnecessarilyneedtohaveanimalstorageon-sitebutrequirereadyaccesstosuchfacilities.Thesefacilitiesaretypicallyalignedwiththemajorresearchuniversities.

Therewasnoparticularbarriertogrowthidentifiedbecauseofthelackofsupplyofparticularanimalsorofanimalhousingfacilities.Ifaparticularbreedofanimalisnotavailablelocally,biotechnologycompaniescansourcetheseoverseas,orarrangefortestingoverseas.Companiesmayhavetopaymore,butitwasnotratedbyCEOsasamajorimpedimenttogrowthorareasontoleavethestate/country.TheauthorsareawarethatRMIThasrecentlyinvestedinanewfacilityinitsBundooralocationthatisavailableforcorporateuse.TheauthorsarealsoawareofvarioussubmissionstoGovernmentbyuniversitiesforincreasedfundingforanimalhouses.Itisexpectedthatthesefacilitieswillcontinuetogrowasacademicresearchgrows.

Specialisedlaboratories

Eachcompanyhasrequirementsforspecialisedlaboratoryspace.Thatincludeswetlabspace,fumehoods,theprovisionofspecialisedtechnicalequipment,storageofchemicalsanddangerousgoods,andsecureaccess.

Thesefacilitiesareoneofthemajorcapitalexpensecommitmentsofadevelopmentstagebiotechnologycompany.

Therearebarrierstogrowthintheavailabilityofspecialisedlaboratories.ThereisinsufficientlaboratoryspaceavailableinMelbournetomeettheneedsofgrowingbiotechnologycompanies.Thespacemustbedesignedincertainways.Aswellasthespacerequirementstherearealsogapsinhowaccesstothisspaceisfinanced,comparedtohowbiotechnologycompaniesaccessspaceinmajorUSprecincts.Boththefinancingandtheavailabilityofsuitablespaceemergedasbarrierstogrowthinthecompanyinterviews.

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Element Characteristic Barrierstogrowth

Testinglaboratories

Developmentstagebiotechnologycompaniesrequireaccesstoavarietyofexternaltestingservices.

Therewerenomajorbarriersidentifiedthatwouldinhibitthescaling-upoftestingservicesinlinewithbiotechnologycompanygrowth.

Reasonableproximitytotestingservicesisaconsiderationinthelocationdecision.Thesetestingservicesaretypicallylocatedeithernearmajorhospitalsanduniversitiesorneartheairport.Thereisnoparticularbarriertogrowth,providedthatacompanyislocatednearahospital,university,airportorreasonablefreewayaccesspoint.

Cross-industryissuesdoexist.Forexample,NATAcertificationforlaboratoriesisnotnecessarilysufficienttodemonstratethatalaboratorycanundertaketestingofproductdevelopedunderGoodManufacturingPracticestandardsthatisdestinedforclinicaltrials.

Regulatoryadvice Biotechnologycompaniesneedhighqualityadviceonregulatoryapprovalsandcomplianceforbothlocalandtypicallyinternationalstandards.Iftheproducthasnotbeendevelopedinaccordancewithdeterminedstandards(forexampleGoodLaboratoryPractice,GoodManufacturingPractice)thentheregulatoryapprovalisthreatenedandthevalueoftheintellectualpropertyinacommercialdealisalsoatrisk.

Althoughthisisaveryimportantarea,itwasnotseenasabarriertogrowth.ThereareadvisorsavailablelocallyandmanycompanieswillsupplementthiswithspecialistadvisorslocatedintheUSAorEurope.Therewasnoapparentbarrierthatwouldforcecompaniesinterstateoroffshorebecauseoflackofaccesstohighqualityregulatoryadvice.

HumanVolunteers

Humanclinicaltrialsareanimportantpartofthedrugdevelopmentprocess.Itisalsoamajoritemcontributingtothecostofdrugdevelopment.Researchersalwaysneedaccesstopatientpopulationsandsometimesparticularsubsets(forexamplethosewithaparticularconditionorstagesofacondition,thosewithdifferentdemographiccharacteristics).Thesepatientpopulationsmayalsoneedtospandifferentethnicgroups,notallofwhichareavailableinsufficientnumbersinAustralia.

ThereisinfrastructureinplaceandsomeofthemajorinternationalclinicaltrialorganisationsarelocatedinAustralia(forexampleKendleandPPD).TheStateGovernmenthasalsofundedClinicalTrialsinVictoriaandrecentlylaunchedtheCentreforClinicalStudies.

Ifpatientsarenotavailablelocallythentrialscanbecarriedoutinothercountries.Lackofaccesstopatientpopulationsmaynotforcealocalcompanyoverseasbutitmayforcesomeofthespendingoverseas.

TheemergenceofspecialisedPhaseIclinicaltrialcentresisanemergingadvantage.Thesetrialstypicallyrequireintensivemonitoringofstudyparticipants,includingperiodsofconfinement.Previously,thesestudiesweremoreefficientlydoneoverseas.

HospitalsandMedicalCentres

Hospitalsandmedicalcentresarerequiredforavarietyofreasonsincludingaccesstopatientsforclinicaltrials,accesstospecialisedequipmentandaccesstotestingservices.

Therewerenofundamentalbarrierstocompanygrowthduetoanylackofinfrastructureoraccesstohospitalandmedicalcentres.Howeveraccesstohospitalpathologyservicesmaybelimitedinsomesituations.Manypubliclyfundedinstitutionsaresaidtobeoperatingatnearmaximumcapacity.

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Element Characteristic Barrierstogrowth

IntellectualPropertyAdvice

Intellectualpropertyadviceisaveryimportantinputtodevelopmentcompanies.Itisimportantinsecuringinitialpatentprotection,inmaintaininganddefendingpatentrights,forin-licensingintellectualpropertyfromothersources,andforsupportduringlicensingnegotiations.

Althoughanimportantinput,therewasnoidentifiedbarriertogrowthbecauseofanylackofaccesstointellectualpropertyadvice.Inasimilarmodetoregulatoryadvice,biotechnologycompaniesmayuselocallawyersandpatentattorneysandsupplementthatwithspecialisedadvicefromUSandEuropeanfirmsasrequired.

Manufacturing Therearetwotypesofmanufacturingrequirements.

1.)Productsarerequiredtobemanufacturedinsmallquantitiesforthepurposesofdrugdevelopmentandclinicaltrials.Thisistypicallyconductedbyspecialistcompanies.

2.)Onceadrugisapprovedforsalethereistherequirementtomanufacturedrugsoncommercialscalequantitiesunderapprovedconditions.

Therewerenoparticularbarrierstogrowthduetoanylackofmanufacturingcapabilities.

ForproductdevelopmentpurposescompaniescanuseIDT,whichisbasedintheCityofKnox,orusespecialisedsuppliersoverseas.IfthebiotechnologycompanysectorexpandsthereisnoparticularconstrainttoIDTorotherbusinessesalsoexpandingtomeetdemand.

Asforcommercialscalepharmaceuticalproduction,totheextentthatproductisrequiredbylocalbiotechnologycompanies(ifforexampletheyretainAsiaPacificrights)thentherearecontractmanufacturersavailable,suchasSigmaCompany.

Onceaproductismanufactured,itmustbedispensedinacleanenvironment.ThisisadifferentactivitytobulkmanufactureandthereislimitedcapacityinAustralia.Processingfailureatthispointcanleadtothelossofallmanufacturedproduct.

Salesanddistribution

Asmentionedintheprevioussection,thesellinganddistributionactivitiesgenerallyneedtobecarriedoutinthecountrywherethedrugissold.Itislikelytobecarriedoutbyalicensee.

Therewerenoparticularbarrierstogrowthmentioned.Ifcompaniesdointendtoselltheirownproducts,theywouldnaturallyusesalesindistributionassetsineachindividualcountry.Theabilitytoattractinvestmentincommercialscalemanufacturing,salesanddistributionisabarrierpresentedbygeographicreasonsandthehistoricaldevelopmentofthepharmaceuticalindustrythatisnoteasytoovercome.

Rawmaterials:supplies,humanresources,finance

Developmentstagebiotechnologycompaniesareatthebeginningofthevaluechain.Theydonottypicallyrequireanycomplexmanufacturedinputs,andthereforearenotdependentontheseasinputsorbarrierstogrowth.Theycombinerawmaterialssuchaschemicalsandreagentsintoproducts.Thereisnoparticularlackofbasicchemicalsandreagents,theycanbepurchasedlocallyorinternationallyasrequired.

Thereareperennialissuesinthelackofcertain‘soft’infrastructure(people,finance)whichhavebeenoftenreportedonothersurveysofthebiotechnologysector.

Therealbarriersareaccesstoskilledandexperiencedstaffandaccesstocapital.Lackofaccesstoeitheroftheseelementsmayforcecompaniesoffshore.

TheoverallsolutiontotheseissuesisamatterforStateandFederalpolicy(andforindustryaction),aswellasforlocalgovernment.

OnepleasingresultwastheconsistencyofviewheldthatcompanyCEOswouldfarprefertocontinuetobasetheirR&DandproductdevelopmentactivitiesinVictoria.Eveniftheyhadtorelocatethecorporateheadofficeforfinancingreasons,theywouldnotnecessarilyrelocatetheirR&Dactivitiesoffshore.

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4.3MedicalDiagnosticProducts

Humandiagnosticproductsfollowhighlysimilardevelopmentandapprovalstagesastherapeuticproducts.Theirsafetyandefficacyisregulatedbythesameagencies,suchastheTGAandFDA.

Thephysicalformofdiagnosticproductscanvarygreatly.Somearesimplechemicaltests,someusespeciallyconstructeddevicesusingadvancedmanufacturingandnanotechnology,somerelyonhighpowermedicalimaging(oftenassociatedwithinjectableimagingagents)andothersuseinformationtechnologytoanalysegeneticdifferences.

Thegrowthpotentialfromdiagnosticproductsintroducestheopportunitytoengagesupplierswithavarietyofskillsincludinginformationtechnology,microfluidics,advancedmanufacturingandmedicalimaging.Inthisprojecttherewereopportunitiesidentified,particularlyinnanotechnologyandinmedicalimaging.Thefollowingsub-sectionprovidessomebackgroundinformationastowhythisisimportant.

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4.3.1PharmacogenomicsandTargetedDiagnostics

Thetopicofpharmacogenomicshasrisentoprominenceinrecenttimes.Itisalsoknownaspersonalisedmedicine,orasIBMcallsit,InformationBasedMedicine.Therehavebeenanumberofinstancesrecentlywherebyadrughasfailedinthefinalstagesofevaluationbecauseithasnotdemonstratedsufficientefficacyoverapopulationbase.Insimpleterms,itmayonlyhavebeenafewpercentagepointsbetterthanexistingdrugsalreadyonthemarket,oritmayhaveprovenharmfultoasubsetofpatients.Anindividualdrugcandidatemayhavecostacompanyfarinexcessof$US100Mtogetittoitsfinaltrialstagesbeforeitfailed.Itscommercialvalue,atthatpoint,wouldhavelargelyevaporated.

Uponfurtherinvestigationitmaytranspirethatadrugishighlyeffectiveforsomepatients,haslittleeffectonotherpatientsandmaybeharmfulforafew.Theissueofdiagnosticsbecomesextremelyimportantinthiscontext.Ifasubsetofthepopulationcanbeefficientlyidentifiedthenthedrugcanbeprescribedonlytothosewhowillbenefit.Therearemanyimplications;

• Properuseofdiagnosticscanbeanefficientuseofanexpensivedrug,prescribingitonlytothosewhoareknowntobenefit;

• Itcanprovidesavingsinhealthcarecostsbynotprescribingcertaindrugstopeoplewhomayonlybenefitmarginally;

• Thereisasafetybenefitinscreeningoutthosewhocouldbeharmedbyadrug.

Thereissignificantcommercialinterestinpharmacogenomics.Thelargestsingleventurecapitalraisingfor2004wasJazzPharmaceuticals.Theyraised$US250M($AU330M)frominvestorsforastart-upcompany.JazzPharmaceuticalshasnolaboratoriesanddevelopsnodrugs.Jazzselectivelyacquiresdrugsthathave‘failed’andusesarangeofdiagnostictechniquestoexploreifthedrugsareactuallybeneficialinapatientsubsetorcanbemodifiedtobecomeso.Ifsuccessful,Jazzcanmakeadramaticturnaroundinthevalueofthe‘failed’productcandidate,andalsobringatherapeuticbenefittoasegmentofthepopulation.

Diagnostictechniquescanbeusedinmanyways;

• Itmayinvolvesophisticatedinformationtechnologytoanalysethegeneticprofileofanindividualandidentifytheirsuitabilityforaparticulardrug.

• Itmayinvolvebloodtestsorotherbiologicalmarkersthatrelatetoaparticularconditionortreatment.Thatcreatesarequirementforrapidandlowcostdiagnostics.MelbourneCompanyMiniFab(basedintheCityofKnox),forexample,hasusednanotechnologytodevelopa‘labonachip’diagnostic.Invetech(intheCityofMonash)isalsoinvolvedindiagnostictestsandmedicaldevices.

• Itmayinvolvediagnosticimagingtoidentifyrelationshipsbetweenstructureandparticularconditions.Forexample;

- The CRC for Biomedical Imaging(whichisbackedbyinternationalinvestmentfromGE,IBMandPfizer)candemonstratethathighpoweredimagingcanidentifystructuraldifferenceswithincancertumoursthatrespondtospecifictreatments.

- ResearchersattheMelbourne Neuropsychiatry Centrearedevelopingalargeimagingdatabasetobeabletotrackstructuralchangesinthebrainthroughthestagesofonsetofschizophrenia.Thisinformationcouldthenbeusedtotargetdrugdevelopmentandtreatmenttopatentsubgroups.

ThediagnosticfieldcombinesarangeofdisciplinesandtherearestrengthsinVictoriainmanyofthesedisciplines;forexample,informationtechnology,nanotechnology,medicalimaging,medicaldevicesandadvancedmanufacturingtechnology.Scienceandtechnologyinfrastructuresuchasthesynchrotroncanalsoplayanimportantroleindevelopingdiagnostics.

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Therearesignificantopportunitiesforjobsandinvestmentsnotonlyinscientificresearchbutinproductmanufactureandotheractivitiesalongthevaluechain.ForexampleBertholdAustralia,whichhasbeenthedrivingforcebehindtheCooperativeResearchCentre(CRC)forBiomedicalImagingDevelopment,hasattractedinvestmentfromGE,IBMandtheinternationalpharmaceuticalcompanyPfizer,tobeaglobalcentreofexpertiseinbiomedicalimaging.TheCRCwilldevelopverypowerfulimagingequipmentthatwillenhancePET(PositronEmissionTomography)scanners.Thesedevices,ifsuccessful,willbemanufacturedinVictoriaandsoldworldwide.TheCRCisprojectingsalespotentialofoveronedollarswithintenyearsandwillneedamanufacturingsite.ThemostlikelyareasarewithintheCitiesofMonashorKnox,tobenearthesynchrotronandMonashUniversity.

Table 3: Potential for Sales of Manufactured Units and Associated Services from the Biomedical Imaging CRC

Product line Sales by 2010 ($ Million) Sales by 2015 ($ Million)

Radiotracersynthesisunits 10 65

Functionaldetectors 15 375

Pixeldetectors 0 550

Industrialx-raydetectors 10 30

Clinicaltrialincome 30 375

Total 65 1395

Inthetargeteddiagnostics/pharmacogenomicsfield,eachcompanyhasdifferentinfrastructurerequirements.Theydonotnecessarilyrequirespecialisedspacesuchaswetlabs.Theirneedsaresimilartoothercompaniesinvolvedininformationtechnologyandadvancedmanufacturing.TheseneedsarewellcateredforintheMonashandKnoxareas.

Insummary,thereisthepotentialtoencourageaconcentrationoffirmsinthetargeteddiagnosticsectorthathavetheopportunitytoattractlocalandinternationalinvestment,andcreatejobsinresearch,manufacturingandotherrolesacrossthevaluechain.ThereisaroleforlocalgovernmentfacilitationtoacceleratetheconvergenceofbiotechnologycompanieswiththoseinvolvedinIT,advancedmanufacturingandnanotechnologytoencouragetheexplorationofjointopportunities.

4.4AgriculturalBiotechnologyProductsProductdevelopmentandapprovalforfoodproductionfollowssimilarprocessestothatofmedicalproducts,althoughtherearedifferentregulatoryagenciesanddifferentinfrastructureused.Ratherthanclinicaltrials,foodproductsgothroughaseriesoffieldtrials.Thereisastageddevelopmentprocesswherebytheinitialscienceisconductedinawetlab,plantsarethenpropagatedinacontrolledgreenhouseenvironmentandlaterongrowninlargerscalecontrolledfieldtrials.ThereisregulatoryapprovalthroughtheFederalGovernmentOfficeoftheGeneTechnologyRegulator(OGTR)forscientificapprovalandthentheindividualstategovernmentsforapprovalformarketingofGMOproducts.

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CurrentlytheVictoriangovernmenthasamoratoriumpreventingthecommercialreleaseofGMOcropsandthathasdampenedcommercialandinvestorinterestinthisarena.WeconcludethattherearelimitedopportunitiesforinvestmentandjobcreationinrelationtoGMOproductsforfoodconsumptioninVictoria.GMOcropsarebeingrapidlyadopted,particularlyinemergingcountries.China,IndiaandSouthAmericahaveaggressivelyinvestedinGMOcropproductioninrecentyears,asillustratedinthefollowinggraphic.

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IfVictoriaweretobecomeinvolvedinGMOcropproductionforhumanconsumptioninthefuture(whichitmaynot),thenitmaybeatacompetitivedisadvantagetodevelopingnations.TheintroductionoflowcostGMOproduceintotheglobalmarketsmayreduceglobalpricesforspecificproductstothepointthatnon-GMOproductscouldbecometooexpensiveinprice-sensitivecommoditymarkets,leadingtofutureexportfailureofsomenon-GMOAustraliancrops.Thereisanadvocacyrolethatlocalgovernmentcanplaytofindnewopportunitiesforhighvalueagriculturalproductiontoprotectthecurrentemploymentbaseinprimaryproductionandprocessing.

4.5BioActiveProductsThereisanotherrapidlyemergingapplicationofbiotechnologytocropproductionthatislesswellknownbutoffersfargreaterpotentialthanGMOcropsforhumanconsumption.Cropscanbegrownascarriersofparticularproperties(bio-actives)thatcanbeextractedandusedindifferentways,forexample;

• BioMass Conversion Technologiesisinvestigatingthepotentialtoextractmethanolfromstraw,whichisabyproductofVictoria’sgrainsindustry.Thiswouldextractvaluablefuelsfromarenewableresource;

• Plantic Technologieshasbeensuccessfulincommercialisingtheextractionofbiodegradableplasticsfromplants(cornstarch).

Insomeinstancescropsarenaturallybred(forexampleinPlantic’scase),inotherinstancesitispreferabletogeneticallymodifyaplanttoenhanceaparticulartraitorintroduceanewtrait.Ironically,tobaccoisoftenusedasanexampleofacropthatcanbeusedtogrowvaluablevaccinesandothermedicinestotreatavarietyofillnesses.Thegeneticstructureoftobaccoiswellknownanditgrowsasaverybulkycropwhichisidealforproducinghighyieldsofbioactiveproperties.

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BioactivecropproductionfitswithVictoria’sexistingcompetitiveadvantages,skillsandinfrastructure.Theyareveryhighvaluedifferentiated(non-commodity)crops.Theyrelyonhighlevelsofexpertiseandscientificinputintheirdevelopment,production,extractionandprocessing.Thatraisesthepossibilityofarangeofhighvaluejobsandinvestmenttobecreatedalongthevaluechain.ThereisthepotentialtobuildasustainablecompetitiveadvantageasVictoria’soverallpackageofsupportinginfrastructurewouldbedifficulttoreplicateindevelopingcountries.

Thereistheopportunityforjobandinvestmentatmorepointsalongthevaluechain.Whereasindrugdevelopment,itisdifficulttobuildanindustrybeyondtheproductdevelopmentstage,inbio-activesitmaybepossibletoinvolvescientificresearchers,primaryproducers,downstreamprocessorsandmanufacturers.

Thepotentialuseofgeneticallymodifiedmaterialsmayrequiresegregationofassetsinthevaluechain.Thatwillmeancropsaregrowninseparateandcontrolledareasandperhapsalsoseparateinfrastructureforextractionandprocessing.Thatisbothapotentialbarrierandanopportunityforspecialisedassetinvestment.

The‘molecularfarming’market,whichisanothertermforbioactivecropproduction,israpidlydevelopingworldwide.AccordingtotheinternationalmarketresearchfirmFrost&Sullivan9,“Currently,therearenobiopharmaceuticalproductsmanufacturedusingplantmolecularfarminginthemarket,withthefirstproductsanticipatedtoreachthemarketaround2005-06.However,theU.S.marketcouldbeworth$2.20Billionin2011,asthisemergingsectorrapidlygatherspaceaspublicperceptionandtheregulatoryclimateimprove.Growthislikelytooccurfastestbetween2008and2010asmoreproductsenterthemarketandreceiveregulatoryapproval.”

Onelocalbio-activesexamplegivenbyProfessorStalkerofRMITistheproductionofwheatbyVictorianfarmers(orthestrawfromwheat).Doingsowouldenablefarmerstoreceivedramaticallybetterreturnsfortheircrops.Pricesfortraditionalwheatcropsarecurrentlyapproximately$300pertonne($0.30cperkg)atthefarmgate,andstrawabout$150pertonne($0.15cperkg)10.AccordingtoProfStalker,afarmermayexpecttoreceive$10.00perkgfortheirwheatifitisgrownwithbioactiveproperties.Thiswheatcouldthenbeprocessedintoflourandsoldinternationallytochemicalcompaniesatbetween$30.00to$50.00perkg.Thenextstageoftheprocess(purificationandextraction)wouldproduceabioactivepropertythatcouldsellforinexcessof$3,000pergram.

Thebioactivesegmentisalongtermdevelopmentopportunity,itwilltake5to10yearsforanindustrytodevelop.Othercountrieshavebeguntoinvestinthisarena.ForexampletheCanadiangovernmenthasrecentlyannounceda$10Minvestmentinapilotplantforplasticsproductionfromcanolawhichhasbeenmatchedwith$10Minvestmentfromindustry11.TheyhavealsoencouragedtheformationoftheAlbertaBioplasticsNetworkwhichisamulti-institutionalresearchnetworkwhosemandateistoengageinactivitiestopromotetheuseofAlberta’sagriculturalcommoditiesasfeedstockfortheproductionofspecialtychemicalsandpolymers.Thereisalsoanemerginginterestinfibresforpaperproductionduetoaworldwideshortageofpulp.

9 StrategicAnalysisoftheWorldPlantMolecularFarmingMarket.Frost&Sullivan.December21,2004-PubID:MC1073740

10 AreportbyPrimaryIndustriesandResourcesSA.“Strawofhighvaluethisyear.”11April200511 InterviewwithEdPhillipchuckfromAlbertaAgriculture,FoodandRuralDevelopment.

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4.6BioFuelsBioFuels,thegenerationofenergyfromrenewablebiologicalsourcematerials,isanotheremergingopportunityareaforVictoria.ThereisinvestmentactivityalreadyoccurringwithAxiom EnergyannouncinganASXfloatinAugust2005toraise$37.6M.ThiswillbeusedtopurchaseanexistingplantinLaverton(CityofWyndham)thatproduces10millionlitresp.a.ofbiodieselfromwastecookingoilandexpandittoacapacityof100millionlitres.

Thereisalsoactivityinotherstates.Natural Fuels,acompanyinDarwin,isinvesting$75MtobuildAustralia’sbiggestbiodieselplanttomakefuelfrompalmoil.ThefacilityisexpectedtobecompletedinSeptember2006andproduce130,000tonnesperannumoffuel.

Thescientificandcommercialinvestmentinbiofuelsisgrowingrapidlyinternationallythroughapowerfulcombinationofeconomic,environmentalandpoliticalreasons.ADecember2004report“GrowingEnergy:HowBiofuelsCanHelpEndAmerica’sOilDependence,”12outlinedaplanforgovernmentinvestmentofUS$1.1Billionforresearch,developmentandconstructionofdemonstrationprojectsinadditiontoapproximately$US800Millionfordevelopmentofbiofuelprocessingplantsbetween2006and2015.Newbiofuelscouldbeproducedfromagriculturalwasteproductsatacostequivalenttothecurrentcostsofgasolineanddiesel,whileatthesametimegeneratingeconomicbenefitsforfarmersandruralcommunities.

Thereportcitedthefollowingbenefits;

• “By2025,producingthecropstomakethesefuelscouldprovide(American)farmerswithprofitsofmorethan$US5Billionperyear;

• Biofuelscouldbecheaperthangasolineanddiesel,savingus$US20Billionperyearonfuelcostsby2050;

• Biofuelscouldreduceour(US)greenhousegasemissionsby1.7Billiontonsperyear–equatetomorethan80percentoftransportationrelatedemissionsand22percentoftotalemissionsin2002.”

Followingonfromthis,theUSSenatevotedonJune282005topassenergylegislationthatwouldrequireUSfuelsupplierstoblend8billiongallons(36.4billionlitres)ofethanolannuallyintodomesticfuelsupplyby2012.Theamendmentalsocreatedincentivesforbioethanolandbiobasedplasticsproductionfromcropbiomassandprovidesfundingforresearchanddevelopmentofnewbiotechenzymes.13

InVictoriathelogicallocationforabiofuelpilotplantwouldbeintheCityofWyndham.Thisisadjacenttothepetrochemicalindustry.BothPlantic(Plasticfromplants)andAxiomarebasedinLaverton.Theremayalsobeopportunitiesfortrialsitesforthedevelopmentandevaluationofbioactivecrops,asthereisalreadylandintheWerribeeprecinctthathasbeenAQISapprovedforGMOcroptrials.

12 ThereportwaspreparedfortheNationalCommissiononEnergyPolicy(NCEP)bytheRoleofBiomassinAmerica’sEnergyFuture(RBAEF)project.

13 Source:BiotechnologyNewsWednesdayJuly29,2005

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4.6.1ProductionandProcessingofBioActives

Therearealsorelateddevelopmentsinefficientproductioninfrastructure.ThereisinterestingresearchbeingconductedinVictoriainmethodsofintensiveandefficientcropproductionbyusingbiospheres.TheDPIInstituteforHorticulturalDevelopment(basedintheCityofKnox)isconductingresearchinthisarea.Thesesystemsforefficientandhighyieldproductionmaybesuitedtotheproductionofbioactiveplants(andparticularlyGMplants)whereaclosedenvironmentisanadvantage.ThereisalsoresearchbeingconductedatRMITinclosedaquaculturesystemsthatrecyclewaterthroughplants.Ifsuchfacilitieswerebuilttheycouldbeanalternativetofieldcrops,theywouldrequirecapitalinvestmentandskilledlabour,andmaybeofparticularinteresttocouncilsintheruralfringe(Whittlesea,HumeandWyndham).

Thereisalsointerest,bothatFoodSciencesVictoria(intheCityofWyndham),andatRMITBundoora,inpilotscalefermentationplantsandbioreactors.Theyhavepotentialapplicationsinprovidinginfrastructurefortheextractionandprocessingofbioactivepropertiesandfortheprocessingofwasteplantmaterials.ThereareanumberoffoodprocessingcompaniesofvaryingsizethroughoutMelbourne.Ifthesepilotscaleplantsareestablishedasdemonstrationsitesthereisthepossibilityofengagingexistingindustryanddemonstratingnewpossibilities.

4.6.2BarrierstoBioActivesIndustryDevelopment

Ifthereisinterestindevelopingabioactivesorbiofuelsindustrysector,thenanumberofbarriersneedtobeovercome.

Thefirstbarrierisknowledge.Therehavebeenad-hoceffortsbutnosystematicevaluationofthepotentialfordevelopmentinVictoria.WorkisneededtoidentifyifthereareparticularcropsorapplicationsthatarebestsuitedtoVictoria’sclimate,primaryproduction,processingandindustrialbasethatwillprovideasustainablecompetitiveadvantage.

Theoutputsofbioactiveplantsareofteninputsintoexistingvaluechains(forexamplepharmaceutical,chemical,petrochemicalorindustrial).IntheinterviewsconductedforthisreporttheprevailingviewwasthatVictoriaiswellplacedinprimaryproductionandintheinitialprocessingoftheplants.Howeverthereweremixedviewsontheextenttowhichthereisthepotentialforthechemicalrefinementorextractionrequiredinthenextstepsofthevaluechain.ItmaybepossibletoworkcollaborativelyandengageexistingcompanieswhoarepartofthedownstreamvaluechainandattracttheirinvestmenttoVictoria.Therewasinsufficientscopewithinthisprojecttoinvestigatetheseissuesanyfurther.

Therearebarriersinprevailingattitudes.Theattitudeofbiotechnologyinvestorsinterviewed,withtheexceptionofone,werenegativetowardbioactiveproperties.Theirviewwasthatthemoratoriumhaddampenedinvestorinterestinallaspectsofagriculturalbiotechnology,notjustinGMOcrops.Workneedstobedonetochangeinvestorattitudesand/orengageotherinvestorsinthisfield.Thereisperhapsroomforencouragingcorporateinvestmentfrompharmaceutical,chemical,petrochemicalandothercompanies.

Productionofbioactivecropswillrequireengagingfarmers,localcommunities,investorsanddownstreamprocessingormanufacturingcompanies.AlthoughthisdoesnotinvolveGMOmaterialforhumanconsumptiontherearestillnegativeattitudestowardsgeneticmodificationofanykindthatmustbeaddressed.

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Thefollowinggraphicsummarisesthepossiblelifecycleofthecommercialdevelopmentofbioactivepropertiesfromplants.

Thekeypointsare;

• Thebioactivevaluechainisaninputintoexistingchemical,pharmaceuticalandindustrialvaluechains;

• Comparedtodrugdiscovery,thereisgreateropportunitytocapturemoreoftheeconomicactivitywithintheStateofVictoria;

• Comparedtodrugdiscovery,ithasshorterproductdevelopmentandtimetomarket;

• ThereisastronglinktoexistingindustriesandcompetitivestrengthsinVictoria;

• Weareataveryearlystageofindustrydevelopment:5-10yearhorizon;

• CurrentbiotechnologyinvestorsarelukewarmbecauseoftheGMOissue.

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4.7ComplementaryMedicinesThereisalsoindustrybuildingpotentialinthefieldofcomplementarymedicines.Complementarymedicinesprovideopportunitiesforhighvaluedaddedcropsandintensivelanduse,aswellasassociatedinvestmentinprocessingfacilitieswhichwillbeofsignificantinteresttocouncilsintheruralfringe.

AustraliaisuniquebecauseChinesemedicinecanberegisteredasatherapeuticgoodthroughtheTherapeuticGoodsAdministration(TGA),whereasintheUSAChinesemedicinesareregisteredasafoodstuff.Thedifferenceisimportant.TobeapprovedbytheTGA,thepropertiesoftheremedymustbescientificallyvalidatedanddemonstratedtohaveaclinicalbenefit.ThatisseenasanimportantstepinincreasingtheacceptanceofChinesemedicineinwesternsocieties.

ThereisastrongChineseMedicineresearchgroupatRMITledbyAssociateProfessorCharlieXue.TheyareassessingthepropertiesoftraditionalChinesemedicinesandformulationstovalidatetheirsafetyandefficacy.ThisisbeingdoneforthepurposesofregulatoryapprovalthroughtheAustralianTGA.IthasattractedtheinterestsandfinancialsupportofChinesepharmaceuticalcompanies.IfChinesecompanyproductshaveTGAapprovalitwillgivethemacompetitiveadvantage,notjustinAustralia,butthisapprovalcarriesweightinothercountrieswheretheproductsaresold.RegulatoryapprovalofthetherapeuticbenefitsbyAustraliaisconsideredasavaluablesteppingstonetodifferentiatetheproductclassintheimportantUSmarkets.

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China’straditionalmedicineindustryisexpandingrapidly.In2004Chinaexportedover12,000tonsofpatentedmedicinevaluedat$US150Million,andannualsalesofChineseherbalmaterialsexceed$US16Billion14.ThefollowingfiguresillustratethegrowthinChineseR&Dexpendituresupportingthisindustry.

VictoriaisalsowellplacedbecauseitistheonlystatethatregistersandregulatesChineseMedicinepractitioners.

ThereisnodoubtthatthereisahighlevelofinterestinChinesemedicineinVictoria.Whatislessclearishowindustriesandjobswillbecreatedfromthisinterest.IntheabsenceofstrongadvocacyasituationmayevolvewherebyherbalproductsareapprovedformedicinalusebytheTGAandprescribedbyregisteredChinesemedicinepractitionersinVictoria,butalloftheeconomicactivitymayoccurelsewhere(growing,harvesting,formulation,packaging).Thereisaroleforlocalgovernmenttobetheadvocatetoensurethatconsiderationisgiventohowlocaljobsandinvestmentcanbeleveragedfromthissector.

14 BeyondBorders,GlobalBiotechnologyReport2005.Ernst&Young

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ThereiscertainlyanopportunityformedicinalherbstobegrowninVictoria.Iftheparticularpropertiesofaherbareapproved,thenthatapprovaldoesnotapplytoallherbsinthatclass.Theherbmustbeofadefinedtypeandgrownundercontrolled,traceableconditions.ThetraceabilityandqualityassuranceproceduresthatcanbeimplementedbyVictorianfarmerswouldgiveconfidencethatthesupplyofmedicinalherbsiscompliantwithregulatoryspecifications.Suchcropsmayalsobeabletoearnasignificantpremiumforfarmers.

Theremayalsothenbeopportunitiesindownstreameconomicactivity.Ifasufficientrangeofherbsaregrownhereitmaythenbeeconomicallyfeasiblefortheprocessing,extractionandformulationtoalsobedoneinVictoria.TherearealsoopportunitiesforclinicaltrialstobeconductedinVictoria.Asoutlinedearlier,theclinicaltrialscomponentisamajorcostofthedevelopmentandregulatoryapprovalofdrugs.

Inthefuturethereisalsothepossibilityofdeeperengagementoftheresearchcommunity.Atthemomenttheeffortisinscientificallyvalidatingthepropertiesoftraditionalherbs.Thenextstepmaybetoisolatethechemicallyactivepropertiesthatprovidethebeneficialeffects.Ifso,theremaybeopportunitiesforchemicalsynthesis(e.g.drugdiscoveryanddevelopment)orinselectivebreedingtoenhanceparticulartraits(e.g.bioactivecrops).

4.7.1BarrierstoComplementaryMedicinesIndustryDevelopment

Theobservationsmadeinthisreportareveryhighlevelandbasedonasmallnumberofinterviews.Theinterviewshaveindicatedthatthereisapparentpotentialforindustrydevelopment,butmoreworkisneededtomapthevaluechainandtoidentifystrategiestostimulatelocaljobsandinvestmentfromthatvaluechain.

TherearemanypocketsofinterestandhiddencapabilitiesinVictoriathatcouldcombinetocreateanemergingindustry,butworkneedstobedonetofacilitatecommunicationlinks.Inthefirstinstancegrowersneedtobeencouragedtobecomeinvolvedinherbproduction.TheauthorsnotethattheCityofWhittleseahasbeenactivelysupportingatrialherbprogramwithgrowers.TheauthorsalsonotethatDIIRDhasbeenactiveinidentifyingandpromotingcapabilitiesinChinesemedicineandthereisthepotentialroleoflocalgovernmenttohelpengageandcoordinatelocalindustry.

Thereareotherattitudinalbarrierstoovercome.Thereareconcernsinthemedicalandscientificcommunityaboutspuriousclaimsofnaturalremedieswithoutproof,wheninfactwhatisactuallyhappeningisanefforttoprovideevidencebasedvalidationofthepropertiesofmedicinalherbs.Thereisalsoadvocacyrequiredtodemonstratethatthisisavaliduseofscience,andtherearebenefitsfortheresearchcommunityifVictoriatakesaleadershippositioninthisarena.

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Thissectionbeginsbypresentingthesurveyresultsonwheretheexistingbiotechnologycompanieswouldprefertobelocated.Thenextpartprovidesinsightsintothephysicalspacerequirementsofthecompaniesthatwereinterviewed,asasnapshotoftheneedsofthebroaderbiotechnologycompanysectorinVictoria.Thepartimmediatelyfollowingprovidesinformationontheidealattributesofanexpansionspacefacilityifoneweretobebuilt.

Wethendevoteattentiontohowthebusinessmodelforsuchafacilityshouldbestructured.Wedothisfirstlybylookingatthelocationcostsandconsiderationsinaneconomywithadevelopedbiotechnologycompanysector(theUSA).WethenapplyasimilaranalysistounderstandthemajorcostsandcostdriversforVictoriancompanies.Wethenturnattentiontohowthesecostsarepaidfor.WeillustratethedifferencesintheinfrastructurecharacteristicsofestablishedsectorsversusthecharacteristicsoftheemergingVictorianbiotechnologycompanysector.Weoutlinesomeoftheattributesofanexpansionspacedevelopmentthatwouldmakeitmorecapitalefficient.Thesectionendswithadiscussionofthepotentialroleoflocalgovernmentinencouragingprecinctdevelopment.

5.1LocationConsiderationsSixteenoperatingbiotechnologycompaniesparticipatedinadetailedsurveyforthisreportandtwelveoftheserespondedtothequestionoftheirpreferredlocationforexpansion.

ThesecompaniesarecurrentlyspreadaroundMelbourneandsomearesplitovermultiplelocations.Thechoiceoftheircurrentlocationwastypicallyopportunistic.Whenthesecompanieswereinastart-upmodetheytookpremisesinlessthanideallocations,orevenpaidapremiumforspacebecauseoftheirspecialisedrequirementsandthelimitedavailabilityofsuitablespace.

ThemostpreferredlocationforfutureexpansionisParkvilleorsurroundingareas,withMonashalsobeingacceptable.Theresultsvalidatethepreviousanecdotaldiscussionsthatbiomedicalcompanieswillprefertostayclosetothemedicalandeducationalprecincts,andwillnotconsiderrelocationfromthesebasesastheygrow.Itmustbenotedthatthesecompaniesareprimarilyinvolvedinmedicalbiotechnology.

Discussionswiththoseinterviewedshedmoreinsightintolocationdecisions.

• Companiesprefertobenearhospitalsanduniversities,butthatdoesnotnecessarilymeanon-siteattheselocations(‘notnextdoorbutnear’).Theyneedtobenearbybecausetheymayhaveaneedtousethetestingfacilities,whichareoftenlocatednearmajorhospitalsanduniversitiesandmayneedaccesstospecialistequipment.

• Accesstotheairportisalsoanimportantlocationconsideration,particularlyforthosewhosendandreceivetestsviaairfreight.Anotherconsiderationisthetravellingtimeforvisitingexecutivesandcustomers.Thatdidnotmeanthatcompaniesneededtobelocatedattheairport,buttherewasastrongpreferencetothenorthernendoftheCBD(e.g.Parkville),oratleastreasonableproximitytofreewayaccess.

• Therewaslittlesupportforphysicallylocatinginauniversityprecinct,orwhereauniversityorhospitalisthelandlord.Threeseparatecommentsweremadeabouttheattitudinaldifferencesrequiredinworkinginacompanyenvironmentversusworkinginauniversityresearchenvironment.Employersrequiredagreaterdeadlinefocusandwerealsolesswillingtosupportpeople‘comingandgoingastheyplease’.Althoughnotanentiresolution,itwasfeltthatphysicalseparationfromuniversitiesandco-locationinacommercialenvironmentwouldbehelpful.

5 eXpAnsion spACe foR ViCtoRiAn BioteChnoLogy CoMpAnies

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• OnecompanyinthesurveythatpreferredWerribeeisamanufacturerbasedinLavertonthatwouldprefertostayinthatarea.

5.2FutureSpaceRequirementsOfthesixteenoperatingbiotechnologycompaniesinterviewed,thirteenoftheseprovidedinformationontheircurrentspaceusageandfuturerequirements.Threehavemanufacturingorassemblyoperations,onehaslaboratoryfacilitiesandoperatesatestingserviceandtheremainingninearedrugdevelopmentcompanies.

• Currentspace

- Intotalthesecompaniesoccupy6,904m2ofspace,atanaverageof531m2percompany.

- Thelargestdrugdevelopmentcompanyrespondingtooursurveyhas1,000m2andplanstodoublethiswithinfiveyears.

- Thesmallestcompanyoccupies30m2,becauseitisinstart-upphaseandcontractsitsresearchtoexternalorganisations.Itplanstogrowto60m2intwoyearsand200m2withinfiveyears,whichsuggeststhatitwillremainarelatively‘virtual’operation.

• Thereisaverypositiveoutlookfordemandforexpansionspace

- Ofthethirteencompaniesresponding,theirnextexpansionstepwillrequireatotalof16,526m2,whichismorethandoublethecurrentspaceused.

- Elevencompaniesestimatethiswillbeneededwithintwoyears,twocompaniesestimatethiswillbeneededwithinfiveyears.

- Theaveragespacerequirementis1,271m2overall.

- Theaveragespacerequirementfordrugdevelopmentcompaniesis450m2.

- Theproportionofspacerequiredfordrugdevelopmentcompaniesis:

- 38%Office

- 57%Laboratory

- 5%Manufacturing/stores/other.

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5.3AttributesofFacilitiesTheCityofMelbourneengagedtheBioMelbourneNetworkandDesignInctostudytheexpansionspaceneedsofsixVictorianbiotechnologycompanies.Thesamequestionswerethenputtoparticipantsinthisprojectandtheanswerscombinedtogiveatotalresponsebaseoffifteenparticipatingcompanies.

Themajorobservationsareasfollows;

• Publictransportconsistentlyratedasanimportantissue.Howeveritislikelythatitwouldrateasanimportantissuebycompaniesfrommanyindustries;

• Biotechnologycompanieshaveaparticularneedforsecurity.Thatisbecauseofthesensitivenatureoftheirwork.Accesscontrolisalsoarequirementofgoodmanufacturingpractice(GMP)andgoodlaboratorypractice(GLP);

• Informationtechnologyfacilitiesandinfrastructureareveryimportanttobiotechnologycompanies.Theuseofverypowerfulandcomplexinformationprocessingtoolsisbecomingveryprevalentinmanyoftoday’sbiotechnologycompanies;

• Althoughcollocationwithcompaniesdidnotrateasthehighestofthefactors,itwasstillseenasrelativelyimportant.Companieswouldpreferifpossibletobeco-located,butintheabsenceofaprecinctdevelopment,theywillgowherethespaceisavailable;

• Therearedefinedpreferencesaboutwhereandhowfartheiremployeeswilltravel(e.g.toParkville,St.KildaorMonash,butnotfarbeyondtheseareas).Theadministrativeandsupportstaffwouldgenerallybeemployedlocallybutthescientificandprofessionalstaffwouldtraveltowhereverthecompanywaslocated.

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Otherelementsthatwerenotinthequestionnairebutwereraisedinassociateddiscussionsareasfollows;

• Biotechnologycompaniesarerelativelycompactbutintenseusersofspace.Theyaresometimeslocatedinindustrialareasbutthepersonpersquaremetreratioisfarhigherthanatypicalindustrialcompany.Thatmeans,amongotherthings,arelativelyhighnumberofcarparkingspacesarerequired;

• Biotechnologycompaniestendtobeveryhighusersofelectricalpower;

• Thosewhowerebasedonsitesassociatedwithuniversitiesandhospitalsdidnotoriginallyappreciatethebenefitsofbeingonsite,byhavingmanyofthepermitsandapprovalsalreadyinplace.Theymentionedthatifaprecinctweredevelopeditwouldbeefficientforallofthepermitsandassociatedapprovalstobehandledonce,ratherthanforeachcompanytodiscoverthesamedifficultieseachtime.TheauthorsobservedthateconomicdevelopmentofficersintheUSAoftenprepareplanningcheckliststhathelpcompaniesmakeasmoothtransitionintodedicatedprecincts;

• Theworkforcesaretypicallyyoungandwellpaidandengagedinbuildingtheircareers.OneCEOcommentedontheimportanceofchildcarefacilitiesifabiotechnologybuildingwasestablished.Althoughitcanbearguedthatsuchfacilitiesdependonnormalmarketforces,itwasaninterestinginsightintotheneedsandpreferencesofarelativelyyoungworkforceandhelpstodefinetheidealconditionsthatarerequiredtoattractthatworkforce.

5.4OccupancyCostsandLocationDecisionsThefollowingsectionisbasedondatafromColliersInternational15.ItcomparesthecostofCBDversussuburbanlocationsinmajorUSbiotechnologycities.WethenadoptedasimilarmethodologytocomparetheCBDversussuburbsforVictorianbiotechnologycompanies.Thiswasdonefortworeasons,firstlytoexplorethesimilaritiesanddifferencesinexpansionspacecostsbetweenestablishedbiotechnologylocationsandemergingbiotechnologylocations.Secondly,althoughbiotechnologycompanieswouldprefertobelocatedintheCBD,itwasimportanttovalidatethatitisfinanciallyfeasibletodoso.

15 Alchemy2005.AnnualReviewandAnalysisofRealEstateTrendsintheLifeScienceIndustry.Volume2,Summer2005.ColliersInternational

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TheUSdataindicatesthatthepremiumforacitylocationversusasuburbanlocationisverysmall.ACBDwetlabcosts3%morethanasuburbanwetlab,a‘highrange’cityofficecosts5%morethanasuburbanoffice,and‘lowrange’cityofficecosts9%morethanasuburbanoffice.Thesuburbsdonothaveaslargeacostadvantageasonemaythinkbecausetheunderlyingcostoftherealestateisonlyonecomponentoftheoverallprice.Themajorcostdriveristhecostoffitout,particularlyforwetlabs.

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IntheVictorianexamplethepremiumforCBDlocationversussuburbanis12%forawetlabdevelopmentand33%foranofficedevelopment.TheoverallcostsarenotdramaticallydifferenttotheUSexamples($668forUSAwetlabspacevs$770forAustralian,$371USAofficevs$277Australian).ThisanalysisisbasedonarangeofassumptionsthatareoutlinedinAppendix3.

5.5CapitalEfficiencyAlthoughtheactualspacecostsperm2aresimilarbetweentheUSAandVictoria,thereisafundamentaldifferenceinhowthesecostsarepaidfor.TheUSAhasahighlydevelopedenvironmentforsupportingemergingcompanies,whereasthesameisnottrueofAustralia.

Emergingbiotechnologycompaniesarecashconstrained,faceahighcostofcapitalandmustbeextremelycapitalefficienttosurvive.MostVictorianbiotechnologycompaniescannotrelyondirectproductsalesandmustraisecapitaltofundtheirgrowth.Debtfundingisdifficultbecauseoftheriskprofileofthesecompanies.Theytypicallyrelyonexternalequityfunding,initiallythroughventurecapitalinvestmentandthenastockmarketlisting.Thecostofcapitalishigh.Thatisbecauseanequityinvestorwouldaimtomakeacompoundrateofreturnontheirinvestmentataminimumof25%compoundperannumandideallyinexcessof40%compoundperannum.EvenifacompanyisASXlisteditneedstodemonstrateveryhighratesofreturnbecauseithasahigherrisk/returnprofilethannormalindustrialstocks.

TherearefundamentaldifferencesinhowcapitalisusedbetweentheUSandAustralianbiotechnologycompanyenvironments.Thefollowingitemsillustratethesedifferences;

• Lease vs PAYG.InAustraliathemodelistypicallyforcompaniestoleaseabuildingandthenpayforthespecialisedfitoutandequipment.Inthefollowingexample,basedontheearlierrealestatecostcomparison,thewetlabfitoutalonewouldcost$1.25Millionfora500m2space,notincludingtheadditionalcapitalexpenditureforthepurchaseandinstallationofspecialisedscientificequipment.Thesecostssoakupscarcecash.IntheUSAamorecommonmethodisforthedevelopertofundthecapitalcostofthefitoutandrecoverthisbyothermeans(forexamplethecostsarerecoveredviahigherleasepayments,orinexchangeforequity,optionsorwarrants).Thetenantmaypayalittlemoreannually,ordeferpaymentthroughequityexchange,butwillnotneedtomakealargeup-frontcapitalexpenditure.Thismodelworksbecausethedevelopercanaccessfundsatamuchlowercostofcapitalthanahighriskbiotechnologycompany.Thisarbitrageofthecostofcapitalcanworktotheadvantageofbothorganisations.Anemergingbiotechnologycompanycanpayminimalrent,bothorganisationstakeariskonthesuccessofthecompany,andifthecompanyissuccessful,thedeveloperwillshareinthecapitalgain.

Table 4: Comparison of Lease Versus Capital Expenditure for Wet Lab Fit Out

Costsfora500m2wetlab City Suburbs

Annualleasecost 390,000 342,000

Capitalcostwetlabfitouttodeveloper 1,000,000 1,000,000

Capitalcostforwetlabfitouttoclient16 1,250,000 1,250,000

Source:Basedondeveloper’sruleofthumbestimates

16 Basedona25%marginoncosts–thiswillvarywidelybetweendevelopers/builders.

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• Incentives.AccordingtoourdeskresearchanddirectinterviewswithcityeconomicdevelopmentofficersintheUSA,itistypicalforarangeofincentivestobeavailableforprecinctsandtenants.Thatincludesdeferralsofstateandfederaltaxes,loanguaranteesorfinancingforspecialisedequipment.Therearemanydifferentincentivepackagesofferedonastate-by-statebasis.Theirexistenceillustrateswhatispossibleinahighlydevelopedeconomythatsupportsthegrowthofemergingbiotechnologycompanies.Italsodemonstratesthatcitiesandstatesarekeentoinvesttheirtimeandresourcesinattractingandencouragingbiotechnologyfirmstotheirlocations.

• Cost of Land.Theoccupancycostsofbiotechnologyprecinctsareoftenhelpedbytheacquisitionoflandatlowcost.TwocommonsourcesoflandformajorUSbiotechnologyprecinctsintheUSAaretheredevelopmentofformermilitarybasesandthroughurbanrenewalprojectsinrun-downareasoflargecities.

Ideally,Victorianeedsanenvironmentcomparabletothatofotherdevelopedbiotechnologysectors.Thereisastructuralimbalancebetweentheestablishedbiotechnologycompanysectorsandemergingbiotechnologycompanysectors.AVictorianbiotechnologycompanyhastopayitswayincashwhereasaUScompanyoperatesinanenvironmentthatismorecapitalefficient.AVictoriancompanyhastoraisemorecashthanaUScounterparttoachievethesameends,andthelackofdepthofcapitalmarketstobeginwithmakesitdifficultforAustralianbiotechnologycompaniestoraisefunds.

5.6PrecinctDevelopmentThereisanopportunityforlocalgovernmenttochampionthedevelopmentofabiotechnologyprecinct.Aprecinct,ifdevelopedproperly,canbeafarmorecapitalefficientmodelofoperationforbiotechnologycompanies.Thereareanumberofmechanismsthatlocalgovernmentasaprecinctfacilitatorcouldexplore;

1.Attracting developers.Localgovernmentcanhelptoengagedevelopersbyassessingthenatureandextentofdemandandpresentingitasanopportunityfordevelopers.TheCityofMelbournehasbegunthisprocessbyengagingtheBioMelbourneNetworktoassesstheexpansionspaceneedsofsixbiotechnologycompanies.ThisBioCouncilsAlliance‘LifeCycles’reportalsoprovidesfurtherdetailandinsightintotheexpansionneedsofbiotechnologycompanies.

2.Creating the right business model.ThisreporthasidentifiedthatthereisafundamentaldifferencebetweenthebusinessmodelsinUSbiotechnologyprecinctsversusthestandardpropertydevelopmentapproach.Localgovernmentasaprecinctfacilitatorcouldworkwithdeveloperstoensurethatacapitalefficientbusinessmodelisstructuredandisappropriatetoattractbiotechnologytenants.

3.Site selection.Victoriadoesnothaveastockofformermilitarybasesormajorsectionsofthecityrequiringurbanrenewal.HowevertheremaybeopportunitiestoexplorethroughtherestructuringofhospitalsitesacrossVictoriaorintheParkvilleprecinctdevelopmentplans.Localgovernmentcanuseitsuniqueknowledgeofthemunicipality,andaccessthroughothergovernmentchannels,toidentifyandlobbyforaccesstosuitablesitesifanopportunitybecomesavailable.Thatwouldprovideabenefitinreducingthecostsofthelandcomponentofabiotechnologyexpansionbuildingorprecinct.

4.Zoning, planning and permits.Thereisaclearacceptanceoftheimportantrolethatlocalgovernmentcanplayinfacilitatingthepermits,approvalsandzoningofaspecialbiotechnologyprecinct.ThatisconsistentwiththeactiverolethatCitiesplayinthedevelopmentofbiotechnologyprecinctsintheUSA.

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5. Incentives.OurresearchindicatesthatCitieshavebeenmajordriversinthedevelopmentofsuccessfulbiotechnologyprecinctsintheUSA(forexampleBoston,Baltimore,Virginia).Inthesecontextstherehasgenerallybeenanincentivepackagedevelopedtoattractdevelopersandtenants.Thatcanbeamixoflandgrants,taxdeferrals,bondsorloanguarantees,forexample.TheauthorsrecognisethattherelativerolesofFederal,StateandLocalGovernmentaredifferentinAustralia.Localgovernmentcanplayanadvocacyroleinbringingthismattertotheattentionofstateandfederalagenciesandencouragingacoordinatedresponse.

5.7DesignofExpansionSpaceTheauthorsareawarethatapreliminarybuildingdesignhasbeendevelopedforexpansionspaceforbiotechnologycompanies.Someofthefeaturesofthatbuildingincludeefficientuseofsharedspacessuchasmeetingrooms,trainingandpresentationareas.Interviewswithlocalbiotechnologycompaniesforthisreportgeneratedadditionalideasforsharedservicesthatcouldbehousedwithinadedicatedcommercialbiotechnologybuilding.

1.Video conferencing and Telecommunications.Victoriancompaniesarehighlyactiveinternationally.Theyrelyonfrequentcommunicationswithresearchcollaborators,investors,alliancepartnersandothersupportersaroundtheglobe.Thereismeritinexploringthefeasibilityofinvestinginsharedvideoconferencingfacilities.Thiscostofthismayotherwisebeoutofthereachofindividualbiotechnologycompanies.

2.Market Intelligence.Everycompanyreliesheavilyonmarketresearchsubscriptionservicesforproductresearch,marketdevelopmentanddealnegotiation.Companiestypicallyspend$50,000to$100,000p.a.forsubscriptions.TherehasbeenaproposaldevelopedbytheBioMelbourneNetworktocreateamarketintelligencelibraryonasharedservicesbasisforemergingbiotechnologycompanies.Ifthisproposalissuccessful,theideallocationforthislibrarymaybewithinadedicatedbuildingforbiotechnologycompanies.

3. Information Technology Support.ManybiotechnologycompaniesareincreasinglyreliantonsophisticatedITenvironments.IfallarelocatedinonebuildingthereareopportunitiestosharecostsandattracthighqualityITsupport.

4.Employee Services.Biotechnologycompanieshaveyoungworkforces.Anideallocationwouldbeonethathadchildcareservices,butitisnoteconomicforanindividualcompanytoprovideachildcareservice.Howeverifallcompaniesweretogetherintheoneprecinct,andtheyallhadyoungworkforces,thatmayprovidesufficientincentiveforachildcareoperatortoestablishaserviceinornearthatbuilding.

Capitalefficientfeaturessuchasthoselistedabovecouldbemadepossiblebytheeconomiesofscaleofhavingbiotechnologycompanieslocatedinthesamearea.

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ThissectionbeginswithindustryfeedbackonthepotentialroleofLocalgovernmentinbiotechnologyindustrydevelopment.Thenextpartdiscussestherationaleforgovernmentinvolvementbasedonthefindingsofthisreport.ThefinalpartdiscussesthespecificroleoftheBioCouncilsAllianceandprovidesaframeworkforaction.

6.1IndustryFeedbackontheRoleofLocalGovernment

Therewasnotuniversalsupportfortheideaofcouncilsassistingcompaniestosearchforspecificsites.Manyrespondentsfeltthattheirneedsweresospecial-isedthattheyshouldmanagethisin-houseorengagespecialistadvisors.

TherewasveryhighsupportandacceptanceoftheroleofLocalgovernmentinbiotechnologyprecinctdevelopments.ThebiotechnologycompanyCEOsareveryactiveinternationallyandmanyareawareofthedrivingrolethatCitiesplayinthedevelopmentofUSprecincts.TheywouldappreciatetheroleofLocalgovernmentasachampion,lobbyistandfacilitatorofabiotechnologyprecinct.TheyalsofeltthatLocalgovernmentcanmakeanimportantcontributioninplanningandzoningassistanceforsuchadevelopment.

Theresponsetothequestionofassistancewithplanningpermitsneedsfurtherclarification.Onaday-to-daybasisthereareanumberoffederalandstateauthoritiesthatbiotechnologycompaniesdealwithforvariouspermits.Biotechnologycompaniesgenerallyknowhowtodothisandsomewouldbeconcernedifanotherlayerofinvolvementwereadded.Therewassupporthoweverfortheassistancewithpermitsandapprovalsinrelationtoestablishinganewbiotechnologyprecinctorfacility.Theyfeltitwouldbebeneficialforthistobecentrallycoordinated.

6 disCUssion And ReCoMMendAtions

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TherewasreasonablystrongsupportfortheroleofLocalgovernmentinworkingwithcommunityattitudes.Themajorityrecognisedthatcouncilsareaccesspointstocommunityconsultationandifanynewdevelopmentweretooccur(forexampleabiotechnologycompanyprecinct,orafieldtriallocationforbioactives),thenCouncilwouldbeinstrumentalinworkingwithlocalcommunitiestoprovidebalancedinformationonanyissues,toensurethatinformeddecisionsweremade.Therewereafewcaseswherecompaniespreferredtokeepalowprofileandfeltitwasbetterfortheindustrytoalsodoso.

Intervieweesrecognisedtheroleofgovernmentinprovidingtraditionalservices,howevermanyhadlimiteddaytodayinvolvementwithcouncilsorhadnoparticularlystrongoruniqueneedsthataredifferenttoanyothercompany.

6.2TheRationaleforLocalGovernmentInterventionLocalgovernmentbringsauniqueandhighlypragmaticperspectivetoVictoria’semergingbiotechnologycompanysector.ItcancomplementtheeffortsofStateandFederalGovernmentstosupportbiotechnologyindustrydevelopmentpolicy,butalsosupportbroaderpolicyareasofscienceandtechnology,healthcare,ruralandregionaldevelopment.Local government can help to ensure sufficient attention is paid to practical measures that attract and retain the type of companies that are best placed to invest locally and employ locally.

A2002BrookingsInstitution17studyofbiotechnologyactivityinthe51largestUSmetropolitanareasfoundthattheindustryconcentratedinnineregions.Thesenineareasexcelbecausetheypossesstwokeyingredientsnecessaryforbiotechgrowth;strongresearch,andtheabilitytoconvertthatresearchintocommercialactivity.Theyalsoconcludedthatthepowerofclusteringprovidesdecisivebusinessadvantages.The BioCouncils Alliance can play a role in helping to create the conditions to create biotechnology industry hubs.

6.2.1ExistingBiotechnologyCompaniesandtheRoleofLocalGovernment

TheexistingVictorianbiotechnologycompaniesarepredominantlyinthemedicalsector.Theyplayaspecificroleintheglobalvaluechainasearlystageproductdevelopmentcompaniesfordrugs,vaccinesanddiagnostics.Theyareimportantchannelstotakeproductcandidatesfromthescientificdiscoverystagethroughtheirearlystagesofcommercialriskreductionandvaluecreation.Thesebiotechnologyproductdevelopmentcompanieshaveincreasinglyemergedoverthepast5-10years,theyhaveproventheircompetitiveplaceinaglobalindustryandhavemanagedtocontinuetogrowdespitelimitationsincapitalavailabilityandefficiency.

LocalgovernmentcanhelpensurethattheydoremaininVictoria,butmoreimportantly,create the conditions that encourage a greater depth of operations within Victoria.Thatwouldmean,intheshorttomediumterm,anexpansionofthenumberofproductsintheirdevelopmentpipelines.Achievingthiswouldtranslatetoincreasedcapitalexpenditureinwetlabspaceandtechnicalinfrastructure,additionalemploymentofhighlytrainedscientists,informationtechnologyprofessionalsandotherknowledgeworkers.InthelongertermitwouldalsohelptosecureVictoria’spositionasacorporatebaseforthemanufacturing,sellinganddistributionofproductintothefastgrowingAsianmarkets.

Localgovernmentcanfacilitatethedevelopmentofacommercialbiotechnologyprecinct.Thisfacilitymaybecomethefoundationofacommercialbiotechnologyprecinct.CurrentlybiotechnologycompaniesaredistributedaroundMelbourneforavarietyofhistoricalreasons.Ifaninitialexpansionspacefacilitywasdevelopedandsucceededitmaythenattractotherdevelopersandattractotherbiotechnologycompaniestorelocateastheyoutgrowtheirexistingspace.Itcouldalsobecomethelocationofchoicefornewbiotechnologycompaniesastheyemerge.

17 “SignsofLife.TheGrowthofBiotechnologyCentersintheUS.”BrookingsInstitutionCentreonUrbanandMetropolitanPolicy.JosephCortrightandHeikeMayer.2002

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Thefirststepwillbetosupportdevelopmentofexpansionspaceforexistingbiotechnologycompanies.LocalgovernmentcanensurethatanexpansionspacefacilityisdesignedtofittheneedsofbiotechnologycompaniesandthatitsbusinessmodelisstructuredinawaythataddressessomeofthecapitalefficiencylimitationsfacingVictoriancompanies.

AcommercialbiotechnologyprecinctwouldbegintoaddresssomeofthestructurallimitationswithinVictoria’semergingbiotechnologysector.Theeconomiesofscaleandcapitalefficienciesfromcollocationwouldenablethecompaniestoachievemorewiththeirscarceinvestmentcapital.

IfLocalgovernmenttakesaleadershiproleinencouragingthedevelopmentofexpansionspace,therearebroadeconomicbenefitsacrossthevaluechain;

• InvestmentfundschannelledintoVictoriancompanieswillflowbackintotheresearchcommunity,touniversitiesandresearchinstitutesascontractresearchpaymentsandasroyaltypaymentsonintellectualproperty;

• Moneywillalsoflowintotheservicessector;forexampleinformationtechnology,legal,taxation,accounting,financeraising,regulatorycompliance,clinicaltrialsandthemanufactureofdrugsforclinicaltrials;

• TherecouldbeincreasedutilisationoftheState’sscientificinfrastructureincludingadvancedcomputingfacilities,thesynchrotronandtheNuclearMagneticResonanceFacilityatBio21.

Anotherbenefitofacommercialbiotechnologyprecinctisthatitwouldmakethelabourmarketmorevisible.Thenaturalexpansionofthebiotechnologycompanysectorwillseesomecompaniesrisewhileothersfail.Ifthisoccurswithinaprecincttherecanbeanefficientreallocationofpeopleandresources.

Aconcentrationofyoung,wellpaidknowledgeworkersinthebiotechnologycompanyprecinctwouldalsohaveaflow-oneffectonthedemandforresidentialaccommodationinthevicinity.

6.2.2EmergingBiotechnologyCompaniesandtheRoleofLocalGovernment

AsoutlinedintheExecutiveSummary,thebiotechnologysectorisabouttochangeshapedramatically.Whereastheexistingbaseisprimarilyinvolvedindevelopingdrugs,vaccinesanddiagnostics,wholenewsectorswillemergeinbioactives,complementarymedicinesandindiagnosticsinvolvingmedicalimaging,informationtechnology,advancedmanufacturingandnanotechnology.Thejobcreationandinvestmentattractionprospectsarefundamentallydifferenttothatofdrugdiscoveryanddevelopment.Thereisthepotentialtoengagemoreoftheeconomicvalueaddedactivitywithinthisstate.Thiseconomicactivitycanspanfurtherdownthevaluechain,fromdiscoveryanddevelopmenttomanufacturing.Theemploymentbaseispotentiallybroader,fromhighlyqualifiedscientists,engineersandinformationtechnologyprofessionalsthroughtomediumskilledjobsinadvancedmanufacturingaswellasmediumskilledjobsinprimaryproductionandprocessing.

ThereisaroleforLocalgovernmenttoplayinhelpingtocreatetheenvironmentthatattractsandsupportsemergingcompanies.Aswiththeprecedingbiomedicalbiotechnologysector,thiswillbedoneinconcertwiththeeffortsofStateandFederalagencies.Localgovernmentcanplayacriticalroleasanactiveon-the-groundparticipanttoensurethatattentionremainsonthefundamentalsoflocaljobcreationandinvestmentattraction.Withoutstrongadvocacythesesectorscanbesupportedbyworthwhilesciencebutthedownstreameconomicactivitymaybelicensedoffandconductedoffshore.

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ThereisaroleforLocalgovernmenttoplayasthechampionandfacilitatorofthedevelopmentofsubsectorsinbioactives,biofuels,herbalmedicinesandadvanceddiagnostics.LocalgovernmentcanactivelypromoteVictoria’scapabilities,andthoseofeachcouncilregion,asabaseforgrowing,processinganddownstreammanufacturing.

• Localgovernmentcanplayaroleinthedevelopmentofthecomplementarymedicinessectortoensurethatattentionisgiventohowlocalemploymentandinvestmentwillbegenerated.

• Itcancontinuetoactivelyengagegrowersandothersinthevaluechaintoensurethatthereisinterestattractedtothevalueaddedeconomicactivitiesinthisarena.

• Localgovernmentcanplayasimilarfacilitatingroleinthedevelopmentofnascentsectorsinbioactivesandbiofuels.Itcanbeavoicetoensurethatconsiderationisgiventojobcreationandinvestmentwaswellasscientificresearch.Itcandothisbycreatingopportunitiestobringtogetherexistingandemergingbusinesses.

• Localgovernmentcanencouragethecrosssectorcommunicationsthatarerequiredintheconvergingdiagnosticsfield,encouragingcreativitythroughtheintersectionofdisciplinesfrominformationtechnology,medicalimaging,advancedmanufacturingtechnologyandnanotechnology.Itcanencourageexistingcompaniesworkinginthesesectorstoturntheirattentiontowardsopportunitiesinbiotechnologyandadvanceddiagnostics.

6.3TheRoleoftheBioCouncilsAllianceThisreporthighlightsthediversityofthebiotechnologysectorandthatitisenteringaphasewherethiseconomicdiversitywillbecomeevenmorepronounced.Itsuggeststhattherearedifferentareasofopportunitysuitedtodifferentcouncilcapabilities.Itsuggeststhatcouncilinvolvementwouldhelpconcentratespecificeconomicactivitiesintoparticularmunicipalities.

6.3.1JointInterests

ThereisjustificationforthecontinuedroleoftheBioCouncilsAllianceasagroupoflikemindedcouncilsinterestedintheeconomicdevelopmentopportunitiesassociatedwithbiotechnology.

6.3.2CollaboratetoCompete

TheBioCouncilsAlliancecanworkasagrouptopromotethefieldofbiotechnologyoverallandtheirspecificadvantagesasmunicipalities.Theycanalsodefinenichesandpromotetheirindividualadvantagesashubsforindustrydevelopment.DoingsowillhelppromotethestrengthandthediversityofbiotechnologylocationswithinthestateanditwillactivelypromotetheideaofVictoriaasastrongcommercialbase.

Thebiotechnologysectoriscomplexanddiverse,ifeachcouncilconcentratesonaparticularthemeitwillhelptodevelopadeepknowledgebaseofthesectoracrossthememberbase.Theycaneachdevelopageneralknowledgeofissuesfacingtheemergingbiotechnologysectorbutthenspecialiseinparticularareasthataremorerelevanttotheirparticulararea.

Thiswillhelpcouncilstobetterunderstandandservetheneedsofbiotechnologycompaniesthatareattractedtotheirmunicipalities.

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6.3.3PromotingCapabilities

LocalgovernmentcancontinuetopromoteVictoria’scapabilitiesandindustriesthroughdirectcity-to-cityrelationships.AverygoodexampleofthisistheCityofMelbourne’srecentroleinleadingadelegationofVictorianbiotechnologycompaniestoChinaandactivelyusingitscity-to-citylinkstofacilitateaccesstohighleveldecisionmakers.

BioCouncilsAlliancememberscanactivelyengageinforumsrelatingtoinvestmentattractionandindustrydevelopment,suchasmajornationalandinternationalconferences.ForexampleABIC2006,theworld’smajorglobalconferenceforagriculturalbiotechnologywillbeheldinMelbournefromAugust6-9,2006.BioCouncilAllianceMembersshouldconsiderajointpresenceatthisimportantinternationalconference.

6.3.4ProvidingInformationtoCommunities

Thereisaneedtodevelopmaterialsthatgiveabalancedperspectiveontherisksandrewardsofbiotechnologyindustrydevelopment.Councilscandevelopcommunicationsmaterialsoftheirown,sharematerialswithBioCouncilsAlliancemembersoraccesstheservicesofsupportingagenciessuchastheGeneTechnologyInformationServicewhichisbasedinMelbourne.Theycanalsocontinuetoorganiseforumsandinviteexpertspeakersonspecifictopics,asissuccessfullydonenow.

Councilsalsoneedtoworkcloselyasafacilitatorandcoordinatorofindustry,helptochangetheattitudesofexistingparticipantstoacceleratetheadoptionofnewtechniquesorproducts.

6.3.5HostingDelegations

Thereisanimportantroleforlocalgovernmenttohostinboundtrade,investmentandpartneringdelegations.Wereceivedfavourablecommentsintheindustryinterviewsthatlocalgovernmentwasrecognisedbybiotechnologycompaniesasmakinganimportantcontributioninhelpingthemattractinternationalsupport.AcooperativeandcoordinatedapproachtohostingdelegationswillhelpVictoriashowoffdifferentaspectsofitscapabilitiestopotentialinvestors.Itwouldalsogiveconfidencetopotentialinvestorsthatthereissupportforthebiotechnologyindustryatalllevelsofgovernment.

6.3.6CouncilsasLeadUsers

Localgovernmentcanactasaleadusersandtrialsitesfornewtechnologywhereappropriate.Therearemanycouncilactivitiesthatcaninvolvebiotechnologysuchaswastedisposal,wastewaterreuseandtheuseofrenewableenergysources.Wenote,forexamplethatCityofHumepurchasesbiofuelswhentheyareavailable.

6.3.7ProvidingPremisesInformation

Theremaybesomeinstanceswherecouncilscanplayaroleinprovidinginformationonsuitablepremises.Theauthorsunderstandthatthediversityandcomplexityofthebiotechnologyindustrymakesitdifficultforcouncilofficerstocorrectlyrespondtoanyenquiriesbyindividualcompaniesforpremisesavailability.Ifcouncilswishtoprovidepremisesorlocationinformationthenitwouldbemadefareasieriftheyweretoconcentrateonspecificaspectsofbiotechnology.ForexampletheCityofMonashcouldconcentrateonunderstandingtheneedsofadvancedmanufacturingandITstylebusinesses,theCityofMelbournecouldconcentrateonunderstandingtheneedsofdrugdiscoveryanddevelopmentcompanies.

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6.3.8EngagingOtherLevelsofGovernment

ThisreportcanbeusedasacatalystfordiscussionandtoexploreareasofcommoninterestwithotherlevelsofGovernment.ThesediscussionscanidentifyfurtherwaysinwhichLocalgovernmentmaysupporttheimplementationoftheinitiativesofStateandFederalagencies,wheretheyrelatetodirectinvestmentandjobcreationopportunitieswithinmembermunicipalities.Acopyofthefinalreportshouldbesenttothefollowingagenciesforcomment;

• Department of Innovation, Industry and Regional Development.ThisreporthasbeenwrittenwithabackgroundunderstandingofthecurrentBiotechnologyStrategicDevelopmentPlanforVictoria(2004).TherehavealsobeenconsultationswithindividualDIIRDofficersonspecificissues.TheremaybeideasandproposalsdevelopedsubsequenttothepublicationoftheBSDPthatareofmutualinterest.AswellasthebiotechnologygrouptherearealsogroupswithinDIIRDwithinterestsinarangeoftopicsincludingprecinctdevelopment,complementarymedicines,nanotechnologyandadvancedmanufacturing.

• Department of Primary Industries.AlthoughtherehavebeeninitialdiscussionswithDPI,thereismeritincontinuingdiscussionsonareasofcommoninterest,particularlyinvalueaddedagricultureandthepotentialforindustrydevelopmentopportunitiesemergingfromDPIresearch.ThesediscussionscouldidentifyfurtherrolesforlocalgovernmenttoplayinthealleviationofanybarriersthatDPIoritsresearchprogramsmayfaceinbringingproductstomarket.

• Biotechnology Australia.TheremaybeinitiativesofopportunitiesunderconsiderationinBiotechnologyAustraliathatareofmutualinterest.BiotechnologyAustraliaisresponsibleforprovidingbalancedcommunicationstothesector.TheremaybeopportunitiestoworkwithBiotechnologyAustraliaandtheGeneTechnologyInformationServicetoaccesstheircommunicationsresourcestousewithlocalcommunities.

• Invest Australia.TheFederalGovernmentagencyresponsibleforattractinginboundinvestmentalsohasaninterestinbiotechnologysectordevelopment.

6.4OverviewoftheCapabilitiesandInterestsofSpecificMunicipalities

6.4.1CityofMelbourne

ThereareareasofparticularinteresttotheCityofMelbourne,particularlyasthefacilitatorofacommercialbiotechnologyprecinct.TheCitycould;

• UsetheinformationonfacilitiesrequirementsprovidedinthisreporttoprovidefurtherdetailtotheplansbeingdrawnupbyDesignIncandtheBioMelbourneNetwork.

• Conductfurtherworkondevelopingacapitalefficientbusinessmodelfortheexpansionspacefacility.Thatmayinvolve;

- Incorporatingcostestimatesfromthedevelopmentproposal;

- Developingafinancialmodeltorestructurethecostbaseawayfromup-frontcashto‘pay-as-you-go’chargestotenants;

- Exploringothermodelsoffundingincludingequityexchangeandthepotentialforbondsorguarantees;

- Exploringmodelsofexpansionspacedevelopmentsfromestablishedbiotechnologycentresoverseas;

- ConsideringtheCity’spolicyonincentivesandexploringthepotentialforengagingStateandFederalsupport.

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• Furtherevaluatethepotentialforsharedservicestobeincorporatedintheexpansionspacefacilitydevelopment(thevideoconferencing,andtelecommunications,marketintelligence,I.T.supportandchildcarefacilities).IndoingsotheCityofMelbournecouldliaisewithotherorganisationsthatareactiveindevelopingproposalsandideasforsomeoftheseservices,forexampleDIIRDandtheBioMelbourneNetwork.

• Explorethepotentialavailabilityoflowcostlandbyinvestigating,throughgovernmentchannels,ifthereareopportunitiesarisingfromhospitalsitepermitsthroughtheParkvilleprecinctdevelopmentplans.

• Provideadviceandactivesupportforzoning,planningandpermitapprovalsfortheexpansionspacedevelopmentandthebroaderprecinctconcept.

6.4.2CitiesofHumeandWhittlesea

ThereareopportunitiesfortheCitiesofHumeandWhittleseafromemergingareasofbiotechnologyinbioactivesandcomplementarymedicines.Theseopportunitieshavealongtimescale(5-10years),butareacloserfittothecharacteristicsofHumeandWhittleseathandrugdiscovery.Ifrealised,theseopportunitiesofferthepotentialforabroadbaseofhighvalueaddedemploymentinprimaryproduction,processingandmanufacturing.

ItisrecommendedthattheBioCouncilsAlliancemembersinthenorthernsuburbscontinuetoforgecloserelationshipswithRMITUniversity.TheBioCouncilsAlliancememberscanplayapracticalroleinhelpingtoengageindustryintheextensionoftheirwork(forexampleinengagingfoodprocessingcompanies,manufacturingcompaniesgrowersandprocessors).

RMITishighlyactiveinbiologicalsciences,itsbiotechnologyactivitiesarebecomingconcentratedinBundoora.Thenatureofitsworkisoftenappliedresearch,whichtypicallylendsitselfwelltoindustryuptake.TherearemanypotentialindustrydevelopmentopportunitiesthatareassociatedwithRMITasmentionedthroughoutthisreport,forexampletheworkofProfessorDavidStalkerinbioactives,AssociateProfessorXueinComplementaryMedicinesandProfessorMajewskiinDrugDiscoveryTechnologies.TheHeadofSchool,ProfessorColoehasalsooutlinedarangeofresearchfieldsthathaveopportunitiesforindustrydevelopment.

ThereisinterestatRMITindevelopingapilotscaleplantforfoodprocessing.Ifthisisestablisheditmaybecomeafocalpointforadvancedscienceinfoodprocessing(forexampleusingbioactiveproperties).Ifsothereareadvantagesinlinkingthefoodprocessingcompanieswithinthemunicipalitiestosuchafacilityasameansofengagingtraditionalcompaniesinnewdirections.Thatmayultimatelyleadtonewemploymentandinvestmentopportunities.

AlthoughDPIisamajordriverofactivityandithasexcitingfutureplans,muchofthisworkwillbeconcentratedinacentralfacilityattheLaTrobeUniversityR&DPark,whichdoesnotfallintothemunicipalboundariesofHumeorWhittlesea.Inaddition,DPIwillbeconcentratingitsresourcesonasmallernumberofhighimpactresearchareasinordertogaincriticalmass.Muchofthisinvolves‘smallfootprint’science,whichmeansitcanbedoneonacomputer,inawetlaborincontainedglasshouses.ThereislimitedopportunityforwidescaleexpansionrequiringextensivelandorcommercialspaceintheCitiesofWhittleseaorHume.TheauthorsnotethattheremaybeotheropportunitieswithinDPIandtherewerelimitationsinthenumberofpersonsthatcouldbeinterviewedintheprojecttimeframe.WesuggestthatongoingcommunicationsremainopenwithDPI.

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DiscussionswereheldwithDIIRD,BioCommandRMITregardingthedevelopmentofaComplementaryMedicinessector.Oneofthefindingsofthisreportisthatthereisworkrequiredtomapthevaluechaintoidentifyopportunitiestoengagelocaleconomicactivity.TheauthorsareawarethatDIIRDisconsideringsuchastudyandthatitmaypotentiallyinvolveFederalGovernmentsupport.TheBioCouncilsAlliancemaybevaluablestakeholderinthatstudybecauseoftheworkalreadydoneinapilotprograminorganisingherbgrowersbytheCityofWhittlesea.

TheCitiesofHumeandWhittleseaalsohaveadvantagesaslocationsformanufacturinganddistributionbusinesses.Howeverthisreporthasconfirmedthatthefutureprospectsfordrugmanufacturinganddistributiononanymajorscalearelimited.

TheCityofHumealsohasadvantagesasalocationfortestingcompaniesbecauseofitscloseproximitytotheairport.Howevertheresponsefromthecompanyinterviewswasthatforthemajorityoftesting(exceptnuclearmedicinetracematerial)theydonotneedtobedirectlyadjacenttotheairport.Thereforetheopportunitiesarisingfromtheexpansionofexistingbiomedicalbiotechnologycompaniesarelimited.

6.4.3CitiesofMonashandKnox

ThereareimmediateopportunitiesofinteresttotheCitiesofMonashandKnox.Accordingtoourindustryresearchthereisaconsiderableconvergenceoccurringintargeteddiagnostics,asoutlinedinSection6.3.2ofthisreport.TherearemanycompaniesinMonashandKnoxwithactiveinterestsinthisfield,forexampleWikore,MinfabandInvetech.TherearealsonewinvestmentsinmedicalimagingbeingmadeintheMonashSTRIP,andweareawareoffuturemanufacturingspacerequirementsfromtheCRCforMedicalImagingandBertholdAustralia.Thisconcentrationofcommercialinterestislikelytoincreasewiththecommissioningofthesynchrotron.

Theinfrastructureneedsoftheseconvergentcompaniesaresimilartootheradvancedmanufacturersrequiringhighstandard,modernfacilities.TheroleofLocalgovernmentisnotnecessarilytofacilitateadedicatedwetlabdevelopment,butmoretopromoteandencouragecrosssectorengagementofcompaniesinthesefields.

TheopportunitiesoutlinedinthisreportarehighlyconsistentwiththeworkbeingconductedbyDIIRDinitsprecinctdevelopmentplansfortheMonashareaandtheSouthEastInnovationandTechnologyClusterProject.WeconcludethatthebestprospectsforjobcreationandinvestmentcreationforMonashandKnoxliesinacontinuedinvolvementwiththeseinitiatives.

TheCitiesofMonashandKnoxalsohavelocationadvantagesformanufacturinganddistributionbusinesses,howeverthisreportconcludesthattherearelimitedopportunitiesfromexistingbiomedicalbiotechnologycompanies.

TheSouthEasternsuburbshaveanumberofcompanieswithpharmaceuticalmanufacturingcapabilitiesatarangeofdifferentlevels;GSKasaglobalpharmaceuticalmanufacturer,SigmaasacontractmanufacturerofcommercialscalequantitiesofpharmaceuticalsandIDTasamanufacturerofspecialtypharmaceuticalsforclinicaltrials.EachofthesecompaniesservesademandbasefarbeyondVictoria.IftherewasadramaticincreaseindemandfromVictorianbiotechnologycompanies,itmaynotoverlystresstheproductionvolumesofthesecompanies.Weconcludethatalthoughtherearesomefuturegrowthopportunities,itmayresultinadditionalproductthroughputorsomeexpansionofexistingcompanies,ratherthanattractalargenumberofnewcompanies.

WealsonotethatthefutureoftheDPIKnoxfieldsite(theInstituteforHorticulturalDevelopment)islimitedbecauseoftheconcentrationofDPIfacilitiesandresearchdirectioninBundoora.

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Asforbiomedicalbiotechnology,Monashalsoratedasapreferredlocationforbiomedicalbiotechnologycompanies,andthereareanumberofcompanieswhoarelocatedintheMonasharea.However,atthisstageofindustrydevelopmentitisdoubtfulifthereissufficientdemandforasecondexpansionspacedevelopmentforbiomedicalbiotechnologycompanies.Astheindustrycontinuestoexpanditmayreachapointinthefuturewherethisisviable.

6.4.4CityofWyndham

ThemainbiotechnologyrelatedopportunityfortheCityofWyndhamappearstobeinbiofuelsandbioplastics.Thisisarapidlyemergingareaofinterestworldwide(seecommentsinSection6.3.5)andthereareatleasttwocompaniesactiveinthisarena(PlanticandAxiomEnergy).Thetimeframeofthereportprecludedfurtherinvestigationoftheseopportunitiesbutourinitialdeskresearchindicatedthatthisisafieldthatislikelytoattractinvestment.Victoriadoeshaveastrongsciencebaseandresourcescouldbeturnedtowardsthisareaofapplicationiftherewassufficientattentiondevotedtoit.

OurrecommendationisthattheCityofWyndhamshouldconsiderifbiofuelsandbioplasticsisafieldthatitwouldliketopursueinthemediumtolongterm.TheCityofWyndhamcouldbecometheactivechampioninthisfieldandmaybeabletoharnessinterestfromotherStateandFederalagencies.Ifso,theCityofWyndhamwouldneedtobeginwithpreliminarystudyofthepotentialelementsfromwhichanindustrycouldbecreated.Itcouldholddiscussionswithexistingchemicalandpetrochemicalcompaniestogaugetheirlevelofinterest,assessthecapabilitiesoftheCityofWyndhamasalocation,thenassessVictoria’ssciencebaseasasourceofintellectualpropertyandcapabilities.Iftheopportunitycomestofruitionitwouldmeansignificantcapitalinvestmentinproduction,processingandextractionofbioactivepropertiesforfuels,plasticsandotherapplications.

TheCityofWyndhamcouldalsoexplorethepotentialofexpandingtheuseoftheAQISapprovedGMOtrialsiteownedbyAgrifoodTechnologiesasthebaseforlargerscalefieldtrialsforthedevelopmentofgeneticallymodifiedcropswithbioactiveproperties.

WeinterviewedsomecurrentWerribeeprecincttenantstounderstandtheirfuturedirectionsandtoidentifyifthereareopportunitiesasnaturalextensionoftheircurrentstrengths.Wefoundthatoneoftheopportunitiesisnotbiotechnologyrelated.FoodScienceAustraliaisinterestedindevelopingpilotscalefacilitiesforfoodprocessingandhopestobeabletoengagebothlocalsmallandmediumfoodprocessorsandalsomajorinternationalfoodprocessingcompanies.ThatisnotnecessarilybiotechnologyrelatedhoweverbecausetherearereservationsinthefoodprocessingindustryaboutitusingGMOproductforhumanconsumption,asoutlinedearlierinthisreport,itisanopportunityforemploymentandinvestmentnonethelessandcouldbeexploredfurtherbytheCityofWyndham.ThepotentialroleoftheCityistohelpfacilitateaccesstoexistingfoodprocessingcompaniestohelpthemengageintheattractionofadvancedtechnologyandbecomeinvolvedinthepilotfacilitiesatFoodScienceAustralia.

WearealsoawarethatDPIhasresearchfacilitiesintheWerribeeprecinct,althoughweunderstandthatthefuturedirectionofDPIinvestmentistowardsitsBundooralocation.

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6.5FrameworkforAction

Table 5. Framework for Action

Item Action Responsibilities

1. Commoninterestareas

1.1 Advocacy

• MaintainsupportfortheBioCouncilsAllianceascollaborationofcouncilswithaninterestinadvocatingtheeconomicdevelopmentopportunitiesassociatedwithbiotechnology.

All

1.2 Collaborate to compete

• BioCouncilsAlliancemembersshoulddevelopcomplementaryinterestsinspecificniches,forexampledrugdevelopment,targeteddiagnostics,bioactives,biofuelsandcomplementarymedicines.Targetedcouncilinvolvementwouldhelpconcentrateeconomicactivitiesintoparticularmunicipalities.

All

1.3 Promote Victoria’s capabilities

• DevelopmaterialsthatpromotethediversityofresourcesandcapabilitieswithintheState.HighlightthespecificcapabilitiesthatBioCouncilAlliancemembershaveinsupportingbiotechnologycompanyestablishmentandrelocation.

• AttendABIC2006asaconferenceexhibitorunderasingleBioCouncilsAlliancebanner.

All

1.4 Host delegations

• Remainengagedinhostingofinternationaldelegationswithinterestsinbiotechnologyinvestmentandrelocation

• PresentthebenefitsofeachoftheBioCouncilsAlliancemunicipalitiesinspecificniches.

All

1.5 Engage all levels of Government

• SendcopiesofthisreporttoDIIRD,DPI,BiotechnologyAustraliaandInvestAustraliaasacatalystfordiscussion.

• Seekfeedbackonareasofmutualinterestandwherelocalgovernmentmayassisttheimplementationofinvestmentandjobcreationinitiatives.

• Developforumsforregularcrosscommunication,forexampleaquarterlyorbi-annualsharingofinformationbetweenlevelsofgovernment.

All

1.6 Remain Engaged with Industry

• Sendcopiesofthereport(orextracts)tothosewhocontributedcommentstothereport.

• SeektheirongoingfeedbacktoensurethattheBioCouncilsAllianceremainsintunewithandrespondstoindustryneedsastheydevelop.

• Developlongtermallianceswithorganisationsthatareworkinginfieldsthatmaygeneratesignificantnewindustries(forexamplekeepclosetotheactivitiesofRMIT,keepclosetothoseinvolvedinmedicaldiagnosticimagingandthoseinvolvedinnanotechnology).

All

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2 Playactiveroleinland/precinct/sectordevelopments

2.1 Capital efficient expansion space for existing biotechnology companies.

• Facilitatethedevelopmentofexpansionspaceforbiotechnologycompaniesby;

• Attractingdevelopers

• Creatingtherightbusinessmodel

• Siteselection

• Zoning,planningandpermits

• Incentives

CityofMelbourne

2.2 Capital efficient facilities design for existing biotechnology companies.

• Provideinputtothebuildingdesignforexpansionspace;investigatethefeasibilityofprovidingthefollowingfacilitiesonasharedservicesarrangement:

• Videoconferencingandtelecommunications

• MarketIntelligence

• InformationTechnologySupport

• EmployeeServices

CityofMelbourne

2.3 Creating local jobs from complementary medicines.

• LiaisewithDIIRDinconductingadetailedstudyofthevaluechainforComplementaryMedicinesandensurethereisfocusonhowthiscanbetranslatedintoinvestmentandemploymentcreation.

• Remaininvolvedintrialprogramswithgrowers,theVictorianFarmersFederationandotherstocontinuallyencouragecommercialinterestinComplementaryMedicines.

CouncilswithaninterestinComplementaryMedicines.(potentiallyWhittleseaandHume)

2.4 Creating a local scientific, primary production and industrial base from bio fuels and bio plastics

• AssessthefeasibilityandcompetitivenessofaVictorianbiofuelsandbioplasticsindustrybase.ConductasystematicevaluationofthepotentialfordevelopmentinVictoria.IdentifyifthereareparticularcropsorapplicationsthatarebestsuitedtoVictoria’sclimate,primaryproduction,processingandindustrialbasethatwillprovideasustainablecompetitiveadvantage.

• Takealeadroleinfacilitatingthedevelopmentofthissectorbycoordinatingthosewithinterestsinthesupplychain;scientists,growers,processors,downstreamusers,investorsandgovernmentagencies.

(potentiallyCityofWyndham)

2.5 Attracting industry to bio processing

• Workwithcurrentscientiststofurtherevaluatethepotentialofvalueaddedprocessingofcropswithbioactivepropertiesandthepotentialusesofnewbioreactors.

• Identifyandengagelocalcompaniesorinvestorstoencouragetheirparticipation.

• FollowupwithDIIRDontherecommendationsofthe2004BSDPfortheprovisionofpilotscalemanufacturinginfrastructureforbioprocessing.

Councilswithaninterestinbioactivesgrowingandprocessing.

(potentiallytheCitiesofHume,Whittlesea,Wyndham)

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2.6 Attracting commercial interest in targeted diagnostics (pharmacogenomics)

• Encouragethecrosssectorcommunicationsthatarerequiredintheconvergingdiagnosticsfield,encouragingcreativitythroughtheintersectionofdisciplinesfrominformationtechnology,medicalimaging,advancedmanufacturingtechnologyandnanotechnology.

• Encourageexistingcompaniesworkinginthesesectorstoturntheirattentiontowardsopportunitiesinbiotechnologyandadvanceddiagnostics.

• ContinuetoparticipateintheSouthEastRegionalDevelopmentplanandtheMonashprecinctplansbeingdevelopedbyDIIRD.Wheregovernmentinitiativesrelatetostrengtheningthescienceandtechnologybase,playanadvocacyroletoensuretherearemeansthroughwhichtheinitialsciencecanbeextendedintolocaljobsandinvestments.

Councilswithinterestsintargeteddiagnosticsandpharmacogenomics.

(potentiallytheCitiesofKnoxandMonash)

3. Assistwithspecialistplanningpermits(GMO,animalhousing)

3.1 • Developoracquireachecklistofplanningpermissionsanditemsrequiredfortheestablishmentofaprecinct.

• CommunicatewithCitiesintheUSAorelsewherewhomayhavechecklistmodelsthatcanbeadaptedforlocaluse.

• Developoracquireachecklistofpermitsandapprovalsrequiredforanindividualcompanytomakeatransitionintoabiotechnologycompanyprecinct.Theprocesswillbesimilarbutthechecklistitemsdifferbetweenabioactivesprecinctandabiomedicalprecinct.

Anycouncilinvolvedinprecinctfacilitation.

4. Workwithcommunityattitudes

4.1 • Developspecialisationsinparticularareasofinteresttobebetterabletounderstandandadviseonindustrymatters.

• WorkwithBiotechnologyAustraliaandtheGTISinacquiringordevelopingcommunicationsmaterialsrelevanttoindustrydevelopmentandcommunityconcerns.

• Workcloselyasafacilitatorandcoordinatorofindustry.Helptochangetheattitudesofexistingparticipantstoadoptnewtechniquesorproducts,providecommunicationsandadvicetolocalcommunitiesregardinganypotentialconcerns.

Allcouncilstodevelopalibraryofinformationsourcesintheirparticularspecialisations.

Councilstoshareinformationandresourcesasrequired.

5. Provideinformationonsuitablepremises;

5.1 • Individualcouncilsdecidewhetherthisisaservicetheywilloffer.Councilsmaydecidetolimittheirservicesonlytonichesaligningwiththeirspecificinterests(forexampledrugdiscovery,diagnostics,agriculturalorindustrialbiotechnology).

Eachtoconsiderindividually

6. TraditionalCouncilServices

6.1 No action required

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Inadditiontothepublishedbrief,aseriesofindividualinterviewswereheldwitheachcouncil.Theinterviewsconfirmedthatcouncilsareinterestedinunderstandingwhatcanbedonetoattractandretainbiotechnologycompanies(andthoseassociatedwiththeirvaluechains)tocouncilareas.Italsoconfirmsthattheinterestslieinattractingandretaininginvestment,establishingphysicallocation,andskilledemployment.Theirinterestscouldbedefinedinthreemainthemes;

1.Tounderstandthelifecycleofbiotechnologycompanies;

• Usingthelifecyclemodeltoeducatecouncilsaboutbiotechnologycompanies;

• Tohelpplotwhereeachcompanyisnow,whereitmightbeanditsfutureinfrastructureneeds;

• Usingthelifecyclemodeltounderstandwhyinvestmentdecisionsaremade,andwhylocationandemploymentdecisionsaremade.

2.Tounderstandthenatureandextentofdemandforinfrastructure;

• Industrialparkspaceforgrowingbiotechnologycompanies;

• Identifyingtheroleoflocalgovernmentinthesematters.

3.Tounderstandtherangeofadvice,advocacyandservicesrequiredoflocalgovernment;

• Thatmayincludetraditionalbusinesssupportandplanningroles;

• TheremayalsobeaninterestinCouncilsasalinktocommunityconcernsandattitudesaboutbiotechnology.

Table 6: Interests of Councils

Municipality Specificinterests

CityofHume • Anestablishedindustrialanddistributionbase,closetoairports.

• Smallbaseofexistingbiotechnologycompanies.

• NotnecessarilyexpectingbiomedicalcompaniestorelocatetoHume.

• MoreinterestedinwhethersomeelementsofthevaluechainarebettersuitedtoHume,forexamplehighvalue,timecriticalbusinessessuchasdiagnosticservicesandtestinglaboratories.

• Hasasignificantfoodprocessingbaseandinterestedintherelationshipofbiotechnologyinthatvaluechain.

• Someinterestinthepotentialtrainingneeds(forexampleGLP/GMPtrainingopportunitiesforTAFE).

• Australia’slargestlistedbiotechcompany,CSL,hasamajorpresenceinHumebutCouncilisalreadyawareoftheirneeds.

CityofKnox • IsinterestedinthedevelopmentandpromotionoftheSouthEastcorridor.

• Isinterestedinthepotentialforbiotechnologycompanies(ortheirsuppliers)astenantsofpremiumindustrialparks.

• HasabaseofpharmaceuticalmanufacturersinthegreaterregionincludingGSK,SigmaandIDT.

• Alsointerestedinfoodprocessing.

CityofMelbourne • Hasabaseofestablishedandgrowingbiotechnologycompanies,aswellasestablisheduniversityandmedicalresearchprecincts(Parkville,TheAlfred).

• HadaskedtheBioMelbournenetworktosurvey6-8biotechnologycompaniesregardingtheirspaceneeds.Thatcanbebuiltuponbyaskingthesefirmsmoreabouttheirlifecycleissuesandextendingthespacesurveytootherfirms.

7 AppendiX 1. speCifiC inteRests of CoUnCiLs

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CityofMonash • Hasabaseofestablishedandgrowingbiotechnologycompanies,anestablishedmedicalresearchandtechnologyprecinctaroundMonashUniversity.

• IsinvolvedintheSouthEastInnovationandTechnologyClusterPrecinct.

• TherearesomebiotechnologycompaniesthathavehaddiscussionswithMonashSTRIPregardingtheirfuturegrowthneeds.

CityofWhittlesea • Smallbaseofexistingbiotechnologycompanies.

• NotnecessarilyexpectingbiomedicalcompaniestorelocatetoWhittlesea.

• RMIThasagrowingbiotechnologypresenceindrugdiscoveryandinagriculturalbiotech.

• TheLaTrobeincubatorandR&DParkisnotinthemunicipalitybutWhittleseaisinterestedifthereareexpansionneedsoftheirtenants.

• Alsointerestedincomplementarymedicinesandisactivelysupportingatrialprograminthisarena.

• Significantrurallandholdingsinthemunicipality,interestedintheagriculturalandanimalbiotechnologyopportunities(e.g.controlledfieldtriallocations)forhighvaluelanduse.

CityofWyndham • Smallbaseofexistingbiotechnologycompanies,thereisagrowingclusterintheGeelongareabutnotnecessarilyexpectingbiomedicalcompaniestorelocatetoWyndham.

• TherehavebeenaseriesofdevelopmentplansfortheWerribeeprecinctovertime,someinvolvingbiotechnologyaspects.

• Interestedinthecurrentprecincttenants,theirfuturegrowthplansandthepotentialforbiotechnologyindustriestoemergefromresearchinfoodproduction,processingandanimalhealth.

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DefinitionsofBiotechnologyCompaniesTherearemanydifferentdefinitionsusedtocharacterisethebiotechnologysector,dependingontheintendeduseofthedefinition.Thefollowingsectiondiscussesthedefinitionsthataregenerallyusedinthissectoranddescribestheparticularareasthatwereexploredinthisproject.

• Core Biotechnology-Corebiotechnologycompaniesusescience-basedapproachestounderstand,mimicorcontrolbiologicalprocess.Theyareofteninvolvedingeneticanalysisormanipulation.Typicallythetechnicalcompetencyandbusinessmodelof‘core’companiesdependsonexploitingintellectualpropertyembeddedinmolecular,cellularandtissuebiology.Thesecompaniesundertakeresearchanddevelopmentactivitiesinlaboratories,inhospitals,onfarmsandindiagnosticlaboratories.Examplesofsuchcompaniesare:Biota,ViraxHoldings,AmradandStarpharma.

• Popular Biotechnology–Inrecentyearstherehasbeenabroadeningofthedefinitionofthebiotechnologysector.Themostrecent2005Ernst&YoungGlobalBiotechnologyReportstates“Biotechnologycompaniesaredefinedascompaniesthatusemodernbiologicaltechniquestodevelopproductsorservicesforhumanhealthcareoranimalhealthcare,agriculturalproductivity,foodprocessing,renewableresources,industrialmanufacturing,orenvironmentalmanagement.”18

Itisimportanttonotethatadvancedknowledgeaboutbreedingtechniquesandbiologicalprocesseshasbeenusedforcenturies.Longestablishedmanufacturersandprocessors,forexamplebeermakersandcheesemakers,havealwaysusedbiotechnology.

TypesofCompany

Today’sCompaniesandTomorrow’sCompanies

Oneimportantaspectoftheproject’sdesignwastonotonlyidentifythegrowthneedsoftoday’scompaniesbutalsotoidentifywheretomorrow’scompanieswillcomefrom.Theymaybemedicalcompanies,butcouldalsocomefromdifferentsectorsforexamplefoodprocessing,agriculture,industrialorenvironmentalsectors.Thisisimportanttoknowbecausedifferentcouncilsmaybebettersuitedfordifferentaspectsoftheemergingbiotechnologysector.

CompanyBusinessModels–Physicalvs.Virtual

ThereareanumberofbiotechnologycompaniesinVictoriawhohave‘virtual’operations.Virtualoperatorscontract-outthemajorityoftheirinputs(forexampleResearch&Development,Manufacturing,Sales)andtheiractualproductissimplyatechnologylicense.AlthoughthesecompaniescreateeconomicwealthfortheState,theydonotmakepermanentinvestmentsinpeopleorinfrastructure.WhileStateandFederalindustrydevelopmentpoliciesencourageallbiotechnologycompanies,thisBioCouncilsAllianceprojectismoreinterestedincompaniesthatwillhaveastrongphysicalpresence.Oneoftheimportantthemesofthisprojectwillbetoidentifyifthereisarolethatlocalgovernmentcanplayincreatinganenvironmentthatencouragesphysical,ratherthanvirtualoperations.

8 AppendiX 2. definitions And types of CoMpAnies inteRViewed

18 BeyondBorders.GlobalBiotechnologyReport2005.Ernst&Young.

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ListedversusStart-up

Thefocusofthisreportisonbiotechnologycompanieswithexpansionneedsandthosewiththeabilitytocreatejobsandpermanentinvestment.Thathasledtheauthorstoconcentrateonlistedbiotechnologycompanies,whereasmanyotherreportsonthebiotechnologysector,respondingtodifferentbriefs,havefocusedmoreonstart-upcompanies.Whilestart-upcompaniesareimportant,thestatisticscanbemisleadingbecauseaproportionofthesecompaniesarevirtualoperators,orareessentiallyproductdevelopmentprojectsinacompanyshell.Asteadyflowofstart-upcompaniesisvitaltothecontinuedhealthofthebiotechnologysectorbuttheyarenot,atthatstageoftheirdevelopment,majoremployersorinvestorsinpermanentinfrastructure.Hencethefocusofthisprojectisoncompaniesatmoreadvancedstagesofdevelopment.

Limitations

Therearelimitationstothisproject,aswithallstudies,thatareconductedwithinadefinedbudgetandadefinednumberofinterviews.Initiallythebrieffocusedontheexpansionneedsofexistingcompanies,whowereprimarilyinthebiomedicalsector.Itwasagreedtoexpandthesearchtoexplorenewareas,forexampleagricultural,industrialandenvironmentalbiotechnologythatmaybetteralignwiththestrengthsofsomeBioCouncilAlliancemembers.Itmeantthattheinterviewswerespreadacrossbothexistingandnewopportunities.

Wedonotfeelthattheanalysisoftheexistingbiomedicalcompanieshasbeenhamperedinanyway.Theauthorsbelievetheyhaveidentifiedthemainissues,andfoundtherewasasignificantdegreeofsimilarityofresponses.Theauthorsarealsoinregularcontactwithmanyofthesecompaniesandwereabletodrawupontheknowledgegainedfromrelatedprojectsthatalsoexaminedcompanydevelopmentissues.

Thelimitationshavebeeninthedepthofanalysisofnewopportunities.Inaprojectofthisscope,theauthorshavebeenabletogainaccesstoleadingscientistsandindustryexpertsandforthemtoidentifythemainareasofpotentialinterestforfutureindustrydevelopment.Theauthorshavenotconductedanydetailedinvestigationofeachoftheareasidentified,orvalidatedtheclaimsmadebytheseexperts.ThepurposewastoidentifyareasofopportunitysothattheBioCouncilsAllianceorindividualmemberscouldthenexploretheseinmoredetailiftherewassufficientinterestinaparticulartopic.

OperatingBiotechnologyCompaniesThereweresixteenoperatingbiotechnologycompaniesinterviewed,asoutlinedinthefollowingtable.Theprojectsoughttomapoutthelifecycleofbiotechnologycompaniesandalsotoidentifytheexpansionneedsofgrowingbiotechnologycompanies.Thecompanieswereselectedforinterviewbecausetheywereidentifiedtohaveactivelyexpandingbusinesses.

Ashortdescriptionofeachcompanyispresentedinthefollowingtabletoillustratetheworkthattheydo,theirintendedbusinessmodels,andthestageofdevelopmentoftheirproductpipelines.Theinformationcamefrompubliclyavailablesourcesincludingcompanywebsites,annualreports,ASXannouncementsandinvestorpresentations.Furtherdetailontheirlifecycle,valuechainpositionandfutureintentionswascollectedduringindividualinterviewsandispresentedinlatersections.

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Shortcasedescriptionsofcompanies

AcruxAcruxisadynamicAustralianspecialtypharmaceuticalcompanywithvisionandskillsintransdermal drug delivery systems-waysofadministeringdrugsthroughtheskin-formanytherapeuticuses.Acrux’scorebusinessisthedevelopmentandcommercialisationofitstransdermaldrugdeliverytechnologyoriginallydiscoveredatMonashUniversity.Acrux’sbusinessmodelisbasedonitstechnologyaddingvaluetodrugswhichalreadyhaveregulatoryapprovalandwhichareconsideredsafeandeffectiveforuseinhumans.Acruxcanthereforeavoidmanyofthecostlyandtime-consumingprocessesinvolvedinmeetingregulatoryrequirements.Acrux’scommercialvaluedriversconsistof:

• Applyingtechnologytoalargenumberofhighvaluehumanandveterinarypharmaceuticalandhealthcareproducts.Thiswillbedonethroughlicensing,royaltyarrangementandothercollaborations;and

• ReplacingproductsusingcurrentdeliverytechnologywithproductsusingGroupTechnology.Initially,Acruxintendstoenterglobalmarketsbyformingpartnershipswithcompanieswithmarketingandsalesexpertise.TheGroupalsointendstodevelopproductsfornichemarketstoparticipatedirectlyinproductsales.

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AmradAmradCorporationLimitedisadrug discovery and developmentbiotechnologycompany.Amrad’scorebusinessisdiscoveringandcommercialisingdrugsbasedonmoleculesthebodynormallyusestoregulateitsvariousinternalprocesses.Thesemolecules,knownasbiologicalsorcytokines,areinvolvedintheregulationofabroadrangeofbodilyfunctionsandhencemayhaveapplicationsinavarietyofdiseases.Amrad’scurrentR&Dportfolioincludesprojectsinthetherapeuticareasofcancer, inflammation, asthma, rheumatoid arthritis and cardiovascular disease.

AvexaAvexaCorporationisinthebusinessofdiscovery and developmentofanti-infectivepharmaceuticalmedicinesforthetreatmentofserioushumaninfectiousdiseases.Avexa’sprincipalresearchprogramsfocusonthediscoveryofinnovativemedicinesforthetreatmentofthediseasescausedby:

• HumanImmunodeficiencyVirus(HIV);

• HepatitisB(HBV);and

• Vancomycin-andmethicillin-resistantbacteria.

BiomassConversionTechnologiesAstart-upcompanyfocusingonconversionofethanol from straw.BCTisacompanyassociatedwithProfessorStalkerfromRMIT.ProfessorStalkerwasoneoftheoriginal12foundersofCalgeneIncin1981,thepioneeringagriculturalbiotechnologycompanyfromCalifornia.From2002-2004hewasCorporateVicePresidentforVentriaBioscience,aCaliforniabasedbiotechnologycompanyspecialisinginplantderivedproductionofpharmaceutical/nutritionalproteins.

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CryptomeCryptomePharmaceuticalisadrugdiscovery and development company.Cryptomeusesitsproprietary“Cryptomics”technologytodiscover“hidden”or“cryptic”peptidefragmentswithinexistinglargerproteins.Thecompany’sscreeningandhit-identificationtechnologyyieldsleadcandidateswithgreaterimmediatesignificancefortheinhibitionofphysiologicfunctionsoperatingindiseasestates.Currentlythecompanyfocusesoncardiovascular, neuroinflammatory diseases and cancer.

Itcurrentlyhasfourcompoundsinthepreclinicalphaseandtencompoundsindiscoveryphase,includingananti-coagulantleadmoleculeCR001,whichhasnowbeenshowntohaveinvivoefficacy.

CytopiaCytopiaisaMelbourne-baseddrug discovery and developmentcompanycommittedtoredefiningthewaymedicinesarediscovered.Thecompanyispositionedatthecutting-edgeofstructure-basedrationaldrugdesignanddiscovery.Theirvisionistodiscoveranddevelopanewgenerationoftherapeuticdrugsforcancerandimmunedisease.Itsmajortherapeutictargetsare:Cancer,(specificallyProstateCancer,Lymphoma,Leukemia,andMultipleMyeloma);andImmune Disease,(includingRheumatoidArthritisandAtopicdiseases,suchasEczemaandAsthma).

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EvogenixEvoGenixisaproduct-focusedbiotechnologycompanydeveloping novel therapeutics for significant medical markets.EvoGenixappliesitsproprietaryantibodyengineeringplatformsforhumanisation,optimisationandtoxinconjugationtodevelophighlypotenttherapeuticantibodiesagainstclinicallyvalidateddrugtargets.

EQiTXEQiTXLimitedisdedicatedtothecommercialresearchanddevelopmentofnewtherapeutic drugsforchronicdiseasesandconditionsaffectingtheaging population.Thecompanyisacquiringandmaturingaportfoliooftechnologies,withthepotentialtodevelopmorethanasingleproductthatiscommerciallyattractivetomultinationalbiotechnologyandpharmaceuticalcompanies.ItisinterestingtonotethatEQiTXrelocatedwithinthelast2yearsfromPerthtoMelbournetobeclosertoinvesteecompanies.

GeneticTechnologiesGeneticTechnologiesspecialises in the fields of genetics and genomics.Itisaglobalpioneerinrecognisingtheimportanceof‘non-coding’DeoxyriboNucleicAcid(DNA).Thisresearchdiscoveryenabledustopatentstrategiesbywhichnon-codingvariationintheDNAisutilisedtoanalysegeneticmaterialandalsotomapgenesandtraitsofinterestacrossallmulti-cellularspecies.Thesepatentsformthebasisoftheirsubstantial licensing activities.Inadditiontoongoinglicensingandresearchactivities,theyutilisedtheirlaboratoryandgeneticsexpertisetobuildaDNA testing business-providingtestingforhumans,animalsandplantsincluding;diseasesusceptibilityforconditionsasdiverseascancer,heartdiseaseandblooddisorders,humansportsperformance,humanrelatednessandpaternitytestingservices,forensictesting,plantbreedingimprovementandprogenydetermination,aquacultureandmarinespeciesparentage.

IliadChemicals(sinceacquiredbyBionomics)IliadChemicalsisadrug discovery and development company,withproductcompoundsincancer and multiple sclerosis.IliadChemicalsusesanovelchemicalstrategytoprovideefficientsynthesisofmoleculestraditionallyregardedastoocomplexforachemicallibraryapproachtodrugdiscovery.Usingthistechnology,IliadChemicalshasproducedatargetedlibraryofnovelmoleculesthatarepotenttubulinpolymerisationinhibitors.Thisisanimportanttargetforthetreatmentofcancer.ThecompanyplanstodevelopitsownleadcompoundtothestageofPhaseIIclinicaltrials.

MeditechMeditechResearchLimitedisanAustralian,development stage,biotechnologycompanyfocusedondevelopingandcommercialisingdrugsthatimprovethehealthandqualityoflifeofpatientswithcancer and other chronic diseases.

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MetabolicMetabolicPharmaceuticalsLimitedhasthemissionofdeveloping novel therapiesfordiseaseswithapplicationtoworldwidemarkets,includingobesity,obesity-relateddiseasessuchastype 2 diabetes,andmorerecently,pain, and osteoporosis.Thecompany’soperatingstrategyistooutsourcemuchofitsactivities,minimisinginfrastructureandoverheadcostswhilemaximisingaccesstoworld-classexpertise.Contractresearchorganisationsandothercontractdevelopersarebeingusedforallaspectsofthecompany’spharmaceuticaldevelopments,includingformulation,manufacturing,preclinicalstudiesandclinicalstudies.Theseoutsourcingactivitiesarecloselycontrolledbythecompany’smanagement,whichhasthebenefitofsubstantialskillsandexperienceintheclinicaldevelopmentofdrugs,themanagementofresearchandahigh-levelofdecision-makingexperienceintheinternationalpharmaceuticalindustry.

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PlanticPlanticTechnologiesLtdwasformedin2001tocommercialisetechnologydevelopedattheAustralianCo-OperativeResearchCentreforInternationalFoodManufactureandPackagingScience.‘Plastic from Plants’.Planticisanewstarchbasedbiopolymerthatiswatersolubleandbiodegradable.PlanticTechnologiesLimiteddevelopsandmanufacturesbiodegradablematerialsmadefromrenewableresourcesthatassistmanufacturersandretailersachieveenvironmentallyfriendlysolutionstotheirpackagingandproductneeds.AccordingtoWiredMagazine“Itcouldbethebiggestthingsinceslicedbreadwaswrappedincellophane:biodegradablefoodpackagingthat’scheapenoughtocompetewithconventionalplastic.Onceused,itcanbethrownontothecompostheaporeveneaten.Thetechnology,developedbytheAustraliangovernment,couldhelpusherina21stcenturygreenrevolution.Cornfieldsratherthanoilfieldscouldsatisfymuchoftheenormousdemandforplastic.Ahugechunkofthe24milliontonsofplasticthatAmericanstosseachyearwouldendupinbackyardcom-postersinsteadoflandfills.Andthenthere’sthecarnagethatwouldbeavoidediftheplasticpollutingtheworld’soceansdissolvedratherthankillingseaturtles,furseals,andotherwildlife”(WiredIssue10.07|Jul2002).PlanticisbasedinLavertonintheCityofWyndham.

StarpharmaStarpharmaisaplatformcompanyusingspecifictechniquesinthe discovery and development of pharmaceuticals.Starpharmaiscreatingvaluefromdendrimer-basednanotechnologythrough:thedevelopmentofhigh-valuedendrimernanodrugstoaddressunmetmarketneeds(includingVivaGel™-atopicalmicrobicideforthepreventionofHIV andothersexuallytransmitteddiseases(STDs));andpartneringwithpharmaceuticalcompaniestocreatenewopportunitiesandsolutionstoproblemswiththeapplicationofdendrimernanotechnology.

ViraxViraxHoldingsLtdisdeveloping immune based therapiesthatdirecttheimmunesystemtotreatdisease.TheCompanyisdedicatedtodevelopinganewclassofimmunotherapeuticstotreatwidespread,life-threateningdiseasesoftheimmunesystemincludingHIV/AIDS and other infectious diseases, cancers and autoimmune disease.

Virax Pipeline

Product IndicationStatus IndicationStatus

VIR201 HIVTherapy PhaseI/IIa

VIR401 HepatitisBTherapy Pre-Clinical

VIR501 LateStageProstateCancerTherapy

Pre-Clinical

Source:ViraxCorporateProfile

VitapharmVitapharmisaproduct development and marketing company.VitapharmResearchwithitscommercialoperation,VitalBiotech,isacompanythatefficientlycreatesandcommercialisestherapeuticswithlowrisk,lowcostandimmediatereturns.Itisengagedindownstreamvalue-addedbiotechnologyprocessing.

IthasR&DcentresstrategicallylocatedinMelbourne,AustraliaandChengdu,thePeoplesRepublicofChina.IthasthreeproprietaryplatformtechnologiesrelatedtodrugdeliverydevelopedbyitsAustralianR&Dcentre.

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1.ProteinStabilisationandDelivery(PSD)

2.VaccineStabilisation

3.SkinDrugDeliverySystem(SDDS)ExtensivemarketinganddistributionnetworkinthePRCExistingproductsmarketedinthePeoplesRepublicofChina;Opin,OsteoformandSpray-OnBandage.

Oftheabovesixteencompanies,oneislistedontheHongKongStockExchange,oneislistedonNASDAQ,oneisprivatelyownedandtheremainingelevenarelistedontheAustralianStockExchange(includingoneprivatefirmthatwassubsequentlyboughtoutbyanASXlistedfirm).

SupplyChainCompanies

SupplyChainCompaniesInterviewed

AgrifoodTechnologyAnAustralianWheatBoardsubsidiary.Aswellasprovidingplantandgraintestingservices,hasanAQISlicensedGMO field siteforgrowinggeneticallymodifiedcropsforthepurposesofresearchandevaluation.

BertholdAustMedical devices; diagnostic imaging.AnAustralianCompanywithlinkstotheGermanBertholdmanufacturingcompany.Manufacturerofcomplex,R&Dintensivemedicalimagingandnuclearmedicineequipmentforuseindiagnosisandindrugdevelopment.FoundationpartneroftheCRCforMedicalImaging.

CellTherapiesCellTherapiesPty.Ltdisinthebusinessofplanningandconductingclinical trialsthatinvolvethecollection,manipulationandstorageofblood cells and human tissue.Theservicesrangefromlaboratoryrentalthroughtofully-integratedplanningandexecutionofclinicaltrialsthatinvolvecellulartherapeuticsmanufacturedincodeofGoodManufacturingPractice(cGMP)andTherapeuticGoodsAdministration(TGA)licensedfacilities.

CorticalDynamicsMedical devices; Anasthesia monitoring.CorticalDynamicshasbeenestablishedtocommercialisetechnologyforsystembasedanalysisofbrainelectricalresponsesdevelopedbyresearchersfromSwinburneUniversity.ThistechnologyfacilitatesacomprehensiveanalysisofEEGrecordingsandisexpectedtoprovideareal-timemeasureofthelevelofthedepthofanaesthesiainanaesthetisedpatients.

GlaxoSmithKlineAmajorinternationalpharmaceutical companywithin-houseproductdevelopmentandmanufacturingcapabilities.Apotentialacquirerorlicenseeofbiotechcompaniesand/ortheirproducts.

InstituteforDrugTechnologies(IDT)AlistedAustraliancompanyspecialisinginpharmaceutical manufacture.Particularexpertiseinshort-runmanufacturingofproductsfordrug development and clinical trials.

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RMITDrugDiscoveryTechnologiesSpecialisedlaboratory facilities for drug discovery and development.RMITDrugDiscoveryTechnologies(RDDT)isanotforprofitunitwithintheSchoolofMedicalSciences,RDDTisdedicatedtodevelopingandprovidingOECDPrinciplesofGoodLaboratoryPracticepreclinicaltoxicologyandpharmacologyservicestothebiotechnologyandpharmaceuticalindustries.

WilkoreAdeveloperofbuildingsandfacilitiesforbiotechnology,pharmaceuticalandnanotechnologycompanies,withastronginterestinprecinctdevelopment.WilkorealsohasinterestsinMini-FabTheMicro-Bio-NanoCompany.MiniFABofferscustomisedmanufacturingandadvancedproduct development,exploitingleadingedgepolymermicrofabrication.Itsbusinessisthedesign,fabricationandintegrationofpolymermicroengineeredsystems.

IndustryExperts

Table 9: Industry Experts Interviewed

Person Background Expertise

DrMikeDalling Asuccessfulbiotechnologyentrepreneurandinvestor.ChairmanandActingCEOofLifeScienceinvestmentcompanyXceedBiotechnologyLimited.FounderorDirectorofmanyagriculturalbiotechorganisationsincludingFlorigene(Molecularbreederofcarnationsandroses),Nufarm(chemicalsandcropprotection),BioMassConversionTechnologies(ethanolfromstraw)andformerCEOoftheStrategicIndustryResearchFoundation.

AgriculturalBiotechnologycompanydevelopmentandinvestment.

DrPaulDonnelly CEOoftheCRCforInnovativeDairyProductsandDirectorofASXlistedbiotechcompanyGroPepLtd.

Agriculturalbiotechnology

DavidHudson-SGASolutions

BoardmemberofFarmacule,anAustralianmolecularfarmingcompany.FormerlywithMonsantoforover20yearsandmanageroftheirGMCanolaprogram.

AgriculturalBiotechnology

MichaelMagelakis-SSMI

CompletedasurveyofbiotechnologyskillsrequirementsfortheOfficeofTrainingandTertiaryEducation.

Biotechnologyskillsdevelopment

TimMurphy–ExecutiveDirector.BioMelbourneNetwork

TheBioMelbourneNetworkisVictoria’sbiotechnologyindustrydevelopmentorganisationwithmembershipbyleadingcompanies,researchorganisationsandserviceprovidersacrossthesector.

Biotechnologyindustrydevelopment.

Expansionspacerequirements.

MarcWeiss-VirginiaBiotechnologyResearchPark

Cityinvolvementinbiotechprecincts. Precinctdevelopment

RichardColbert-BaltimoreCounty,DeptofEconomicDevelopment-

Cityinvolvementinbiotechprecincts. Precinctdevelopment

EdPhillipchuk-AlbertaAgriculture,FoodandRuralDevelopment

Recognisedexpertinagriculturalbiotechnologyindustrydevelopment.CommentsonCanadianinvestmentinbioactiveproperties.

Agriculturalbiotechnology

JasonMajor Manager,GeneticTechnologyInformationService.

Communicationsandcommunityconsultation

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Investors

InvestorsInterviewed

StarfishVenturesGBSCapitalBioCommStarfishandGBSCapitalhavebothpre-seedfundsandexpansioncapital.AswellasaninvestorBioComm,isaproviderofcommercialisationadvicetouniversitiesandprivatecompanies.

University

Table 11: University Interviews

University Topic

UniversityofMelbourne–Bio21Institute.(DrPeterGoss)

BusinessIncubatorandResearchTransferFacility

LaTrobeUniversity–LaTrobeTechPark.(SueBell)

LaTrobeR&DParkdirections

RMITUniversity-ProfessorPeterColoe,HeadofSchoolofAppliedSciences&Biotechnology.

RMITbiotechnologyresearchdirectionsandindustrypotential

RMITUniversity–ProfessorDavidStory,AssociateProfessorCharlieXue

ChineseMedicineresearchdirectionsandindustrypotential

MonashUniversity-MonashSTRIP.(DrElaineZelcer)

Biotechparkandcompanyexpansionspace

MonashUniversity–MonashCommercial.(PeterBachelor)

Monashspin-offcompanies

Government

Table 12: Government Interviews

Organisation Topic

DIIRD–Infrastructure.CameronFrazer Infrastructureplans-WerribeeandParkvilleprecincts.

DIIRD–ClusterDevelopmentandSpecialActivitiesCentres.IreneWyld

Cluster/precinctdevelopmentplans.TheMonashPrecinct

DIIRD–ChineseMedicine.DaphneThompson ChineseMedicine/ComplementaryMedicineindustrydevelopmentstrategy

DPI–ChiefScientist.DrGrahamMitchell Scientifictrendsandopportunitiesinagriculturalbiotechnology

DPI–ActingChiefEconomist.LorisStrappazzon IndustrydevelopmentissueswithinDPI

DPI–DirectorFacilitiesandInfrastructure.FranklinTrouw

Investmentspending,facilitiesandlocationdecisionswithinDPI

DPI–InstituteforHorticulturalDevelopment.DrIanPorter

Biospheresandintensivecropproduction

FoodSciencesAustralia(CSIROandDPI)–IanGould,OperationsDirector

Trendsinfoodprocessing,agbiotech,Werribeepotential

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AssessingthecostofUSbiotechnologyfacilitiesConstructioncostscanrangefrom$US175to$US500persquarefoot,whiletenantimprovementcostscanrangefrom$US75to$US200persquarefoot.Howeverbuildoutcostscanbeashighas$US200persquarefootNNNforhighendsophisticatedlabbuildouts.Theabovecostsarebasedonatriplenet(NNN)lease.Thatrequiresthetenanttopaybaserentplusashareoftheexpensesoftheleasedproperty.Suchexpensestypicallyareitemisedwithinthefollowingcategories;taxes,insurance,operatingexpenses(maintenance,utilities,janitorial,etc).Thewetlabfacilitiesgenerallyplanforaratioof60%laband40%officeuse(whichisconsistentwiththefindingsofthespacesurveyforVictorianbiotechnologyfirmsearlierinthissection).

Table 13: Conversion of Colliers USA Biotech Data to Australian Terminology

ConversionofUSdatatoAustralianterminology USA(persquarefootpermonthin$US)

Austconversion(persquaremetreperannumin$AU)

RentalratesNNNinmajorsuburbancluster(LA&Raliegh)-low 15 23

RentalratesNNNinmajorsuburbancluster(LA&Raliegh)-high 36 54

RentalratesNNNindevelopedurbanclusters(Boston&SanFrancisco)-low

25 37

RentalratesNNNindevelopedurbanclusters(Boston&SanFrancisco)-high

50 74

Tenantimprovementpackagesfromlandlords-low 75 111

Tenantimprovementpackagesfromlandlords-high 200 297

Labbuild-outcosts-high 200 297

Table 14: Conversion Factors

Conversion-USindustryterminologytoAustralian Example

Costpersquarefootpermonth 200

Metricconversion 0.0929

Costpersquaremetrepermonth 19

Costpersquaremetreperannum 223

Exchangerate 0.75

Costperm2p.a.in$AU 297

VictorianCostComparisonsThismodelisdevelopedforthepurposesofdiscussingthecostoflocatinginaCBDbiotechnologyprecinctversusasuburbanbiotechnologyprecinct.Thecostsarehighlevel‘ruleofthumb’estimatesforthepurposesofdevelopingasimplecomparison.TheestimateswereprovidedbyMrMichaelWilkinson,CEOofWilkore.Themodelhasthreeelements,theland,theshellconstructionandthefitout.Thefitoutcaneitherbeofficefitoutorwetlabfitout.ThelocationcanbeeitherCBDorsuburbs(usingKnoxasareferencepoint).

Theauthorshavetakenthecoststothedeveloperplusestimatedprofitmargins(expressedasyield)tobeabletocalculatethefinalpricetocompanies.ForeaseofcomparisonwiththeUSmodeltheauthorshaveusedamodelwherebythefullyfittedoutspaceisofferedtocompanies.Ifthedeveloperfundsthefitouttheywillseekahighermarginbecauseofthebusinessriskoffundingspecialisedassetsforrelativelysmallandhighriskcompanies.

9 AppendiX 3. Costing ModeLs foR eXpAnsion spACe

76

Table 15: Estimates and Assumptions for Wet Lab Cost Comparison

Wetlab-Highrange City Suburbs

Developer’scostforland(perm2) 1,000 200

Developer’scostforwarehouseshell(perm2) 500 500

Developer’scostforwetlabfitout(perm2) 2,000 2,000

Yieldrequiredonland&warehouseshell 10% 10%

Yieldrequiredonwetlabfitout 25% 25%

Leasecosttotenant-Land&w/hcomponent(perm2p.a.) 150 70

Leasecosttotenant-Wetlabcomponent(perm2p.a.) 500 500

Subtotal(perm2p.a.) 650 570

Costofoutgoings(estimate) 20% 20%

Totalcostperm2perannum 780 684

Source:Basedondeveloper’sruleofthumbestimates

Table 16: Estimates and Assumptions for Office Cost Comparison

Office-HighRange City Suburbs

Developer’scostforland(perm2) 1,000 200

Developer’scostforofficeshell(perm2) 900 900

Developer’scostforofficefitout(perm2) 500 500

Yieldrequired 10% 10%

Subtotal(perm2p.a.) 240 160

Costofoutgoings(estimate)3 20% 20%

Totalcostperm2perannum 288 192

Source:Basedondeveloper’sruleofthumbestimates