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Geelong Biotechnology Opportunities Study

Buchan Consulting

Final Report

July 2004


Contents

Executive Summary...................................................................5G21 Strategy......................................................................................................................... 5Defining the Boundaries........................................................................................................5Australia - A Major Biotechnology Hub.................................................................................5Biotechnology in Victoria.......................................................................................................5Victorian Research Clusters..................................................................................................6Biotechnology in Geelong.....................................................................................................7SWOT Analysis..................................................................................................................... 7Drivers of Future Development.............................................................................................8The Strategy.......................................................................................................................... 8A Geelong Biotechnology Network......................................................................................12Taking the First Steps.........................................................................................................12Recommendations..............................................................................................................13

1 Introduction.....................................................................15

2 G21 Context.....................................................................162.1 G21 Our Region our Future - Geelong Region Strategic Plan...............................162.2 Biotechnology Project............................................................................................17

3 Defining Biotechnology.....................................................193.1 Defining Biotechnology..........................................................................................19

3.1.1 Analysing the Sector.....................................................................................193.1.2 Defining the Industry.....................................................................................20

3.2 Applications of Biotechnology................................................................................20

4 Biotechnology - a Global Industry......................................224.1 Key Industry Centres.............................................................................................224.2 Size of the Industry................................................................................................224.3 Growth of Networks and Alliances.........................................................................23

5 Biotechnology in Australia.................................................245.1 Industry Structure..................................................................................................245.2 Public Sector Research.........................................................................................255.3 Australian Biotechnology Companies....................................................................25

5.3.1 Core Biotechnology Companies....................................................................255.3.2 Publicly Listed Biotechnology Companies.....................................................28

6 Biotechnology in Victoria..................................................296.1 Overview................................................................................................................296.2 Public Research Organisations..............................................................................30

6.2.1 Research Institutes.......................................................................................306.2.2 Cooperative Research Centres.....................................................................31

6.3 Clinical Trials.........................................................................................................316.4 Biotechnology Companies.....................................................................................32

6.4.1 Core Companies...........................................................................................326.4.2 Group 2 Companies......................................................................................34

7 Support for Biotechnology in Australia...............................367.1 Policy Overview.....................................................................................................367.2 Australian Government Support for Biotechnology................................................37

7.2.1 Funding for Research....................................................................................377.2.2 Research and Development Tax Concessions.............................................387.2.3 Major Initiatives.............................................................................................38

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7.2.4 Biotechnology Centre of Excellence..............................................................387.2.5 Biotechnology Innovation Fund.....................................................................39

7.3 Victorian Government Policies and Programs.......................................................397.3.1 Biotechnology Strategic Plan........................................................................397.3.2 Bio21.............................................................................................................407.3.3 Science Technology and Innovation Fund....................................................407.3.4 Synchrotron...................................................................................................407.3.5 Bio21.............................................................................................................417.3.6 Science Technology and Innovation Fund....................................................417.3.7 Synchrotron...................................................................................................417.3.8 Funding for Infrastructure..............................................................................42

8 Biotechnology Locations in Victoria...................................438.1 Biotechnology Clusters in Victoria.........................................................................438.2 The Major Precincts...............................................................................................43

8.2.1 Parkville Precinct...........................................................................................438.2.2 Alfred Medical Research and Education Precinct (AMREP) - Prahran.........438.2.3 Monash Health Research Precinct - Clayton.................................................448.2.4 Werribee Precinct..........................................................................................448.2.5 Bundoora Precinct.........................................................................................448.2.6 Austin Biomedical Alliance Precinct - Heidelberg..........................................44

8.3 Location of Biotechnology Firms............................................................................46

9 Biotechnology in Geelong..................................................479.1 Overview of the Sector..........................................................................................479.2 Research Resources.............................................................................................50

9.2.1 Research Funding.........................................................................................509.2.2 Researchers..................................................................................................50

9.3 CSIRO...................................................................................................................519.3.1 CSIRO Geelong............................................................................................519.3.2 Research Priorities........................................................................................529.3.3 The Diagnostic Sciences Program................................................................529.3.4 The Infectious Diseases and Food Safety Program......................................529.3.5 The Vaccines and Therapeutics Program.....................................................52

9.4 Deakin Research...................................................................................................539.4.1 A Commitment to Research..........................................................................539.4.2 Research Priorities........................................................................................549.4.3 Research Funding.........................................................................................549.4.4 Biosciences at Deakin...................................................................................57

9.5 BioDeakin..............................................................................................................599.6 ChemGenex Pharmaceuticals...............................................................................609.7 Chirogen................................................................................................................609.8 Barwon Health.......................................................................................................60

9.8.1 Clinical Trials.................................................................................................609.8.2 Osteoclast Cell Biology.................................................................................619.8.3 Douglas Hocking Research Institute.............................................................61

9.9 PIRVic Marine and Freshwater Science................................................................629.10 CSIRO Textile and Fibre Technology....................................................................629.11 Geelong Education and Training...........................................................................63

9.11.1 Deakin University..........................................................................................639.11.2 Gordon Institute.............................................................................................649.11.3 Marcus Oldham College................................................................................64

10 SWOT Analysis..................................................................6510.1 Strengths of Geelong.............................................................................................65

10.1.1 Reputation and Infrastructure Foundations are Significant...........................6610.1.2 Quality Education is Available.......................................................................6610.1.3 Cooperation and Linkages............................................................................6610.1.4 Locational Factors were Important................................................................67

10.2 Weaknesses..........................................................................................................67

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10.3 Opportunities.........................................................................................................6810.3.1 Geelong Opportunities..................................................................................6810.3.2 National Opportunities...................................................................................69

10.4 Threats.................................................................................................................. 70

11 Developing the Biotechnology in Geelong..........................7111.1 Key Factors Supporting Development...................................................................7111.2 Proximity to Academic Excellence.........................................................................7211.3 Business Model for Biotechnology Firms...............................................................73

11.3.1 Timing Cost and Risk....................................................................................7311.3.2 Business Structures......................................................................................7511.3.3 Alliances and Partnerships............................................................................7611.3.4 Location Factors............................................................................................77

11.4 The Need for Funding............................................................................................7911.4.1 Raising Capital..............................................................................................7911.4.2 Venture Capital and Business Angels...........................................................82

11.5 A Skilled Workforce...............................................................................................8211.5.1 Research Leaders.........................................................................................8211.5.2 A Skilled Workforce.......................................................................................83

11.6 Research Leaders are Active in Driving Development...........................................8511.7 Established Infrastructure/Co-locations.................................................................8511.8 Technical Support and Services............................................................................8611.9 Intellectual Property being Generated from Institutions.........................................8611.10 Specialist Education and Training.....................................................................8611.11 Connections with Larger Life Sciences Companies..........................................8611.12 Commercialisation and Patenting Expertise......................................................8711.13 Lifestyle Attractions...........................................................................................87

12 A Growth Strategy............................................................8812.1 Growth Horizons....................................................................................................8812.2 The Strategy..........................................................................................................90

12.2.1 Local Growth.................................................................................................9012.2.2 Strategy Overview........................................................................................9112.2.3 Components of the Strategy..........................................................................92

12.3 Expansion of the Current Research Base..............................................................9312.3.1 Deakin University..........................................................................................9312.3.2 Barwon Health...............................................................................................9412.3.3 CSIRO...........................................................................................................95

12.4 Increase Commercialisation of Research..............................................................9612.5 Research Cooperation...........................................................................................9712.6 Attracting a New Research Centre........................................................................9712.7 Developing the Skills Base....................................................................................9812.8 Developing Research Infrastructure......................................................................9912.9 Attracting a Biosciences Manufacturing Operation..............................................100

12.9.1 Scale up Facilities.......................................................................................10012.9.2 Good Laboratory Practice Facilities............................................................10112.9.3 Large Scale Manufacturing Operations.......................................................10112.9.4 Small and Medium Scale Manufacturing Operations..................................103

12.10 Marketing of Geelong Capability.....................................................................10312.11 Networking......................................................................................................104

12.11.1 Assessing the Need for a Network..........................................................10412.11.2 Benefits of a Cluster................................................................................108

12.12 A Geelong Biotechnology Cluster....................................................................10812.12.1 Objectives and Activities.........................................................................10912.12.2 Membership of the Cluster Organisation.................................................11112.12.3 Resources...............................................................................................11112.12.4 Location..................................................................................................11212.12.5 Funding the Network...............................................................................11212.12.6 Governance of the Network....................................................................112

12.13 External Linkages............................................................................................112

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12.14 BioMelbourne Network....................................................................................11312.15 Linkages with Werribee Technology Precinct..................................................114

13 The Way Ahead...............................................................11513.1 A Long Term Strategy..........................................................................................11513.2 Taking the First Steps..........................................................................................11513.3 Establishing the Network.....................................................................................116

13.3.1 Geelong Council Taking a Lead Role..........................................................11613.3.2 Key Tasks...................................................................................................116

14 Recommendations..........................................................118

Appendix 1 References...........................................................120Appendix 2 Geelong Technology Precinct................................122Appendix 3 Werribee Technology Precinct...............................124Appendix 4 Public Sector Biotechnology Research and Development.........................................................................126Appendix 5 Location of Biotechnology Firms by LGA................130Appendix 6 Location of Metropolitan Research Institutes........132Appendix 7 Government Funding Programs.............................134

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Executive Summary

G21 StrategyThis report provides an assessment of biotechnology opportunities in Geelong, it examines the existing industry and its potential and outlines a strategy for achieving future growth.

It is part of a series of reviews being undertaken on future industry opportunities in Geelong. These studies are part of the G21 Strategy and are aimed at assessing Geelong’s potential for development in key sectors.

Biotechnology was identified in the G21 Strategy as one of the pillar projects – projects of major significance to the region’s long term future.

Biotechnology was chosen as a pillar project because the region has an existing research base and the sector is one that is growing at a rapid rate internationally. It is seen as an industry of the future and one that is knowledge intensive.

Defining the BoundariesAs the basis of industry analysis, there is a need for a clear definition of biotechnology and the segments that make up the biotechnology sector. A range of definitions of the sector are often used, ranging from those that are narrowly focused on biotechnology to broader definitions that take a biosciences approach.

The broader biosciences approach also takes accounts of activities, which are not directly pure biotechnology, but use the products and processes that are derived from biotechnology. This broader definition opens up greater research and industry development opportunities for Geelong.

Activities can be grouped into several broad categories including human healthcare and medical research, agricultural, environmental, and food.

Each of these categories draws to a varying degree on new technologies in molecular life sciences, chemistry, biology, applied physics, and engineering and applied mathematics/ computational sciences.

Australia - A Major Biotechnology HubAustralia is recognised as a major centre of biotechnology. The biotechnology sector in Australia comprises: research institutes, cooperative research centres, universities and private and public companies. The public research organisations are the largest employers in the sector.

The business component of the sector has the following characteristics: biotechnology is significant in Australia and is a growing industry; there are around 700 companies involved in biotechnology in Australia, of which 190 are mainly engaged in biotechnology activities (core biotech companies) and 490 are involved in related activities.

Biotechnology is a major focus of government policy at a national and state level. The key focus is on encouraging research, product and process development, commercialisation, and the development of international partnerships.

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Biotechnology in VictoriaIn Victoria, government policy is aimed at making the State one of the world's top five global biotechnology hubs over the next decade. The Victorian Government released a major strategy document in 2001. The Government has made a major investment in the sector over the past 5 years, and in mid 2004 released an updated Biotechnology Strategy.

The Victorian biotechnology sector is made up of a diverse range of research areas, however the State has particular research strengths in medical and plant research. There are 181 organisations in Victoria involved in biotechnology: medical related research is dominant, with 105 organisations or 58% involved in the field; plant research involves 31 organisations.

Victoria accounts for over 35% of biotechnology companies in Australia.

Victorian Research ClustersThere are 6 identified biotechnology precincts in Victoria, and their combined level of activity is substantial. In total the 6 precincts employ 6000 researchers and have research funding of around $450 million per year.

The Parkville Precinct is Victoria's largest biotechnology precinct, and is the major focus for the $400 million Bio21 development. The precinct includes the University of Melbourne, the Walter and Eliza Hall Institute of Medical Research, the Howard Florey Institute of Experimental Physiology and Medicine, the Ludwig Institute for Cancer Research, and the Royal Melbourne Hospital.

The Alfred Medical Research and Education Precinct combines the Alfred Hospital, the Baker Heart Research Institute, the MacFarlane Burnet Centre and Monash University School of Medicine. Key strengths of this precinct are research into cardiovascular disease, viruses and HIV/AIDS.

The Monash Health Research Precinct is a biomedical cluster based around Monash University's Clayton Campus. It is linked to clinical research with a major focus on public health and health services. The precinct includes: Monash Institute of Reproduction and Development, Monash Institute of Public Health, Prince Henry's Institute of Medical Research and the Southern Health Care Network. Biotechnology companies located within this precinct include Biota Holdings, Mimotopes and Monash IVF.

The Werribee Precinct is principally focused on animal and food research. Key institutions located on the site include the Victoria University of Technology, Food Science Australia, the Victorian Institute of Animal Science and the CSIRO Division of Animal Health.

The Bundoora Precinct is focused on plant bioscience. Those located in the area are: La Trobe University, La Trobe R&D Park and RMIT University Bundoora campus.

Austin Biomedical Alliance Precinct is located in Heidelberg and is based at the Austin and Repatriation Medical Centre.

A recent study examined the spatial location of biotechnology firms (including devices and diagnostics) and major research institutes1. The analysis shows the major concentrations are in the local government areas of Melbourne, Monash and Yarra. This reflects the size of the biotechnology precincts located in each of these LGAs, and the tendency for companies to continue to locate adjacent to the research institutes that were the foundations for their technologies.

1 Bioscience to Bioindustry A Role for Local Government in Biotechnology in Victoria, Aoris Nova January 2004

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Biotechnology in Geelong

On a total size basis (researchers and research expenditure) Geelong ranks as Victoria’s 7th biotechnology precinct. Biotechnology research and development in the Geelong Region is focused in several areas: CSIRO/AAHL, Deakin University, several spin-off companies AGT Biosciences (now ChemGenex Pharmaceuticals) and Chirogen, Barwon Health, PIRVic Marine & Freshwater Science (at Queenscliffe).

In total we estimated that the resources devoted to biotechnology include around 300 researchers and approximately $ 18 million per year in external research funding.

Education and training is also a strength for the region covering: teaching at Deakin in Biological and Chemical Sciences and Ecology and Environment; and courses at Gordon Institute for laboratory technicians, environmental testing and pathology.

The major research organisations (CSIRO/AAHL, Deakin and Barwon Health) are committed to expanding research activity and each has specific growth projects that they are working on.

For example, Deakin has two successful spin-off companies – ChemGenex (formerly AGT Biosciences) and Chirogen.

All of the major research institutions have links with major life sciences companies, through R&D partnerships, contract research or clinical trials.

SWOT AnalysisGeelong has a number of strong positives as an emerging regional biotechnology hub. A number of strengths come through in the analysis conducted for this opportunities assessment, and these provide a strong foundation for the future growth. The key advantages were: a research reputation and significant infrastructure foundations; availability of quality education; existing cooperation and linkages. Lifestyle factors were also seen as an important positive.

The major weaknesses identified primarily relate to the current scale of R&D, fragmentation and the broader lack of recognition of Geelong as a centre for biotechnology.

Major perceived opportunities were built around the current capability areas. A key development focus needs to be on building current specialisations through securing additional research funding. The existing major research strengths were seen in health-related research in diseases, drug treatments and pharmaceuticals; animal health – including diseases and vaccines; aquaculture; and future potential in environmental applications.

The major threats identified related to the ability of Geelong institutions to compete for research funding and to scale up their activities, and the impact of shifts in government research priorities. The region was seen as having only a few key research leaders, the loss of whom would impact on future growth. While the GTP was seen as a major asset for the region, concerns were expressed about difficulties if market interest could not be secured for a phased development of the site.Concerns were expressed that Geelong would not have the dollars to compete with other regions that were bidding for biotechnology activities. There was also a concern that biotechnology had to compete with other G21 projects that may deliver more immediate pay-offs in business and jobs.

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Drivers of Future DevelopmentIn overall terms, Geelong can be classified as an emerging biotechnology location. It has a base anchored by CSIRO and PIRVic, with significant expansion occurring at Deakin and plans for expanded research activity at Barwon Health.

Activity and resources are concentrated in the research and discovery phase. Any major expansion in the medium term will need to be built on both an expansion in research and increased levels of commercialisation. This will require the attraction of significant additional funding for these research and commercialisation activities.

In our assessment, we ranked Geelong on a number of recognised drivers of development in biotechnology.

The region has: a high ranking on research leaders active in the region/driving cluster; a medium/high ranking on - proximity to academic excellence, established infrastructure/co-locations, lifestyle attractions; a medium ranking on - generation of IP from institutions, availability of a skilled workforce, commercialisation, patenting expertise, technical support and services; and low rankings on connections with larger life sciences companies, venture capital and business angels.

The StrategyOur analysis shows that there is a strong foundation for the further expansion of biotechnology and related areas of biosciences in Geelong. While the sector is small in scale in comparison with size of the major research precincts in Melbourne, it is specialising in areas that provide considerable future growth potential. In particular the areas of human health and aquaculture provide major opportunities.

The key focus of the development strategy outlined in this report is on “growing you own” with a scaling up in activity through an expansion of research funding and increased commercialisation.For several key reasons, the development of biotechnology in the Greater Geelong Region has to be part of a long-term strategy. This situation arises because of: the long cycle in biotechnology to bring new discoveries to market; the time taken to build research capacity and research reputations in new and existing fields; and a need for and expansion in long term investment in research capacity and infrastructure in the region.

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The following diagram summarises the growth strategy within the context of the stages of development of a biotechnology product from concept to market. The value of the IP increases as the product/technology gets closer to the market.

It shows that Geelong is mainly concentrated in the concept development stage, with some activity in product development through clinical trials, some partnerships and other commercialisation activity.

There are some unique features of the sector: the average biotech firm takes on average 7 years before it is cash flow positive; from an initial investment of $2 million in discovery, a total of $50-$100 million would be required to take it through development and trials into the market; and the returns from products that reach the market are very high. To move through this cycle generally required patient capital and partnerships with large companies.

The objective of the Geelong biotechnology strategy is to consolidate Geelong’s research position and move Geelong along the value chain so that by 2015 it will be in a position to attract a major manufacturing operation, having built a substantial research infrastructure and commercialisation portfolio.

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Concept Development

Product Development

Production & Distribution

Increasing cost

Increasing value

Proof of concept/prototype

Discovery

IP Protection

Regulatory compliance

Preclinical/clinical field trials

Scale up

Marketing and distribution

Build industry partnerships

Govt funding

Geelong Now

Geelong 2010

Geelong 2015-20

Manufacturing

Investors Venture capital Licensing Partnerships


The strategy outlined in this report has taken a 15 year perspective, with 3 distinct phases identified.

Phase 1 (Years 1-5) - Building Research Scale – this first phase over the next 5 years concentrates on scaling up research activity through an expansion of research funding and increased commercialisation. While it may take time to secure a result, the investment attraction needs to commence in Phase 1.

Phase 2 (Years 6-10) - From Research to Production - this second phase continues the growth in research and development, while attracting related small to medium scale production facilities (scale up and bioprocessing). The GTP site will be important as a location for these activities.

Phase 3 (Years 11-15) - A Regional Bioindustry Centre - this final phase spans the period out to 2020. Geelong will have consolidated its position as biotechnology hub, with a spectrum of activity from discovery to production, and developed to a position where it has the potential to attract a larger scale production facility (eg pharmaceuticals or vaccines).

These phases are summarised in the following table.

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Year Major Activities Targets

Phase 1

Year 1

2005

. Develop the biotechnology cluster and network

Develop marketing kit

. Improve cooperative activities

. Secure additional research funding(national and State)

. Develop a new entrepreneurs program

. Develop linkages with BioMelbourne Network

. Develop other networking programs with industry

Commence a business/research centre attraction strategy

Increase total research funding by 15% on 2003 levels

Years 2-5

2006-2009

Building Research Scale

. Secure additional research funding

. Establish Barwon Research

. Start up of Centre for Aquatic Animal Health

. New spin-off companies

. Extend links with major international companies(life sciences)

. Commence Development of Stage 2 of GTP(land development)

. Continue a business/research centre attraction strategy

. Attract/develop small/medium production facilities (bio-processing)

By 2009 Increase total external research funding by 60% over 2002/03 levels.

Increase number of researchers

Phase 2

Years 6-10

2010-2014

From Research to Production

. Attract an industry research centre

. Continue expansion of research centres

. Increase commercialisation

. Attract small/medium production

. Seek to attract a major manufacturing related facility

External research funding to have doubled over 10 years.

Target 500 researchers

Phase 3

Years 11-15

2015-2019

A Regional Bioindustry Centre

. Attract a major biotechnology related manufacturing operation

. Continue expansion of research activities

. Increase commercialisation and creation of successful spin-off companies

Target 800 researchers in Geelong biotechnology organisations

While much of the biotechnology activities will be focused in Greater Geelong, the other G21 Councils will benefit through residential development and the increase in knowledge based job opportunities in the region.

Geelong Council needs to take a lead role in facilitating the strategy.

The growth strategy that we are recommending encompasses: expanding the current research base; developing industry linkages; building research cooperation; attracting a

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new research centre; increasing commercialisation of research; developing skills; expanding infrastructure; attracting a major player – research centre or manufacturing operation; marketing Geelong's biotechnology capability; and developing an industry network.

Achievement of the targets in the strategy will require:

The major research centres continuing to pursue aggressive growth strategies to expand R&D.

Promotion of Geelong as a regional biotechnology hub.

Development of a segment of the Geelong Technology Precinct as a biotechnology location.

Local government, particularly Greater Geelong City Council, taking a active role in facilitating the development of the sector and helping to secure government support for specific research and industry programs.

A Geelong Biotechnology NetworkOur analysis indicates the need for an organisational structure to deliver the strategy. While there are already the foundations of a biotechnology cluster in Geelong, there is a need for a new organisation to be established.

This organisation is BioGeelong - the Geelong Biotechnology Network.

The network would have a range of objectives including: facilitating an expansion in research funding; assisting with the development of regional, national and international partnerships; encouraging greater commercialisation of research; assisting in the development of biotechnology infrastructure; and assisting in the marketing of regional biotechnology capability.

Taking the First StepsOur analysis also shows that achieving growth will require the continued momentum that is embodied in the current expansion plans of Deakin, CSIRO and Barwon Health, combined with increased cooperation on broader initiatives.

This cooperation is required to realise emerging opportunities and to deal with some of the constraints identified in the SWOT analysis.

A new vehicle is required to facilitate this industry cooperation on an ongoing basis. As we have seen there is a need to build on the regional cluster, through the establishment of a formal Geelong Biotechnology Network.

The next steps would involve:

Forming a Bioindustry taskforce to consider this report.

Securing additional funding for the establishment phase of the Network.

Development of a detailed business plan for the Network.

Setting up the Network and commencing on the Year 1 projects

The implementation timetable should aim to have the Network in place and functioning by early 2005.

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RecommendationsThe following are the major recommendations in the report.

Recommendation Priority Implementation Responsibility

Timing Page

Strategy DirectionsRec 1 That the focus of the development strategy for the biotechnology sector in the Geelong region be primarily on a “grow your own strategy” over the first 5 years

Medium BioGeelongDeakin, CSIRO, Barwon Health, PIRVic

Ongoing 90

Rec 4 That a major focus of the strategy be on scaling up the biotechnology sector in Geelong through securing increased research funding


Ongoing 93

Rec 5 That a major focus be placed on increasing commercialisation of research


Ongoing 96

Rec 6 That a major emphasis be placed on increasing research collaboration and joint projects among the research organisations in Geelong


Ongoing 97

Committing to the StrategyRec 2 That the development strategy outlined in this report be adopted as the long term regional biotechnology plan for the Geelong and the broader G21 Region

Short Term Geelong Council, other G21 Councils, Deakin, CSIRO, Barwon Health

Sept 2004 93

Rec 3 That Geelong City Council seek endorsement of the report from the research organisations and other major stakeholders and support for its key directions

Short Term Geelong Council Sept –Nov 2004

93

Establishing a NetworkRec 17 That a Geelong Biotechnology Network (BioGeelong) be established as the vehicle for delivering the regional biotechnology strategy

Short Term Geelong Council Feb 2005 108

Rec 18 That the BioGeelong – the Geelong Biotechnology Network be located at the GTP

Short Term Geelong Council, Deakin

Feb 2005 112

Rec 19 That the funding for the Network include member contributions as well as funding from relevant government programs.

Short Term Geelong Council, Deakin, CSIRO, Barwon Health

Feb 2005 112

Rec 20 That the Network establish links with key industry organisations and relevant government agencies

Short Term BioGeelong Network

Feb 2005 onwards

113

Rec 21 That as part of the development of the Network, the potential for linkages with organisations in the Werribee Precinct be further examined

Short Term Geelong Council, Bio Industry Taskforce Business Plan Consultants

October 2004 114

Rec 22 That a Bio-Industry Taskforce be formed to consider this report and to develop the network

Short Term Geelong Council, Deakin, CSIRO, Barwon Health, other G21 Councils

August 2004 116

Rec 23 That the City of Geelong continue to take a lead role in managing the next stages of implementation of this report including the development of the BioGeelong Network

Short Term Geelong Council August 2004 117

Rec 24 That the City of Geelong seek funding from the Victoria Government for the development of the BioGeelong business plan; an investment attraction plan and a biotechnology infrastructure projects plan, under the Regional Innovations Clusters Program

Short Term Geelong Council/Victorian Government

September 2004

117

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Timing Page

Rec 25 That following the completion of the business plan, Council seek additional funding for establishing the network


December 2004 117

InfrastructureRec 9 That as one of the early projects of the BioGeelong Network an assessment be made of future infrastructure needs to expand the biotechnology sector in Geelong

Short Term BioGeelong NetworkGeelong CouncilConsultant

Nov 2004 99

Rec 10 That the GTP be recognised as a key infrastructure project that is fundamental for the future development of biotechnology in the Geelong Region, including the attraction of research centres and production facilities

Medium Term BioGeelong NetworkGeelong Council

2005 onwards 99

Skills DevelopmentRec 8 That special regional programs be established to develop commercialisation and business skills within the biosciences sector in Geelong. These programs should be developed by the proposed BioGeelong Network


Feb 2005 99

Business Attraction & DevelopmentRec 7 That the attraction of a major new research centre be established as a medium term goal for Geelong


2005 -onwards 98

Rec 11 That the feasibility of developing regional scale up facilities at the GTP be investigated by the BioGeelong Network


March 2005 100

Rec 12 That the feasibility of developing GLP facilities at the GTP be investigated by the BioGeelong Network


June 2005 101

Rec 13 That the attraction of a major biosciences related manufacturing operation be pursued as long term goal for Geelong

Long Term BioGeelong NetworkGeelong Council

2007 onwards 102

Rec 14 That the attraction of a smaller scale biosciences related manufacturing be pursued as a medium term priority for Geelong


2006 onwards 103

Marketing and PromotionRec 15 That an ongoing biosciences industry marketing program be implemented for Geelong Biotechnology

Short/Medium BioGeelong Network, Geelong Council

Feb 2005 104

Rec 16 That Greater Geelong City Council take the lead in developing the marketing materials

Short Term Geelong Council October 2004 104

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1 Introduction

This report is part of a series of reviews being undertaken on future industry opportunities in Greater Geelong and the surrounding region2. These studies are part of the G21 Strategy and are aimed at assessing Geelong’s potential for development in key sectors.

Biotechnology was identified in the G21 Strategy as one of the pillar projects – projects of major significance to the region’s long term future.

Biotechnology was chosen as a pillar project because the region has an existing research base, and the sector is one that is growing at a rapid rate nationally and internationally. Biotechnology is seen as an industry of the future and one that is knowledge intensive.

This report provides an assessment of biotechnology opportunities in Geelong, it examines the existing industry and assesses its potential and outlines a strategy for achieving future growth.

The information contained in this report is derived from an analysis of a range of business databases, industry reports and policy documents and research studies, including major strategy reports commissioned by the Australian Government and the Victorian Government. It is also based on industry consultations and an assessment of future opportunities in biotechnology.

Buchan would like to acknowledge the input provided in this project by researchers and others involved in biotechnology in Geelong and elsewhere. These persons have provided valuable insights into their own work and honest assessments of the future potential for developing biotechnology in the region.

We also acknowledge the input from representatives of the G21 Councils, who participated in the Steering Committee for this project.

2 The G21 Councils include Greater Geelong, Golden Plains, Colac Otway, Surf Coast and Queenscliffe.

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2 G21 Context

2.1 G21 Our Region our Future - Geelong Region Strategic Plan G21 provides the strategy framework for reshaping the Geelong Region. The following diagram summarises the structure of G21. It sets the overall context for this biotechnology opportunities study.

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The following diagram shows how the lighthouse projects have relevance to the pillars.

2.2 Biotechnology ProjectThis Biotechnology Opportunities Study is one of the major projects, under the Economic Development Pillar.

“Biotechnology Cluster - This project aims to provide a comprehensive analysis of biotechnology sector opportunities in the Region and prepare a strategy detailing how actions are implemented to support and facilitate the business development of the sector.”

Source G21 Strategy – Economic Development Pillar

Development of biotechnology has major implications for several of the G21 Pillars – Economic Development and Research.

The focus on the Economic Development Pillar is on building clusters and networks for export and business development and providing services to SMEs. Other aspects are focused on investment and business attraction and developing industry/research partnerships.

In addition to these outcomes, the Research Pillar has identified a number of areas of research that would add particular value to community wellbeing and prosperity. These are: education research; advanced materials manufacturing; textiles research; aquaculture; animal and human infectious diseases and public health research; environmental technologies; aged care research; and biotechnology.

A number of proposals are advanced in the G21 Strategy to build the research capability of the region. These include: more effective leverage of current capability; improving the networking and communication between research groups; securing improved research funding including increased local investment in research; increasing the critical mass of research groups; updating infrastructure and improving access to ‘state of the art’ equipment; improving the profile of research within the Region; changing the negative attitude of many community leaders towards research; and increasing community awareness of the attributes and benefits of research.3 The findings of our assessment of biotechnology are largely consistent with the directions outlined in the G21 Strategy.

3 G21 Our Region our Future Geelong Region Strategic Plan P 57

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Another G21 Project is currently being investigated. This is a proposal for a Geelong based Centre for Population Health and Development4. This Centre will embrace population health and development in its broadest sense and provide a collaborative and sustainable approach to serving the Region’s needs for information, research and development activity for effective human services, infrastructure, environmental and economic planning. Examples of activity would include community safety, lifestyle and well being (arts, culture, sport and recreation), education and lifelong learning, and, particular needs relating to housing, transport and communications.

4 This Centre will embrace population health and development in its broadest sense and provide a collaborative and sustainable approach to serving the Region’s needs for information, research and development activity for effective human services, infrastructure, environmental and economic planning. Examples of activity would include community safety, lifestyle and well being ( arts, culture, sport and recreation), education and lifelong learning, and, particular needs relating to housing, transport and communications.(Project Brief March 2004).

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3 Defining Biotechnology

Biotechnology is expanding globally as its applications are applied more widely to health, environment, agriculture and manufacturing processes

3.1 Defining Biotechnology

3.1.1 Analysing the SectorIn developing any strategy it is important to define the scope of the sector that is being examined.

As the basis of industry analysis, there is a need for a clear definition of biotechnology and the segments that make up the biotechnology sector.

A range of definitions of the sector are often used, ranging from those that are narrowly focused on biotechnology to broader definitions that take a biosciences approach.

The broader biosciences approach also takes accounts of activities, which are not directly pure biotechnology, but use the products, technologies and processes that are derived from biotechnology.

In the same way defining the borders of what make up “the biotechnology industry “can vary. In this report we have adopted the definition of biotechnology that was used in the Ernst & Young, Australian Biotechnology Report 1999 (and in subsequent reports).

“Biotechnology is defined as “the application of science and engineering in the direct or indirect use of living organisms or parts of organisms in their natural or modified forms in an innovative manner in the production of goods and services or to improve existing processes.”

Ernst & Young (1999) – Australian Biotechnology Report P5.

This definition is the foundation of much of the industry analysis included in this report. A similar definition (which also includes devices) has been adopted in the Victorian Government's strategy documents.

“Biotechnology is the application of knowledge about living organisms and their components to make new products and to develop new industrial processes.”

Biotechnology Strategic Development Plan for Victoria, Science Technology & Innovation, 2001 P 7

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3.1.2 Defining the Industry

In a recent global study, Ernst & Young used the following diagram to define the industry. It includes applications in core fields of: medicine and pharmaceuticals, nutrition and fine chemicals, agriculture, and environment. The sector is supported by equipment and processes and specialist services.

Source: Ernst & Young

These categories align with those that are used by AusBiotech5 in analysing its membership, and are also similar to the mix of organisations that are members of the BioMelbourne Network6.

This broader biosciences approach also has implications for future economic and industry development. The expansion of the core research and the areas of application tend to also generate demand for specialist services and equipment and processes.

3.2 Applications of Biotechnology The biotechnology sector can be divided into universities and research institutions (which in Australia, receive most of their funding from government) and companies.

Activities can be grouped into several broad categories including human healthcare and medical research; agricultural; environmental; and food.

Each category draws to a varying degree on new technologies in molecular life sciences, chemistry, biology, applied physics, and engineering and applied mathematics/ computational sciences.

The key focus of research and business activities is in areas including genomics, pharmaceutical/biopharmaceutical, tissue and cell engineering, diagnostics/genetic testing, medical devices and bioinformatics.

The following table illustrates applications of biotechnology based technologies in specific industry sectors.

5 Ausbiotech is a national industry association representing the biotechnology sector in Australia.6 BioMelbourne Network is an organisation established by the Committee for Melbourne to encourage development of biotechnology in Victoria. It has received seed funding from the Victorian Government.

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Table 1. Industries that Use BiotechnologyIndustry Sector ApplicationHealth Pharmaceuticals, diagnostics and

treatmentAgriculture Plant breeding, animal breeding,

veterinary products and diagnosticsEnvironmental and resources Pollution control, land bio-remediation,

water treatment, minerals extraction and processing and pest management

Food and beverage processing Starters, enzymes, fermentationIndustrial applications Further processing of agricultural

products (eg. oils, fibres), bio-processing, and generation of industrial enzymes

Energy production BiomassSource: Biotechnology Strategic Development Plan for Victoria. 2001

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4 Biotechnology - a Global Industry

Biotechnology is a global industry that is dominated by US firms and research organisations. Business and research activity is also expanding across a range of locations across the world, including Australia.

4.1 Key Industry CentresThe biotechnology sector is expanding around the world, with new centres of incubation, discovery and development emerging in a range of locations.

The majority of the industry is concentrated in the United States, with major concentrations in California, Boston, Pennsylvania, and New York.

Australia has a long established reputation as a world leader in biotechnology research, especially in biomedical and agricultural applications.

Over the last decade, new research and development clusters have emerged in Canada, the United Kingdom, the Netherlands and Japan.

Other countries including Singapore and Malaysia are also seeking to develop their capability.

Ernst & Young, in their recent Global Biotechnology Report, make some observations on key global drivers.

“Globalisation is being driven by: bio-tech and large pharmaceutical firms looking for broader markets and for the best R&D partners; companies listing on multiple stock exchanges to expand their investor base; venture capitalists looking for new opportunities; university researchers collaborating internationally; and governments pursuing development strategies based on innovation in biotechnology.”

Source: Beyond Borders Global Biotechnology Report. Ernst & Young. 2003 P 6

4.2 Size of the Industry

US companies dominate account for 73% of global revenue for publicly listed companies in the sector.

Table 2 is derived from the Ernst & Young Global Biotechnology Report 2003 and provides data on the global commercial biotechnology industry. The definition used by Ernst & Young for a biotechnology company is that of a “core biotechnology” company – ie a company with a major focus in biotechnology, or deriving the major proportion of revenue from biotechnology. The report highlights a number of key characteristics.

Total revenue of publicly listed core biotechnology companies globally was estimated at $63 aud billion in 2002.

Approximately 194,000 people were employed in these companies.

Total R&D expenditure per year for these companies was $33.8 aud billion or over 50% of total revenue.

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US companies account for 74% of global corporate spending on R&D, Europe accounts for 23%, and Canada accounts for 2.5%. The Asia/Pacific region accounts for only 1% of world R&D spending.

The US dominates the sector accounting for 75% of employment.

In the Asia-Pacific, Australia is seen as having the most advanced biotechnology sector. There were 601 companies are in the Asia/Pacific region, with Australian companies (190) accounting for approximately half of the total Asia/Pacific revenue.7

Total global expenditure of biotechnology firms is estimated at $82.8 aud billion (on total revenues of $63.6 aud billion), generating a net loss of $19.2 aud billion. This net loss is about 30% of global revenues.8

R&D spending increased by 34% between 2001 and 2002.

Table 2. The Global Biotechnology Industry – 2002 Global USA Europe Canada Asia/Pacific

Public Company dataRevenues ($m aud*) 63,645 46,563 12,711 2,255 2,115R&D expenditure ($m aud*) 33,865 25,034 7,675 854 303Net loss ($m aud*) 19,205 14,428 4,251 405 122Number of employees 193,753 142,900 33,304 7,785 9,764Number of CompaniesPublic Companies 613 318 102 85 108Private Companies 3,749 1,148 1,776 332 493Total companies 4,362 1,466 1,878 417 601Company location by Region % 100% 33.6% 43.1% 9.6% 13.8%

Source: Derived from Beyond Borders Global Biotechnology Report. Ernst & Young. 2003 (* based on exchange rate - $1Aud= $0.65 US)

4.3 Growth of Networks and AlliancesThe E&Y report suggests that the industry is maturing and moving toward an alliance network of specialty companies. This reflects the need for large companies to acquire new IP and for emerging companies to secure funding. This is similar to the pattern of development in the ICT sector.

“A company does not have to do everything, does not have to be a mini-pharmaceutical company to be successful and profitable. But it does have to focus on an area that is essential for bringing products to market, such as analytical instruments, target and compound discovery plus validation, pharmocogenomics and toxicity, regulatory affairs and clinical trials or manufacturing.”

“By refocusing on what they do best, biotech companies can build networks of alliances through which each player contributes to the end product and shares in the revenues. They can generate profit making activities to support other activities. Setting up a company that will not report earnings for 10 to 15 years was a business model for the 20th century not the 21st Century.

Source: Beyond Borders Global Biotechnology Report. Ernst & Young. 2003 P 5

7 Australian Biotechnology Report. Ernst & Young and Freehills. 2001.8 This reflects the high levels of expenditure necessary to establish research facilities support R&D and product development and the significant costs involved in gaining regulatory approval; and the early market stages of many companies, where most are in the research and development phase and do not have current product or technology offerings.

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5 Biotechnology in Australia

5.1 Industry StructureThe following diagram summarises the structure of the biotechnology sector in Australia and the various interaction points between government, research organisations and companies.

The sector is made up of a growing number of participants operating in a diverse range of research areas.

Research strengths of Australia’s biotechnology are in the following fields: agricultural biotechnology, proteomics, stem cells, bioinformatics, human therapeutics, particularly drug discovery, medical devices and diagnostics.

Basic research, development of new technologies and the application of biotechnology is undertaken by private and public companies, universities, CRCs and not for profit research institutes. Appendix 4 contains information on public sector research and development.

Chart 1. Public and Private Sector Biotechnology Linkages

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5.2 Public Sector ResearchAustralia has developed a strong public sector research base in biotechnology and related fields – that includes health and medical applications, agriculture and environmental sciences. The main contributors to Australia’s primary research output are CSIRO, universities, research institutes, government funded research facilities and cooperative research centres.

These public research facilities are the major employers of postgraduate and graduate researchers and support staff.

They have also been the source of much of the technologies under commercial development, through spin-off companies, licensed technologies and joint R&D activity.

Research funding support is provided through a range of national competitive grants and through special programs implemented by State Governments.

5.3 Australian Biotechnology CompaniesThe business component of the biotechnology sector has the following characteristics:

In 2001 there were around 190 companies in Australia mainly engaged in biotechnology activities (core biotech companies) and another 490 engaged in related activities.

The biotech sector is significant and expanding in Australia. Turnover of core Australian biotech companies was estimated at over $1 billion per annum in 2000-01.

Australian universities contribute 20% of biotechnology business innovation.9

5.3.1 Core Biotechnology CompaniesThe concept of a “core biotech” company is used to define the industry in this report. A company is defined as “core biotech”, if the major focus or source of revenue is biotechnology. In 2001 there were 190 core public and private companies in Australia, of which 72 (38%) were located in Victoria.

Table 3. Core Biotechnology Companies 2001

State Number of registered companies

% Share

Victoria 72 38New South Wales 58 30Queensland 22 11South Australia 15 8Western Australia 17 9NT, ACT and Tasmania 6 3Totals 190 100

Source: Australian Biotechnology Report. Ernst & Young and Freehills. 2001.

9 Australian Biotechnology Report. Ernst & Young and Freehills. 2001

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Hopper and Thorburn (2003)10 provide estimates of the number of firms and the pattern of growth over 20 years. They come up with some higher estimates, and their data show that the number of core biotechnology Australian companies has increased from 190 in 2001 to over 300 in 2002. A further 400 companies and agencies (national and state) have an active role in the commercial development of Australian biotechnology.

Growth has continued with more than 30 new companies being formed in 2001–02. Of these around 40% were spin-offs from research institutions and a further 25% were from the business sector.

The Australian biotechnology companies can be divided into three groups:

The largest three companies - CSL, Resmed and Cochlear, which are all global businesses, with comparatively stable levels of business and significant market capitalisations of around $2 billion.

Medium enterprises and other larger companies that are valued at up to $500 million. These companies have been established for some years and have products under development that may be funded by other research and manufacturing.

A large number of SMEs and small start-up companies.

Victoria has consistently accounted for around 35-40% of core biotechnology companies.

'In the three-year period from 2000 to 2002, 68 new biotechnology firms were formed in Victoria. These comprised over 38% of new core biotechnology start-ups nationally. The State with the next highest number of start-ups was NSW (41 new firms, or 23%) followed by Queensland with 34 new firms (19%).'

Source: Victorian Biotechnology Industry Report September 2003 Thorburn & Hopper P9

Chart 2. Number of Biotechnology Companies in Australia

10 Victorian Biotechnology Industry Report September 2003 Thorburn & Hopper P9

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Most of Victoria's core biotechnology start-ups are in human therapeutics, diagnostics products and services. The focus has been on a range of human diseases, including cardiovascular, cancer, infectious and auto-immune diseases.

The next largest group is engaged in the development and supply of platform technology (growth factor mimetics, chiral-based products and animal models). Agricultural firms have been focused on seed technologies and commercial plant genome services.11

In their 2003 Report Thorburn and Hopper use a different classification – core biotechnology firms and diversified biotechnology firms.

"Core biotechnology firms have been established to exploit biotechnology processes to develop goods and services. These companies are mostly small, young and heavily dependent on public sector R&D.

Diversified biotechnology firms are those that are primarily involved in other technologies and markets but that may derive a proportion of their income from biotechnology. Most of the larger pharmaceutical and agricultural companies that have some involvement in biotechnology would be classified as "diversified" in this report..."


Using this classification, the following table shows the number of firms in each category by State. Victoria accounts for 40% of companies and for 40% of the new firms created in the three years - 2000-2003.

Table 4. Biotechnology Companies by State 2002


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5.3.2 Publicly Listed Biotechnology Companies

The majority of companies involved in biotechnology in 2001 were private unlisted companies. Table 4 hows a state breakdown of the listed core biotechnology companies.

Research by Deloitte, estimates that there were 53 publicly listed core biotechnology companies in Australia in 2001 with 21 (40%) in Victoria.

The total value of these Victorian companies, measured by market capitalisation in 2001 was $7.5 billion, representing 52% of the total value of core biotechnology companies in Australia. CSL, Australia’s largest biotechnology company, is located in Victoria and accounts for a significant proportion of the market capitalisation value.

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6 Biotechnology in Victoria

6.1 OverviewThis section analyses biotechnology in Victoria. It covers both public sector research and an analysis of private companies.

Table 5 analyses the activities of the 181 Victorian organisations involved in biotechnology.

Medical research is the major area of operations with 105 organisations (58%) involved in this field.

Plant research is major focus with 31 organisations (17%). Twenty-seven organisations are classified under the “other” category, which covers organisations working in fields such as environmental engineering, cosmetics and chemicals.

"Victoria’s biotechnology industry strengths lie in human therapeutics, followed by diagnostics and agricultural biotechnology. Specialist expertise includes: clinical trials, immunology, neuroscience, stem cells, diabetes, oncology, agricultural, horticulture and food and animal sciences."


Table 5. Victorian Biotechnology Organisations by Research Field

Biotech organisation Medical research

Plant research

Animal research

Other Total

Core organisationsCooperative Research Centres12 4 1 1 1 7

Research organisations13 31 5 6 3 45

Companies14 Core 45 8 5 7 65Non-Core 25 17 6 16 64Total 105 31 18 27 181

Source: Buchan Analysis of Various Reports

12Co-operative Research Centre Compendium 2002. Department of Education, Science and Training13 Acuity Technology Management. An industry training plan for the delivery of training in biotechnology, 2003. A Report for Box Hill TAFE.14 Biotechnology Strategic Plan for Victoria, 2001 Page 21

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6.2 Public Research Organisations

6.2.1 Research Institutes

Victoria specialises in medical related research, with almost 70% of public research organisations involved in this field.

Table 6 lists the 45 not-for-profit institutes in Victoria. These comprise universities, research institutes and organisations, such as the CSIRO. Other activities include animal and plant research, reflecting Victoria’s agricultural specialisation.

Table 6. Not for Profit Research Institutes in Victoria – 2003.Research Institutes Medical

researchPlant

researchAnimal

researchOther

GROUP 1 “CORE” ORGANISATIONSAustralian Research Institute XAustralian Genome Research Facility XBaker Heart Research Institute XBernard O'Brien Institute for Microsurgery XBionic Ear Institute XBio21 XBrain Research Institute XBrain Sciences Institute XCentre for Animal Biotechnology XCenter for Developmental Cancer Therapeutics XCentre for Environmental Stress and Accreditation XCentre for Equine Virology XCentre for Molecular Biology and Medicine XCSIRO for Animal Health Laboratories XCSIRO Health Science and Nutrition XCSIRO Molecular Sciences XGenomic Disorders Research Institute XHoward Florey Institute for Experimental Physiology and Medicine X

International Diabetes Institute XJoint Centre for Crop Improvement XLudwig Institute for Cancer Research XMacfarlane Burnet Institute for Medical Research XMental Health Research Institute XMonash Institute for Health XMonash Institute for Reproduction and Development XMonash Centre for Biomedicine XMurdoch Children’s Research Institute XNational Ageing Institute XPeter MacCallum Cancer Institute XInstitute for Animal Science (DNRE) XPlant Biotechnology Centre (DNRE) XRutherglen Research Institute (DNRE) XPlant Cell Biotechnology Research Centre XPrince Henry's Institute of Medical Research XSt Vincents Institute for Medical Research XSwinburne Centre for Biomedical Instrumentation XVictoria Institute of Biotechnology XVictoria Institute for Dryland Agriculture XWalter and Eliza Hall Institute of Medical Research XTOTAL 31 5 6 3

Source: Acuity Technology Management. An Industry Training Plan for the Delivery of Training in Biotechnology, January 2003. A Report for Box Hill TAFE.

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6.2.2 Cooperative Research CentresTable 7 shows funding levels for the Victorian based CRCs involved in biotechnology.

The funding provided by the Australian Government for CRCs is for a seven year period. For example, the CRC for Micro technology receives $2.5 million in funding annually and $17.4 million over the lifetime of the project.

In total, funding for the biotechnology CRCs currently operating in Victoria is estimated at $116.7 million (over the 7 year funding period).

Table 7. Program Funding for Victorian Based CRCs in Biotechnology 2002CRC Average funding

PA $millTotal program

funding (7 years) $mill

CRC for Micro technology 2.5 17.4CRC for Bioproducts 2.0 13.7CRC for Innovative Dairy Products 2.4 17.0CRC for Cellular Growth Factors 2.4 16.8CRC for Chronic Inflammatory Diseases 3.5 24.6CRC for Cochlear Implant and Hearing Aid Innovation 2.0 14.2CRC for Discovery of Genes for Common Human Diseases 2.2 13.1Total CRC funding 17.1 116.7

Source: Derived from Co-operative Research Centre Compendium 2002. Department of Education, Science and Training.

6.3 Clinical TrialsThere is a significant level of trials conducted in Australia and Victoria is well suited to clinical trials. This arises, in part from the existence of an ethnically heterogeneous population, and seven high quality teaching hospitals. It is also influenced by acceptance of regulatory standards in the US and EU due to common standards of medical practice.15 Costs to conduct trials (Phase I to IV) in Australia are below costs in the United States.

The Victorian Government has recently provided $8 million for the establishment of Clinical Trials Victoria (CTV), a clinical trial support organisation.

In March 2003, four Victorian research institutes were recognised as Centres of Clinical Research Excellence. These are:

The University of Melbourne’s Centre for Clinical Research Excellence in Infectious Diseases

The Jean Hailes Foundation Centre for Clinical Research Excellence for the Study of Women’s Health

The Alfred and Baker Medical Unit Centre for Clinical Cardiovascular Research

The Alfred/Monash Centre for Therapeutics and Clinical Research Barwon Health in Geelong is involved in a substantial number of trials funded by the major pharmaceutical companies.


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6.4 Biotechnology Companies

Victoria has experienced growth in the number of companies that make up the biotechnology sector.

6.4.1 Core CompaniesBiotechnology by its nature has an enabling impact on many industry sectors. In the analysis below, we use the definition used in the BioAccent Report (June 2002) prepared for the Victorian Government. Biotechnology companies were divided into: Dedicated biotechnology companies – Group 1 (core) and Companies that undertake significant biotechnology activity within a broader spectrum of operations, or are working in closely related areas of bioscience – Group 2.

The major focus of core biotech companies in Victoria is related to pharmaceuticals, with 25 companies operating in this area. Many of these companies have grown out of the State’s strong medical research specialisation and some are spin-offs from research institutes.

Table 8. Group 1 Core Victorian Biotech Companies by Area of Operation 2001Group 1 Victorian Companies – by area of operationSector Number of FirmsPharmaceuticals 25Diagnostic (human) 4Tissue and Cell Repair 5Genetic Testing 4Diagnostic (various) 5Platform Technologies (several sectors) 4Veterinary Therapeutics 5Agriculture/Food 7Reproductive Technologies 2Producers of Biologicals 9Other 7Total 77

Source: Biotechnology Strategic Development Plan for the Department of Science Technology and Innovation 2001.

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Table 9 lists the Group 1 companies by area of operation.

Table 9. Group 1 Victorian Biotech Companies by Area of Operation 2001Area of Operation CompaniesPharmaceuticals – 25 companies AMRAD Corporation Limited, Anadis Limited, Analytica Ltd,

Arthron Limited PL, Aus Bio Limited, ATG Limited, Avax Australia PL, Biomolecular Research Institute, Bioproperties (Australia) PL, Biota Holdings Limited, Cervax Pty Limited, Circadian Technologies PL, CSL Limited, Cytopia PL, ExGenix Ltd, Ilexus PL, McFarlane Laboratories Ltd, Metabolic Pharmaceuticals Ltd, MuriGen PL, Pharma Pacific PL, Prana Biotechnology Ltd, Virax Holdings Limited, Syngene Ltd, Thrombogenix PL, Starpharma Pooled Development Limited

Diagnostics (human) – 4 companies Mabtech Limited, Thrombogenix Pty Limited, Syngene Ltd, Ilexus PL

Tissue and Cell Engineering – 5 companies

Bio Nova International PL, Mercy Tissue Engineering Ltd, ES Cell Australia Ltd, Stem Cell Sciences Limited, Ilexus PL

Genetic Testing – 4 companies GeneScan Australia PL, Genetic Technologies Ltd, GeneType PL, Simons GeneType Diagnostics PL

Diagnostics (various) – 5 companies Checkmeat, Trace Scientific Limited, Epitope Technologies PL, Prostate & Diagnostics PL, Pulmosonix PL

Platform Technologies (several sectors) – 4 companies

Copyrat PL, Tridan Limited, Ingenix PL, Vaccine Technologies PL

Veterinary Therapeutics – 5 companies

Alpharma Animal Health PL, Intervet Australia Pty Limited, Bioproperties (Australia) PL, CSL Limited, Vet Biosearch PL

Agriculture / Food – 7 companies Access Genetics PL, Hexima Limited, Checkmeat Cognis Australia PL, Nugrain PL, Florigene Limited, Seed Grain Biotechnology Australia PL

Reproductive Technologies – 2 companies

Genetics Australia Cooperative PL, Monash Reproductive Pathology and Genetics PL

Producer of Biologicals – 9 companies

Auspep PL, CSL Limited, Mimotopes PL, Moregate Exports PL, Natraherbal PL, Nerang Biotechnology PL, Silenus Labs PL, Tocovite PL, Trace Scientific Limited

Other – 7 companies Biomed Investments Limited, EpiTan Limited, Pelston PL, Clean TeQ PL, Tocovite PL, Trace Scientific Limited, Silenus Labs PL

Source: Victorian Biotechnology Directory 2003. Advance Consulting & Evaluation and Aoris Nova for the Department of Innovation, Industry and Regional Development. May 2003.

The focus of research in Victoria differs from that of the rest of Australia. The chart below compares the research focus of Group 1 Biotech companies for Victoria and Australia.

Victoria’s major strength is in research related to health.

Compared to the Australian average, the proportion of R&D in health is significantly higher. In Victoria 54% of companies are involved in health, compared to 38% for Australia as a whole.

Victoria also has double the number of companies involved in biological activities, compared to the whole of Australia, with levels of 13% and 6% respectively.

The State is marginally under-represented in agriculture and food. This reflects the number of companies that have developed around agricultural and viticulture industries in New South Wales and South Australia.

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Chart 3. The Major Focus of Biotech Companies in Australia and Victoria – 2001

Source: Biotechnology Strategic Development Plan. The Department of Science Technology and Innovation 2001

6.4.2 Group 2 CompaniesThere are many companies that have significant life science involvement as part of their spectrum of activity, or are operating in related areas.

Typically they include companies involved in the development of bioscience instrumentation, biomaterials, chemistry, pharmaceuticals or medicine, and are defined as Group 2 (Non Core) companies.

The Group 2 companies are generally larger than the core companies. There were 70 Group 2 companies operating in Victoria in 2001: pharmaceuticals – 21; biologicals, nutraceuticals and complementary medicines – 12; and agriculture/food – 13.

Table 10. Group 2 (Non-core) Victorian Biotech Companies by Area of OperationGroup 2 Victorian Companies – by area of operationSector Number of FirmsPharmaceuticals 21Biologicals, Nutraceuticals, Complementary Medicines 12In vitro Fertilisation (Health) 2Equipment 9Veterinary Therapeutics 2Agriculture/Food 13Environmental 3Other 8Total 70

Source: Biotechnology Strategic Development Plan for the Department of Science Technology and Innovation 2001.

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Table 11. Group 2 or Non-core Victorian Biotech Companies by Area of OperationsArea of Operation CompaniesPharmaceuticals – 21 companies Acrux Limited, Bioactive Enhancement Technologies Aust. PL,

Bristol-Myers Squibb Australia PL, ClinTrials Research PL, Compumedics Sleep PL, Faulding Pharmaceuticals, Felton Grimwade & Bickford PL, GlaxoSmithKline(GSK) Australia, Institute of Drug Technology Australia Limited, Kryocor PL, Vitapharm Research PL, Medical Industrial Group PL, Mondo Medical Ltd, Norwood Abbey Ltd, Optiscan Imaging Limited, PharmAction Holdings Ltd, P.P.D. Development PL, Sigma Pharmaceuticals PL, Solagran Limited, Soltec Research PL, Vita Life Sciences Limited

Biologicals, Nutraceuticals, Complementary Medicines – 12 companies

Australian Botanical Products PL, Bonlac Foods Limited, Corryong Essential Oils PL, Felton Grimwade & Bickford PL, Herbworx Corporation PL, Marine Biotechnology International PL, Nutrition Care Pharmaceuticals, R P Scherer Holdings PL, Solagran Limited, VicMint Partners PL, Vita Life Sciences Limited, Vitapharm Research PL

In vitro Fertilisation (Health) – 2 companies

Melbourne IVF PL, Monash IVF PL

Equipment – 9 companies Axon Instruments, Inc., Biotechnic PL, Compumedics Sleep PL, G.B.C. ScientificEquipment PL, Grale Scientific PL, Optiscan Imaging Limited, Vision Instruments Limited, Vita Life Sciences Limited

Veterinary Therapeutics – 2 companies

Jurox PL, Vitapharm Research PL

Agriculture / Food – 13 companies Ag-Seed Research PL, Aventis Cropscience PL, Bioplasma Australia PLBoulevarde Nurseries Mildura PL, Brewtech PL, Halcyon Proteins PL, Henderson Seed Group PL, Micronized Foods PL, Monsanto Australia Limited, Nufarm Limited, Nutrihealth PL, Valley Seeds PL, Yakult Australia PL

Environmentals – 3 companies EcoEarth Technologies, Rio Tinto Limited, Environmental Biotech (Systems) PL

Other – 8 companies Albright & Wilson (Australia) Ltd, Applied Chemicals PL, Australian Ocean Biotechnology, EMI Consulting Services PL, Microtech Laboratories PL, Monne International PL, Perseverance Corporation Limited, Vacctech Limited

Source: Victorian Biotechnology Directory 2003. Advance Consulting & Evaluation and Aoris Nova for the Department of Innovation, Industry and Regional Development. May 2003. It should be noted that some companies operate in more than one area.

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7 Support for Biotechnology in Australia

Biotechnology is a major policy priority for governments in Australia.

7.1 Policy OverviewThe biotechnology sector has been a major focus for governments over the last five years, and is reflected in a major expansion of government funding.

The key focus is on encouraging research, product and process development, commercialisation, and the development of international partnerships.

Government policies stem from Australia’s research strengths in biotechnology and a strategy to develop Australia as a global leader in biotechnology. The sector is receiving strong support from the Australian government, and the States – particularly Victoria and Queensland which have been active in funding research and commercialisation activities16.

Policies have included:

Implementation of a National Biotechnology Strategy.

Expansion of national research assistance and industry development programs

Development of State strategies, in Victoria, New South Wales, Queensland, South Australia and Western Australia.

In addition to the substantial Australian Government assistance, individual States and Territories have also provided significant support to local biotechnology activities.

Initiatives in Victoria, New South Wales, Queensland and South Australia, in particular, are providing funding for research infrastructure to support biotechnology and are delivering assistance for product development and commercialisation.

Victoria — $347 million Biotechnology Strategic Development Plan

Queensland — $100 million state-sponsored BioCapital venture fund

New South Wales — $68 million BioFirst initiative

The Australian Government announced another round of innovation funding under Backing Australia’s Ability 2 on May 6 2004, with biotechnology continuing to receive substantial funding.

16 Victoria and Queensland have been the most active, with Victoria setting an objective of making the State the 5th largest biotechnology centre in the world by 2010.

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7.2 Australian Government Support for Biotechnology

7.2.1 Funding for Research

Resources applied to the biotechnology sector are substantial. The Australian Government provides over $300 million per year to support research and development activity in biotechnology. When State programs are included, the total government expenditure (R&D related) is estimated at around $450 million per year, and is increasing.

The Australian Government supports biotechnology activity through research grants provided to public research organisations.

In 1998-99 a total of $3.2 billion was provided by the Australian Government to support R&D activity. Of this, an estimated $255 million or 8% was spent on biotechnology .17

Table 12 provides an estimate of funding for biotechnology R&D from the Australian Government in 2000-01. Total funding for biotechnology R&D was $307 million.

This expenditure has increased, with additional funding provided under the Government’s Backing Australia’s Ability statement of early 2001 and expanded funding under the May 2004 Innovation Statement.

This funding relates to support for research and development only and does not cover support for education (eg. higher education, VET).

The largest recipients of research funding are universities ($90 million), CSIRO ($47 million) and the National Health and Medical Research Council (NHMRC) ($54 million).

Funding for CRCs and research funding through the Australian Research Council (ARC) grants are also significant.

The NHMRC and ARC both allocate research grants on a competitive basis to universities and research institutes. CRC funding is also allocated on a competitive basis.

Funding for biotechnology, through the NHMRC, will increase to an estimated $80 million by 2005.

Table 12. Estimated Australian Government Funding for Biotechnology Research and Development

Program 1998-99 $million

1999-00 $million

2000-01 $million

2000-01%

Universities 90 90 90 29National Health and Medical Research Council 40 54 54 18

CSIRO 40 47 47 15Cooperative Research Centres 25 28 28 9Australian Research Council 35 25 25 8R&D Start 15 17 17 6Rural R&D Corporations 10 14 14 5Pharmaceutical Industry Investment Program 0 2 3 1Other 0 19 29 9Total 255 296 307 100

Source: Australian Biotechnology Report. Ernst & Young and Freehills. 2001 Page 11

17 Feasibility Study on Establishment of a National Biotechnology Organisation. A Report by Buchan Consulting to Biotechnology Australia. 2000.

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7.2.2 Research and Development Tax ConcessionsThe Australian Government also provides R&D tax concessions that allow a 125% tax deduction for research and development expenditures incurred by companies.

In 1998-99, there were a total of 3,200 eligible companies were identified, reporting total R&D expenditure of $4.3 billion. It is estimated that $88 million was spent on biological sciences R&D.

In 2000-01 the ICT and engineering sectors continued to dominate the R&D spending that was receiving support from the R&D tax concession. Each sector has total R&D spending of around $1.75 billion.

Biotechnology related fields accounted for about $300 million in R&D spending, with around $150 million for each of medical and health sciences and biological sciences.

Chart 4. R&D Tax Concession by Research Groups

Source: Mapping Australian Science and Innovation Working Paper Business Innovation Department of Industry Technology and Resources December 2003 p 94

7.2.3 Major InitiativesMajor national initiatives directed at the biotechnology sector include $46.5 million Biotechnology Centre of Excellence for Stem Cell and Tissue Repair, and the $40 million Biotechnology Innovation Fund to support research.

7.2.4 Biotechnology Centre of ExcellenceThe objectives of the Biotechnological Centre of Excellence initiative are to expand biotechnology research in Australia and to increase the sector’s international competitiveness.

The National Stem Cell Centre received funding in May 2002 (total funding is $43.5 million over four years). Funds are provided through the Department of Industry, Tourism and Resources and the Australian Research Council.

The Centre combines Australia's expertise in embryonic and adult stem cell technology, from both the public and private sectors.

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The Centre has its central node located in the Monash Biotechnology Strip, with participating organisations including universities, research institutes and commercial partners.

7.2.5 Biotechnology Innovation FundThe Biotechnology Innovation Fund (BIF) has the objective of increasing the rate of commercialisation of biotechnology research.

The BIF helps to bridge the funding gap that often exists between the initial research stage of a biotechnology project and the early stage of its commercialisation. At this in-between stage it can be difficult to obtain funding to prove the viability of a new concept.

The BIF was established with funding of $20 million under the National Biotechnology Strategy and was allocated an extra $20 million in the Government’s 2001 Innovation Statement.

The program is implemented by AusIndustry and runs for three years from 2001 to 2004. To mid 2003, there have been four funding rounds of the program (out of five), with 139 successful applicants being offered $30 million in funding. In the latest round of funding, eight Victorian applicants received funding totalling $2 million, out of a national round that amounted to almost $10 million.

7.3 Victorian Government Policies and Programs

The Victorian Government has the vision of making Victoria one of the top five global biotechnology locations by 2010. This strategic vision has driven the Government’s programs and initiatives.

The Victorian Government provides substantial support for the development and commercialisation of biotechnology research.

Since May 2000 the Victorian Government has committed $900 million to innovation, with a large share of this going to biotechnology.

By 2005, the Victorian Government will have invested more than $500 million in projects to strengthen the biotechnology sector, including building leading-edge science infrastructure, developing dedicated biotechnology precincts and backing the commercialisation of Victorian biotechnology research.

Biotechnology 2004 Strategic Development Plan for Victoria 2004 Foreword

7.3.1 Biotechnology Strategic PlanThe foundation of the Victorian policies is the Biotechnology Strategic Plan.

The Department of Innovation Industry and Regional Development (IIRD) delivers the plan through both funding of programs and coordinating with industry, research organisations, and universities.

Key components of the strategy are: building world class infrastructure, developing the State’s skills base, fostering a culture of innovation, and positioning Victoria as national and world leader in science.

The 2001 Strategic Plan identifies five action areas to position Victoria as a leading biotechnology cluster:18

18 Biotechnology Strategic Development Plan for Victoria. Department of State and Regional Development. 2001.

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Developing a biotechnology skill base: building a pool of skilled people in science, product development and commercialisation.

Developing Victoria’s research base: providing opportunities for growth in science and research infrastructure.

Commercialising Victoria’s biotechnology: developing a culture of innovation and entrepreneurship where clever research can be successfully taken to market.

Building our corporate base and marketing our capabilities: encouraging growth of existing biotechnology companies and investment by local and international firms.

Providing Government leadership and support: providing leadership to the Victorian community, and the research and industry sectors to develop biotechnology for the benefit of Victoria.

These action areas remain current in the new 2004 Strategy, with an increased emphasis on connectivity19.

7.3.2 Bio21In 2002, Victoria launched the $400 million biotechnology initiative, Bio21 which, aims to create a world-leading cluster of medical and scientific research institutes in Parkville, Melbourne.

The Victorian Government has committed an initial $50 million to this project. Foundation partners in Bio21 are the University of Melbourne, the Walter and Eliza Hall Institute and the Royal Melbourne Hospital.

As part of the initiative, the Bio21 Molecular Science and Biotechnology Institute is being developed as the University of Melbourne's core research and development facility within the Bio21 Precinct.

Major issues for the Bio21 Institute are: interdisciplinary biotechnology research, and education and training programs; a strong commitment to the commercialisation of IP; recognition of ethical, social and environmental concerns; building effective partnerships between industry and government; and active science communication and promotion.

The Bio21 Institute includes research and development groups covering biochemistry, gene technology, proteomics, molecular diagnostics, and a broad range of chemistries.

A major objective is achieving the level of inter-disciplinary convergence that underpins innovation in most major biotechnology precincts around the world.

Key priorities for the Institute are multi-disciplinary research and development programs in areas where there are opportunities to develop critical mass, international competitiveness and commercial outcomes.20

7.3.3 Science Technology and Innovation FundThe Science, Technology and Innovation (STI) fund is a major initiative that is providing funding of $310 million over five years to 2005.

Biotechnology is one of the STI priorities, along with information and communications technologies (ICT), new manufacturing technologies, design, and environment technologies.

A third round of STI grants commenced in June 2005.

7.3.4 Synchrotron In June 2001, the planned construction of a $157 million synchrotron, at Monash University’s Clayton campus was announced. Construction works for the Australian

19 Biotechnology 2004 Strategic Development Plan for Victoria 2004, Victorian Government, June 2004

20 Bio21. The Victorian Government Capturing the Opportunity Fact Sheet 2002, www.bio21.org.au

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Synchrotron project will commence in 2004-05 (with project management by Major Projects Victoria).

The Synchrotron is an electron accelerator that acts as an immensely powerful microscope and is used to examine the molecular structure of material. Studying the atomic structure of human proteins can assist in the rational development of drugs and vaccines.

The Synchrotron will assist the development of Victoria and the southeast of Melbourne, as a key biotechnology and research centre.

7.3.5 Bio21In 2002, Victoria launched the $400 million biotechnology initiative, Bio21 which, aims to create a world-leading cluster of medical and scientific research institutes in Parkville, Melbourne.

The Victorian Government has committed an initial $50 million to this project. Foundation partners in Bio21 are the University of Melbourne, the Walter and Eliza Hall Institute and the Royal Melbourne Hospital.

As part of the initiative, the Bio21 Molecular Science and Biotechnology Institute is being developed as the University of Melbourne's core research and development facility within the Bio21 Precinct.

Major issues for the Bio21 Institute are: interdisciplinary biotechnology research, and education and training programs; a strong commitment to the commercialisation of IP; recognition of ethical, social and environmental concerns; building effective partnerships between industry and government; and active science communication and promotion.

The Bio21 Institute includes research and development groups covering biochemistry, gene technology, proteomics, molecular diagnostics, and a broad range of chemistries.

A major objective is achieving the level of inter-disciplinary convergence that underpins innovation in most major biotechnology precincts around the world.

Key priorities for the Institute are multi-disciplinary research and development programs in areas where there are opportunities to develop critical mass, international competitiveness and commercial outcomes.21

7.3.6 Science Technology and Innovation FundThe Science, Technology and Innovation (STI) fund is a major initiative that is providing funding of $310 million over five years to 2005.

Biotechnology is one of the STI priorities, along with information and communications technologies (ICT), new manufacturing technologies, design, and environment technologies.

A third round of STI grants commenced in June 2005.

7.3.7 Synchrotron In June 2001, the planned construction of a $157 million synchrotron, at Monash University’s Clayton campus was announced. Construction works for the Australian Synchrotron project will commence in 2004-05 (with project management by Major Projects Victoria).

The Synchrotron is an electron accelerator that acts as an immensely powerful microscope and is used to examine the molecular structure of material. Studying the atomic structure of human proteins can assist in the rational development of drugs and vaccines.

The Synchrotron will assist the development of Victoria and the southeast of Melbourne, as a key biotechnology and research centre.21 Bio21. The Victorian Government Capturing the Opportunity Fact Sheet 2002, www.bio21.org.au

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7.3.8 Funding for InfrastructureThe following table shows some recent examples of infrastructure projects that have received Victorian Government (including Aquaculture at Deakin). It shows funding of $73 million for infrastructure.

Table 13. Funding for Biotechnology Infrastructure 2002

Source: Bioscience to Bioindustry A Role for Local Government in Biotechnology in Victoria, Aoris Nova January 2004

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8 Biotechnology Locations in Victoria

8.1 Biotechnology Clusters in VictoriaBiotechnology activities in Victoria are mainly clustered around six key precincts22

located in central and suburban Melbourne and at Werribee.

These clusters have developed around the universities and the major research institutes.

Biotechnology companies have also located in and around these precincts. In the case of the emerging firms this reflects the fact that the spin-off or spinout companies have their origins in the research institutes and still maintain ongoing connections. These connections often relate to the use of research facilities, joint research projects or contract research. Moreover there are recognised benefits of locating in these areas in terms of access to skilled researchers.

In many cases companies have grown up in these locations and want to maintain a close proximity to the research facilities.

A model for many small companies is the “virtual firm”, where there is a small core management staff, with research and other activities out-sourced to research institutes and other suppliers.

The emergence of technology parks adjacent to Monash and Latrobe University, have encouraged the location of larger firms across a wide spectrum of activities including engineering, scientific equipment, information technology and telecommunications. There are no exclusive biotechnology parks in Victoria. Biotechnology firms tend to be based in a segment of these broader parks.

The larger pharmaceutical companies have tended to develop on their own sites and have not been attracted to the university parks.

The combined level of activity in the research clusters is substantial. In total the 6 precincts:

Employ almost 6000 researchers

Have annual research funding of almost $450 million

8.2 The Major Precincts

8.2.1 Parkville PrecinctThe Parkville precinct is Victoria's largest biotechnology cluster, and is the major focus for the $400 million Bio21 development. Includes the University of Melbourne, the Walter and Eliza Hall Institute of Medical Research, the Howard Florey Institute of Experimental Physiology and Medicine, the Ludwig Institute for Cancer Research, the Royal Melbourne Hospital

The precinct has advanced research facilities and a major hospital with clinical research and clinical trials capabilities. There is strong commercialisation focus in this precinct.

8.2.2 Alfred Medical Research and Education Precinct (AMREP) - Prahran

The Alfred Medical Research and Education Precinct combines Alfred Hospital, the Baker Heart Research Institute, the MacFarlane Burnet Centre and Monash University School of Medicine.

22 Victorian Biotechnology Industry Report Thorburn & Hopper September 2003

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Key strengths of this precinct are research into cardiovascular disease, viruses and HIV/AIDS.

8.2.3 Monash Health Research Precinct - ClaytonThe Monash Health Research Precinct is a biomedical cluster based around Monash University's Clayton Campus. It is linked to a strong clinical research base, with a major focus on public health and health services.

The precinct includes: Monash Institute of Reproduction and Development, Monash Institute of Public Health, Prince Henry's Institute of Medical Research and the Southern Health Care Network. Biotechnology companies located within this precinct include Biota Holdings, Mimotopes and Monash IVF.

8.2.4 Werribee PrecinctThe Werribee Precinct is principally focused on animal and food research.

Key institutions located in the precinct include: the Victoria University of Technology, Food Science Australia, the Victorian Institute of Animal Science and the CSIRO Division of Animal Health.23

8.2.5 Bundoora PrecinctThe Bundoora precinct is focused on plant bioscience. Those organisations located in the area are: La Trobe University, La Trobe R&D Park and RMIT University Bundoora campus.

A focal point for biotechnology activities on this precinct will be the Bundoora Plant Biosciences Facility. This will house the Agriculture Victoria’s Plant Biotechnology Centre, a State Government Research Institute that specialises in plant genetics.

8.2.6 Austin Biomedical Alliance Precinct - HeidelbergAustin Biomedical Alliance Precinct is located in Heidelberg and is based at the Austin and Repatriation Medical Centre.

23 See Appendix 3 for more information on the Werribee Precinct.

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Table 14. Victorian Biotechnology Precincts

Location Description Specialisations Research Funding2002/03

Researchers

Parkville –City precinct

8 hospitals, 11 research institutes, Uni Melbourne RMIT Health & medical cancer, infectious diseases, neurosciences, diabetes, immunology, cardio vascular, bioengineering, structural biology

$200 million 2,000

Alfred Medical Research and Education Precinct

Prahran

Monash – 2 Research Institutes, 1 hospital Cardiovascular disease, viruses and HIV/AIDS, Immunology

$35 million 500

Monash Health Research Precinct

Clayton

Monash Medical Centre, Monash Uni, CSIRO Health , IVF, Stem Cells, Diabetes, virology, cancer, neurosciences

$70 million 900

Werribee Precinct Research and Education Precinct

Uni of Melbourne, Victoria Uni, 5 research institutes – Agrifood Technology, CSIRO Animal Health, Food Science Australia, Victorian Institute of Animal Health, Victorian Institute of Biotechnology, Australian Food Industry Science Centre (DPI)

Animal and food research $115 million 775

Bundoora Precinct La Trobe and RMIT technology parks, Plant Biotechnology Centre, Walter and Eliza Hall Institute’s Biotechnology Centre

Plant bioscienceBiomedical, genetics, bioinformatics

na na

Austin Biomedical Alliance Precinct Heidelberg

Austin & Repatriation Medical Centre (A&RMC)7 research institutes, University of Melbourne, LaTrobe, RMIT

Neurosciences, immunology, cancer $30 million 700

Source: Derived from Invest Victoria Information

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8.3 Location of Biotechnology FirmsA recent study examined the spatial location of biotechnology firms (including devices and diagnostics) and major research institutes24. The analysis shows the major concentrations are in the local government areas of Melbourne, Monash and Yarra. This largely reflects the size of the biotechnology precincts that are located in each of these LGAs, and the tendency for companies to cluster around major research centres.

Table 15. Biotechnology Institutes and Companies by Local Government AreaLocal Government Area Research

InstitutesCompanies Total

Melbourne 38 59 97Yarra 7 24 31Wyndham 8 9 17Monash 19 33 52Hume 8 8KnoxTotal 72 133 207

Source: Derived from data in Bioscience to Bioindustry A Role for Local Government in Biotechnology in Victoria, Aoris Nova January 2004 Note companies include biotechs and devices and diagnostics.

As we have seen, most of the major research and development institutes in biotechnology are concentrated in the Cities of Melbourne and Monash. Those institutes located in regional centres are mainly agriculture related and many are part of the Victorian Government (Department of Primary Industries).

Chart 5. Distribution of R&D Centres in Biotechnology


24 Bioscience to Bioindustry A Role for Local Government in Biotechnology in Victoria , Aoris Nova January 2004

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9 Biotechnology in Geelong

9.1 Overview of the SectorThis chapter analyses biotechnology activity in the G21 Region. The major research centres are located in the City of Greater Geelong. (one centre is located in Queenscliffe).

Biotechnology research and development in Geelong Region is focused in several areas:

CSIRO/ Australian Animal Health Laboratories (AAHL)

Deakin University

Several Deakin spin-off companies AGT Biosciences (now ChemGenex Pharmaceuticals) and Chirogen

Barwon Health (research centres and clinical trials)

PIRVic Marine & Freshwater Science (at Queenscliffe)In total we estimate that the resources devoted to biotechnology/biosciences activity include around 300 researchers25 and approximately $ 18 million per year in research funding. Total wages and salaries of researchers are estimated at $15 million .

Education and training is also a major strength for the region:

Teaching at Deakin in Biological and Chemical Sciences and Ecology and Environment.

Courses at Gordon Institute for Laboratory Technicians, Environmental Testing and Pathology.

The following diagram highlights the major segments of the sector in Geelong.

25 There is a total of 100 support staff located in the major research centres. These jobs add to the overall regional impact of the current centres.

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Geelong Biotechnology

Barwon HealthDouglas Hocking Institute Stem CellsClinical & Biomedical Sciences (Melb Uni) – Osteoclast BioClinical TrialsPathcarePathology Services

Education & TrainingDeakinBiological & chemical sciencesEcology & EnvironmentGordon InstituteLaboratoryEnvironmental TestingPathology

Deakin – ResearchUniversityMetabolic & Gene DiscoveryPharmaceutical TechnologiesAgriculture Biotechnology - incl aquacultureCommercialisationAGT Biosciences (ChemGenex Pharmaceuticals)ChirogenInfrastructureBioDeakinLaboratoryGTP Building/ development

CSIROAAHLDiseases, Diagnostics, Vaccines, aquaculture

PIRVic Marine & Freshwater Science (Queenscliffe)Marine fisheries sciences Marine and estuarine ecology Aquaculture and freshwater fisheries

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There are over 300 biosciences related researchers in Greater Geelong, with an estimated total annual wages and salaries of $15 million.

Geelong Biotechnology Employees - 421 Researchers - 300+

Barwon HealthDouglas Hocking Institute Stem Cells - 7 Clinical & Biomedical Sciences (Melb Uni) – Osteoclast Bio - 7Clinical Trials - 40Pathcare – 230 staff/ 90 science graduates

Education & Training

DeakinBiological & chemical sciencesEcology & Environment

Gordon InstituteLaboratoryEnvironmental TestingPathology

Deakin – ResearchUniversityMetabolic & Gene DiscoveryPharmaceutical TechnologiesAgriculture Biotechnology - incl aquaculture

CompaniesAGT Biosciences (ChemGenex Pharmaceuticals) – 40 Chirogen - 12InfrastructureBio DeakinLaboratoriesGTP Building/development

CSIROAAHLDiseases, Diagnostics, Vaccines, aquaculture230 staff/ 100 researchers/30 students/visitors

PIRVic Marine & Freshwater Science (QueenscliffeMarine fisheries sciences Marine and estuarine ecology Aquaculture and freshwater fisheries – 85 staff /65 researchers

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9.2 Research Resources

9.2.1 Research FundingWe developed some estimates of annual research funding based on information provided by each of the organisations.26 The data show that total research funding was $18milion in 2003.

Table 16. Estimated Annual Biotechnology Related Research Funding in Geelong (2003) $ millionResearch Organisation Institute

Funding $Govt Grants $

Industry/ partners $

Investors$

Total$

CSIRO 3.0m 3.0m 6.0mDeakin (Biotechnology) staff/oncosts etc

4.4m 4.4m

Deakin (infrastructure funding)

3.3m 3.3

Total Deakin 7.7m 7.7mBarwonHealth 1 1.5mAGT Research 1.7m27 5.0m 6.7m

0.117m 0.117mTotal AGT 1.82m 6.8mChirogenR&D Start 0.9m28 0.9m 1.8mVic Govt Biotech Innovation Fund Grant

0.25m 0.25m

Total Chirogen 1.15m 0.9m 2.05mTOTAL $7.7m $5.97m $8.0m $0.9m $18.05m

Sources: Based on estimates provided by each institution. Note 1 Barwon total includes institution funding, clinical trials funding/company research funding (approx $700,000 total) and government grants.

9.2.2 ResearchersWe also obtained information on the number of researchers.

The data show that there are 301 researchers in the research organisations. An additional 120 staff are employed in these organisations in support roles.

In addition, Pathcare ( a regional pathology services company based in Geelong), has 230 employees of which 90 are science graduates. We have not included Pathcare staff in the researcher or support staff numbers.

Based on a conservative average salary figure of $50,000 per person, the 301 researchers account for a total annual wages and salaries bill of $15.05 million.

26 In most cases only total figures were supplied.27 Pharmaceutical Partnership Program – up to $8.4 million over five years or 1.7m per year.28 R&D Start Grant $1.9m over two years.

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Table 17. Employment at the Geelong Research Organisations 2004Research Organisation Researchers Other Staff TotalCSIRO 130 100 230Deakin BiotechChemgex ( formerly AGT Biosciences

40 40

Chirogen 12 12BarwonHealth 54 54PIRVic Marine & Freshwater Science

65 20 85

Total 301 120 421Other –Pathcare 230(90

graduates)230

9.3 CSIRO

9.3.1 CSIRO GeelongCSIRO's Division of Livestock Industries maintains the Australian Animal Health Laboratories (AAHL) at Geelong.

AAHL is the only national facility for the diagnosis of exotic diseases that infect animals. The overall research is driven by the need to safeguard Australia from exotic diseases and to maintain and grow markets for sheep, cattle, pig and poultry products.

AAHL's research programs are directed toward the development of new diagnostic tests, vaccines and therapeutics for endemic animal diseases of national importance.

The research is very well-resourced and draws on the collective expertise of a large research team with an international reputation.

“The Division plays a major role in the maintaining and improving animal health in Australia. We provide disease surveillance and diagnostic services….

Our scientists are also focusing on protecting livestock from pests and diseases and reducing the use of antibiotics and other chemicals through breeding for resistance traits, as well as developing innovative new products and delivery techniques.”

Source: CSIRO Report of Livestock Industries July 2000-June 2003

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9.3.2 Research PrioritiesCSIRO AAHL has established three major programs in Diagnostic Sciences, Infectious Diseases and Food Safety and Vaccines & Therapeutics

Within each of these overarching programs, several projects are under way.

9.3.3 The Diagnostic Sciences ProgramThe program is involved in diagnosing diseases of national significance to livestock, aquatic animals and fauna. Research projects include the development and application of diagnostic tests, the pathogenesis of diseases and the spread and management of diseases among populations.

The research receives important support from the extensive resources of the Tissue Culture Unit which maintains more than 120 animal cell lines in its collection.

The program applies elements of virology and serology, pathology, epidemiology, electron microscopy.

Diagnostic Sciences includes the AAHL Fish Diseases Laboratory which conducts research on finfish, crustaceans and molluscs of relevance to Australia's aquaculture industry.

Plans are under discussion at AAHL to establish the Australian Centre for Aquatic Animal Health. This Centre was identified in the G21 Strategy as one of the lighthouse projects. A series of feasibility studies on the Centre have been undertaken within CSIRO.

Current and proposed capability covers the major known pathogens of salmon, carp, pilchards, prawns, oysters and tuna.

9.3.4 The Infectious Diseases and Food Safety ProgramThe research of this program is broadly directed toward increasing Australia's capacity for disease control by improving the understanding of viral and bacterial diseases and plant-associated toxins. The five key projects of the program are:

Avian virology, particularly the characterisation of infectious bursal disease virus that affects poultry and the development of vaccines and improved diagnostic tests.

The development of more sensitive diagnostic tests for Johne's disease, a contagious disease of ruminants that causes intestinal inflammation.

Protein chemistry and proteomics to identify, purify and characterise proteins of biological significance.

Study of plant-associated toxins, from plants or bacteria and fungi, that affect grazing animals.

Application of molecular techniques to characterise emerging viruses.

9.3.5 The Vaccines and Therapeutics ProgramResearch conducted under this program is aimed at improving the health, welfare and production of Australian livestock by the development of vaccine-based products.

To meet the growing need to avoid the use of antibiotics and chemicals in controlling disease and promoting animal welfare, new approaches are being employed in the design of vaccines. These involve, for example, assessment by microarray technology of the genes expressed during a protective immune response and the study of natural modulators of the immune system to increase immunity.

Much of the research relates to developing new molecular techniques for application in the livestock industry, including novel applications of RNA interference (RNAi) technology to silence specific genes and the development of recombinant vaccines.

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9.4 Deakin Research

9.4.1 A Commitment to ResearchDeakin University has a strong commitment to research and a strategic plan to expand its research activity.

“ To have a vibrant culture of research with a critical mass of researchers associated with each major discipline providing every student with the experience of being taught by leading researchers, and to foster internationally competitive research groups in areas of strategic importance”.

Source Taking Deakin University Forward Deakin’s Strategic Plan 2004 P 6

Deakin has set itself the target of being in the top 15 Australian universities by 2007 as ranked by research income (in 2002 it was number 20).

Deakin is achieving this through improved targeting of funding bodies, government and industry and facilitation of commercialisation and entrepreneurial activities.

This approach is also captured in the long term plans for the Waurn Ponds Campus, which has a focus on biological and health sciences, technology and manufacturing.

Deakin also has a record of achievement in its industry linkage programs.

Geelong Campus at Waurn Ponds

“The Geelong campus at Waurn Ponds will have a strong focus on research and development and on industry partnerships, particularly in relation to biological and health sciences, technology and manufacturing. The Deakin University Science and Technology Park, which will include the Geelong Technology Precinct, will be located at, and be a focal point for, this campus. On-campus undergraduate and postgraduate teaching and higher degree by research activities will continue to be conducted here. The campus will house the Centre for Knowledge Technologies and Online Learning which will focus research in this area, housing the first CRC to be led by the University, and providing a hub for Deakin’s extensive national and international online and distance education programs. “

Source: Deakin University Campus Vision Statement P 1

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9.4.2 Research PrioritiesDeakin's research has been organised into research priority areas, chosen on the basis of their capacity to compete successfully for national and international research funding, to produce high quality research output, and to collaborate with other organisations. The research specialisations are in:

Advanced Materials Manufacturing and Performance

Cell and Organism Bio-Engineering Cellular Metabolism in Health and Disease Chiral & Molecular Technologies Chronic Illness Citizenship and Globalisation

Physical Activity and Nutrition

Quality Learning

Social and Mental Health Biosciences are a high priority, encompassing three areas of specialisation (bolded).

9.4.3 Research FundingDeakin has been implementing a strategy of increasing its research activity via an active approach to targeting research funding.

External research income has shown strong growth from only $5million in 1998 to $17.2 million in 2002.29

Chart 6. Deakin University External Research Income 1998-2002

29 Research income was estimated at $22 million for 2003.

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The major areas of growth have been in Health & Behavioural Sciences, Science & Technology, and Education.

Health & Behavioural Sciences and Science & Technology together accounted for $14 million or 82% of research income in 2002.

In total, 31% of research funding is from national competitive grants and 47% is from industry and other sources.

In the case of Science & Technology, 45% of research funding is from national competitive grants and 37% is from industry and other sources.

Table 18. Deakin Research Income ($) by Category, 2002Faculty/School National

CompetitiveGrants

Other PublicSector Funding

Industry/OtherFunding

Cooperative Research Centre Funding

Total

Arts 449,985 364,548 464,137 1,278,670Communication & Creative Arts 71,532 10,000 343,737 425,269Social & International Studies 378,453 354,548 120,400 853,401Business & Law 125,014 54,496 144,594 324,104Accounting & Finance 20,879 5,500 26,379EconomicsInformation Systems 54,496 54,496Law 53,041 53,041Management & Marketing 51,094 139,094 190,188Education 170,015 813,904 476,100 1,460,019Scientific & Development Studies 31,872 656,638 471,900 1,160,410Social & Cultural Studies 138,143 157,266 4,200 299,609Health & Behavioural Sciences 1,217,005 1,358,696 3,969,404 6,545,105Health Sciences 972,008 853,218 3,341,567 5,166,793Nursing 47,361 407,429 441,062 895,852Psychology 197,636 98,049 186,775 482,460Science & Technology 3,437,711 889,656 2,820,139 395,278 7,542,784Architecture & Building 125,854 23,409 149,263Biological & Chemical Sciences 1,116,184 74,786 676,705 1,867,675Ecology & Environment 1,203,011 646,120 469,181 2,318,312Engineering & Technology 868,714 129,750 1,625,844 395,278 3,019,586Information Technology 123,948 39,000 25,000 187,948TOTAL 5,399,730 3,481,300 7,874,374 395,278 17,150,682% Share 46.2 2.3 100.0

Source: Deakin University Research Report - Deakin Website Accessed June 2004

Deakin is securing some funds from most of the major national agencies that provide research funding.

The strength of industry relationships is reflected in the fact that over one third of research funding ($6.7 million in 2002) is from industry research contracts.

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Table 19. Research Funds by Funding BodyFunding Body 1998 1999 2000 2001 2002Agriculture, Fisheries and Forestry

Dairy R&D Corporation 43,201 193,303 273,970Fisheries R&D Corporation 204,470 262,652 239,952 145,468 43,568Grains R&D Corporation 30,000 29,774 32,660 45,241 7,000Grape and Wine R&D Corporation 32,806Land and Water Resources R&D Corporation 25,585 37,917 7,038 66,000 159,000Rural Industries R&D Corporation 112,406 89,676

Australian Research CouncilLinkage Grants 218,941 513,102 709,234 1,280,641 1,867,372Discovery Grants 1,097,649 1,360,913 1,277,532 1,626,859 1,675,663Research Fellowships 135,760 164,905 61,087 68,523Small Grants 327,400 381,500 434,000International Researcher Exchange (IREX) Scheme 32,301 32,098 52,816

Health and Aged CareCommonwealth AIDS Research Grants 34,141General Practice Evaluation Program 22,301 10,164National Health and Medical Research Council 349,324 668,749 577,924 722,005 882,844

Research into Drug Abuse Program 37,399 48,261 40,015 19,091

Other-CommonwealthAust. Centre for Int. Agricultural Research 244,046 113,705 229,022 231,162Aust. National Training Authority - VET Research Centres 56,720

Criminology Research Fund 5,751 22,786Industry, Science & Resources 25,000 2,625 226,660Veterans' Affairs: Health and Medical 38,699Vocational Education Research 8,816

Non-CommonwealthClive and Vera Ramaciotti Foundation 12,000 Financial Markets for Children Grants 13,500National Heart Foundation of Australia 33,204 102,415 65,319National Multiple Sclerosis Society of Australia 45,000 45,000

Total National Competitive Grants 2,649,674 3,599,634 3,831,372 4,853,221 5,399,730Local Government 500 18,750 122,384 61,510 15,976State Government 154,776 156,137 1,329,010 2,035,819 2,397,181Other Commonwealth Government 421,354 204,160 608,656 956,515 1,068,143

Total Other Public Sector Funding 576,630 379,047 2,060,050 3,053,844 3,481,300Contracts 1,496,709 3,585,069 4,411,981 6,683,135Grants 2,707,791Donations, Bequests and Foundations 28,600 93,902 220,038 107,484 834,728International Funding 156,679 322,795 448,082 1,685,413 356,511

Total Industry and Other Funding 1,681,988 3,124,488 4,253,189 6,204,878 7,874,374Total Cooperative Research Centre Funding 201,329 303,816 395,278TOTAL RESEARCH FUNDING 4,908,292 7,103,169 10,345,940 14,415,759 17,150,682

Source: Research Report 2003 Deakin University

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Deakin has also been successful in recent years in securing State Government funding (including a bioscience project and the GTP).

In 2002 Deakin secured funding of $ 7.7 million under the Victorian Government’s Science and Technology Innovation scheme. Funding over three years was secured for three projects: Victorian Centre for Advanced Materials Manufacturing, Sustainable Aquaculture Systems, and the Mobile Architecture and Built Environment Laboratory.

In addition, ownership of the former International Fibre Centre Building was transferred to the University. This facility plus $1.9 million of funding for re-development has provided the foundation for the development of the Geelong Technology Precinct (GTP).

9.4.4 Biosciences at DeakinCellular Metabolism in Health and Disease

Deakin is a leader in this field of biological sciences. It has a major focus on diabetes, obesity, anxiety and depression.

The Metabolic Research Unit is a state-of-the-art facility for gene discovery and is researching new treatment for these diseases.

A team of 40 researchers, led by Professor Greg Collier, has discovered more than 65 genes relating to diabetes and obesity. The research is examining the molecular bases of these "lifestyle" diseases and the interactions between physical activity and nutrition. This research will impact on the management of these diseases and future therapeutics.

These areas of research are of global significance. The lifestyle diseases of diabetes and obesity are increasing rapidly in the developed world. Anxiety and depression are estimated to affect 340 million people globally. The economic and social significance of discovery and development in these areas is large.

Reflecting the international significance of the research, Deakin and the spin-off company AGT Biosciences (now ChemGenex Pharmaceuticals) is partnering with a European pharmaceutical company to develop new therapeutic treatments for diabetes and obesity.

Deakin is also involved in research in functional foods – the development of novel foods and ingredients that produce health benefits, beyond the delivery of nutrients.

Chiral and Molecular Technologies

“Chirotechnology is an area which is growing rapidly in academic and commercial importance. Many compounds exist in ‘left-handed’ and ‘right-handed’ forms where one is the 3-dimensional mirror image of the other. This ‘handedness’ is the chiral property or chirality of the molecule. While the two chiral forms of a compound have the same chemical makeup, in some cases they interact with other compounds and systems in dramatically different ways: for example one form may have therapeutic value while the other is toxic. The ability to control the chirality of such molecules during their manufacture is vital, and this is of great importance to the pharmaceuticals sector as well as in many areas of fine and agrochemicals.”

Source: Deakin Website Accessed June 2004

Chiral chemicals are important in pharmaceutical manufacturing. About 80% of all new products in development, from anti-cancer drugs, through antibiotics to cold and flu remedies, are chiral chemicals.

The international market for chiral intermediates is estimated at about $80 billion a year. Further strong growth is predicted, with forecasts of a market demand valued at $138 billion in 2010.30

Chirotechnology has applications in the development of drugs, insecticides and biodegradable plastics. The Chiral and Molecular Technologies Centre is led by Professor Dainis Dakternieks.

Research is funded by the ARC and by industry. International collaborations are in place with researchers at universities in Australia, England, Germany and the United States.

“The free radical chiral technology being developed at Deakin enables the manufacture of new chemical compounds carrying the characteristics that are required for a specific pharmaceutical purpose, leaving out harmful, unwanted side effects. The process reduces waste produced in existing technologies and the outcome is a product with greater purity and effectiveness, yielding significant efficiencies and cost savings for industry.

Recent American Food and Drug Administration guidelines have effectively determined that mixtures of chiral compounds can no longer be brought to the pharmaceuticals market place. For new pharmaceuticals each chiral form must be pure and separately assessed for registration. Making products with a single pure chiral form is the basis of the new multi-billion dollar chirotechnology industry. In 1992 chiral pharmaceuticals alone were estimated to have a market value of US$18 billion. This had increased to US$73 billion by 1997.”

Source: Deakin Website Accessed June 2004

30 BiDeakin Website Accessed June 2004

Cellular and Molecular BiologyDeakin's Centre for Cellular and Molecular Biology (located at the Burwood Campus), is involved in research on the effects of heavy metals (copper, zinc, chromium and arsenic) on biological systems.

The Centre is investigating copper-related diseases including Menkes disease and Wilson’s disease. This research will also assist in the understanding the development of Alzheimer's disease and some motor neurone diseases. New cancer research is also being undertaken for leukaemia and breast cancer.

Cell and Organism Bio-engineering The Cell and Organism Bioengineering (COBE) group uses recombinant DNA methodology combined with advanced biochemical, cellular and genetic techniques to engineer cells and organisms. It is focused on major applications in agricultural and environmental technologies.

There are several internal and external collaborations.

In the Faculty of Science and Technology, biotechnological and molecular biological research is linked to work in chiral and molecular technologies and with aquaculture.

There are links with nutrition and health researchers in the Faculty of Health and Behavioural Science.

External collaborations exist with Botany and Genetics at the University of Melbourne, the Ludwig Institute for Cancer Research, and the Murdoch Children's Research Institute.

Researchers also have national and international links.

Industry links exist via research project funding.

9.5 BioDeakin

Deakin University has been developing its biotechnology and biosciences activity and is commercialising its research through two spin-off companies.

During 2003, a review examining biotechnology and biosciences across the Geelong, Warrnambool and Burwood campuses was undertaken by Dr Andrew Parratt. This review led to the formation of BioDeakin, a whole-of-university vehicle for coordinating future development including research linkages, research funding and commercialisation.

BioDeakin will be an important vehicle for future development and cooperation with other researchers in Geelong and elsewhere, covering areas including biomedical, biological sciences, plant and aquatic biology, and bioprocessing.

“ BioDeakin - a new whole-of-university initiative, created to advance scholarship, research and teaching across a range of applied biotechnology areas. This multi-disciplinary grouping of scientists encompasses the University's strengths in bio-medical and bio-health sciences, plant and aquatic biology, biotechnology, bio-processing, biotech management, bio-informatics and bio-ethics. The goal is to generate and transform knowledge from biotechnology into practical solutions, which will advance health, social, environmental and economic development.”

Source: BioDeakin Website (Accessed June 2004)

From a marketing and research perspective, BioDeakin brings together more than 60 researchers and facilities at the three campuses – Melbourne, Geelong and Warrnambool.

9.6 ChemGenex Pharmaceuticals

“ChemGenex Pharmaceuticals is a genomics-driven pharmaceutical development company dedicated to improving the lives of patients by developing novel protein, antibody and small molecule therapeutics in the areas of oncology, obesity, diabetes and central nervous system disorders.”

Source: ChemGenex Website (Accessed June 2004)

ChemGenex (formerly AGT Biosciences Ltd) is a publicly listed biotechnology company focused on gene and protein discovery and validation. It is a successful spin-off company from Deakin.

AGT Biosciences recently merged with US firm ChemGenex Therapeutics Inc and will maintain operations in California, Texas and Geelong. The new firm is focused on the development of novel small molecule therapeutics for the treatment of cancer and related conditions.

The company has a strong competitive advantage in the metabolic diseases, diabetes and obesity, and now has cancer leads in Phase II clinical trials.

Commercial arrangements have been set up with Merck-Sante, Sequenom and Kyokuto Pharmaceutical Industrial Co in relation to diabetes and obesity.

The company’s eXpress Technology Platform is an integrated suite of technologies leading from humans and animal models of disease through to validation of protein targets. It is high technology in terms of equipment and incorporates considerable application of bioinformatics.

The company generates some revenue from a contract service for validation of target genes.

9.7 ChirogenA long term research program in chirals between Deakin and the University of Melbourne led to the establishment of Chirogen, a private spin-off company.

The company has been established to commercialise the technologies developed in Deakins’s Chiral and Molecular Technologies Centre31. It is involved in commercialising technology for the synthesis of single enantiomer compounds for the pharmaceutical industry.

31 See Section 9.4.4 for details of the Centre.

9.8 Barwon HealthBarwon Health operates a range of hospitals (including Geelong Hospital), clinics and health centres in Geelong and South West Victoria.

Geelong Hospital is a teaching hospital of the University of Melbourne (Chairs in Medicine and Surgery) and Deakin University (Chair of Nursing and Health).

Barwon Health has research strengths in biotechnology, epidemiology and clinical trials, with most of this research based at Geelong Hospital.

Key interests in laboratory research are the molecular and clinical aspects of bone resorption, markers of thyroid disease and stem cell growth, differentiation and gene expression.

9.8.1 Clinical TrialsClinical trials are a major component of Barwon Health's research output. The Annual Report 2002/03 states that the Human Ethics and Research Committee received 92 applications in relation to trials. At any one time there are large numbers of trials being conducted.

In recent years the number of clinical trials has stabilised while the number of investigator-initiated projects is increasing.

The major research areas are oncology, cardiology and clinical and biomedical sciences.

9.8.2 Osteoclast Cell Biology Professor Geoffrey Nicholson is the research leader in this field.

This Geelong laboratory is one of the leaders in the world in the study of osteoclasts, the cells responsible for resorbing bone by demineralisation. The research ties in with the Geelong Osteoporosis Study, a major epidemiological study of 1,600 females (which is being extended to include 1,600 males), the results of which formed the basis of the Australian National Bone Density Range.

Activities include basic research and projects in primary healthcare, such as the effect of Vitamin D treatment (by general practitioners) of older women on the prevention of falls and fractures.

9.8.3 Douglas Hocking Research InstituteA major research activity currently at the Douglas Hocking Research Institute is the study of conditions required for the growth and differentiation of stem cells derived from cord blood and the bone marrow of orthopaedic patients. The stem cell research includes application of a technique of re-programming cells by introducing the cytoplasm of other cells. Researchers have discovered novel genes expressed in stem cells.

9.9 PIRVic Marine and Freshwater ScienceThe Victoria Government’s marine sciences research centre is located within the G21 Region at e.

Queenscliffe is the site of research into marine life at Primary Industries Research Victoria's (PIRVic's) Marine and Freshwater Science program. The research has an environmental and ecological emphasis.

The research involves investigations of both aquaculture and the ecology of the marine and estuarine environment to identify factors necessary for the achievement of sustainable development of Victoria's commercial and recreational fishing, and aquaculture industries.

“In particular, PIRVic has expertise in aquaculture R&D, marine and freshwater fisheries research, monitoring and development, marine and freshwater environmental research and in designing and providing aquatic education programs.”

Source: Department of Primary Industries website Accessed May 2004

The projects under way at Queenscliffe include:

Aquaculture R&D – investigations of aquaculture production systems.

Marine and Estuarine Ecology – assessment, identification and monitoring of estuarine and marine environments including the monitoring of water quality in terms of contaminants, nutrients and life-forms.

Marine Fisheries Science – conduct of stock assessments and population modelling for bay and coastal marine fish resources.

The Centre also provides education services to early childhood centres, school groups, tertiary students and the community.

9.10 CSIRO Textile and Fibre Technology Geelong is also the location of another CSIRO facility, the CSIRO Textile and Fibre Technology Division (T&FT).

This CSIRO Division is textile processing driven, so there is no strong biotechnology connection. In the past, it serviced mainly the wool industry, but more recently has diversified to include other textiles and allied technologies and industries.

Innovations arising from T&FT Division have been mainly chemistry-based scouring technologies and environmental improvements, to assist the Australian industry to reach the stringent wool-processing requirements to be applied in Europe from 200732.

Pesticide residue is another area of research – how and when to treat sheep to release the least residue to the environment (a project requiring skills in organic chemistry) and determining which compounds are most biodegradable.

The Division has around 200 technical staff comprising physicists, chemists and engineers, of which about 160 are full time. These researchers mainly reside in Geelong and the surrounding region, with a small number commuting from Melbourne.

The Division has significant capabilities (many of relevance to biotechnology) including light microscopy, SEN and TEM analytical microscopy, scanning probe microscopy, fibre chemistry and physics, chemical analysis and bonding of polymers to the surface

32 For example, chlorine treatment is currently used to modify the wool cuticle to bond a polymer that prevents shrinking, but there are problems with the discharge of chlorine into the environment.

of natural fibres. A contract project is currently under way that uses wool products for a human medical application.33

The Division can provide information about the chemical composition of amino acids, proteins and lipids and the nature of chemical bonds. It also has R&D capability that is applicable to the hair care industry.

The T&FT Division is seen as having good industry links and has a pragmatic approach to developing intellectual property with its commercial partners.

9.11 Geelong Education and TrainingGeelong is well served with education and training in the biosciences, and this is a major asset for the region.

9.11.1 Deakin UniversityDeakin offers a number of graduate and undergraduate courses at Geelong in biotechnology and biological sciences.

The School of Biological and Chemical Sciences is one of the five Schools in the Faculty of Science and Technology and is located at two campuses – Burwood and Waurn Ponds. Courses on offer include: Biological science - Bachelor of Science (Biological Science), Biotechnology - Bachelor of Science (Biotechnology), Chemical science - Bachelor of Science (Chemical Science) and Forensic science - Bachelor of Forensic Science.

The combination of biology and chemistry has contributed significantly to success in attracting national competitive funding for both teaching and research activity.

In 2004, the School has 32 full-time academic staff (19 at Geelong and 13 at Burwood), and 23 technical staff. More than 1,400 undergraduate and postgraduate students are currently enrolled in degree, diploma or certificate courses offered by the School.

Table 20. Student Enrolments by Field of Study – Deakin University 2000-2002Field 2000 2001 2002Agricultural, Environmental, Related Studies

428 423 421

Architecture and Building 734 694 707Creative Arts 982 1,073 1,173Education 3,138 3,183 3,387Engineering and Related Technologies 1,180 1,072 1,136Health 2,934 2,839 2,766Information Technology 1,408 1,652 1,795Management and Commerce 8,671 9,512 10,117Natural and Physical Sciences 1,536 1,502 1,605Society and Culture 7,806 7,262 7,205Non-award 223 300 442Total 29,040 29,512 30,752

33 This is a confidential industry project.

In addition, the School of Ecology and Environment offers courses in: Bachelor of Environmental Science (Environmental Management), Bachelor of Environmental Science (Conservation Ecology), Bachelor of Environmental Science (Fisheries Management and Aquaculture), Bachelor of Environmental Science (Marine and Freshwater Science) and Bachelor of Environmental Science (Integrated Catchment Management).

.

9.11.2 Gordon InstituteThe Gordon Institute provides courses in biosciences through the School of Life Sciences and the Specialist Centre in Environmental Technologies.

It plays a strong role in supporting the research sector and pathology services in the region.

Courses are delivered in Laboratory Technology, Pathology Testing and Biological and Environmental Testing. The diploma courses are:

Diploma of Laboratory Technology (Biological and Environmental Testing) – the course provides students with laboratory skills and knowledge required of a specialised career in either Biological and Environmental laboratories in a wide range of fields.

Diploma of Laboratory Technology (Pathology Testing) – the course provides students with laboratory skills and knowledge required for a career in the Medical Laboratory field.

The courses in environmental technologies include: Diploma of Conservation and Land Management and Diploma of Environmental Management.

Certificate level courses are offered in Animal Sciences and include Certificate II in Animal Studies and Certificate III in Animal Studies.

9.11.3 Marcus Oldham College

Marcus Oldham College was established in 1992 and teaches the principles of business management for farming, agribusiness and equine enterprises.

The College's approach covers animal and plant production as well as analysis of financial and human resources. It’s mission is "To advance agriculture through innovative educational programs in farm, agribusiness and equine management."

Most of the students live on campus. They come from Australia (96%) and overseas (4%). About 36% of the total are from Victoria, about 25% from New South Wales and 12% from Queensland.

The courses offered are Bachelor of Business (Agricultural Management) and Advanced Diploma of Farm Business Management, Diploma of Agribusiness and Diploma of Horse Business Management.

10 SWOT Analysis

As part of our assessment of biotechnology in Geelong, we conducted a SWOT analysis based on: interviews in Geelong with key persons involved in biosciences, some interviews conducted outside Geelong and our review of the sector.

Our analysis shows that Geelong has a number of strong positives as an emerging regional biotechnology hub. There is a good base on which to build the sector.

10.1 Strengths of Geelong

Significant strengths were recognised, which provide a foundation for future growth.

A number of strengths come through in our analysis. These strengths are summarised below, and combined provide a foundation for the development of biotechnology in the region.

Geelong StrengthsScience Reputation Spin-off Companies AccessInstitutions –CSIRO (AAHL), Deakin,

Two successful spin-offs – with strong futures

Access to Melbourne

Lead researchers at Deakin Want to be involved in helping others

Avalon Airport – connecting flights to international airports

Existing Foundations Committed to staying in the region Ring Road will improve access to Deakin

Major research centres Education and Training LivingResearch infrastructure –buildings, equipment

High quality and industry linked training

Large City

Significant number of researchers Deakin – Science Improving facilitiesMajor local university - Deakin

Gordon – technician level Good housing options

Geelong Technology Precinct (GTP) Building

Lifestyle attractions

Deakin Management Centre

Cooperation Good secondary education

Land available for GTP Informal networks Changing demographics – professionals/ increased education levels

Deakin has history of working with industry – research, IP, education

Research cooperation

Deakin is flexible and entrepreneurial

Exploring new links

Commitment to Future Research

Barwon health well linked to community

Deakin is expandingBarwon Health research restructure and expansion

State Government

CSIRO – developing new areas (aquaculture)

Interest in Geelong and biotechnology

Leadership Other

Active leadership and commitment to biotech – research/health sector

Population characteristics suitable for clinical trials

G21 providing a focus on future possibilitiesCouncils focused on long term future

10.1.1 Reputation and Infrastructure Foundations are Significant

There are a number of key advantages in terms of reputation and research infrastructure.

Science reputation - the presence of institutions with an international reputation (CSIRO/AAHL) and leading researchers at Deakin and Barwon Health.

Existing research infrastructure - the existence of several major research centres, a substantial investment in buildings and equipment, clusters of researchers, a major university with scope for expansion as a research location (via development of the Geelong Technology Precinct).

The Geelong research specialisations are in several areas of Australia’s major research strengths - Animal Health at CSIRO; Health/diseases at Barwon Health and Deakin; and Pharmaceuticals at Deakin (Chirogen, ChemGenex Pharmaceuticals).

There was a strong commitment to future growth among the major research institutions.

Deakin was seen as having a strong commitment to expanding research, combined with an entrepreneurial style and a cooperative approach in working with industry.

CSIRO was seeking to expand through the development of the National Aquatic Animal Health Centre.

Barwon Health is restructuring its research activity and has the concept of developing a major research centre under the umbrella of Barwon Research.

Commercialisation has begun.

Deakin has been successful with the creation of two spin-off companies (Chirogen and ChemGenex Pharmaceuticals) in areas of biotechnology with potential for generating substantial future revenue.

The companies are committed to staying in Geelong and were prepared to play a role in helping other companies to develop.

CSIRO has established commercialisation partnerships with industry and is always looking for new opportunities.

10.1.2 Quality Education is AvailableGeelong has a strong education and training base.

Education and research training is delivered through Deakin’s Faculty of Science and Technology.

Gordon Institute of TAFE provides diploma and certificate level courses in laboratory training, pathology and environmental science.

10.1.3 Cooperation and LinkagesThere is existing cooperation between researchers and this can be developed further.

Significant informal links already exist among the major institutions (CSIRO, Deakin, Barwon Health).

There is a readiness to explore future areas of cooperation.

10.1.4 Locational Factors were ImportantA number of location factors, make for a good location.

Geelong has good road access to Melbourne.

JetStar flights from Avalon provide connections to international gateways in Sydney.

The development of the Geelong Ring Road will improve access to Deakin and provide good accessibility to the GTP (and increase the value of the site).

Geelong has all the facilities of a large city and is a good place to live. Changing demographics are reshaping the city as more professionals are attracted to the coastal lifestyle that the region offers.

10.2 Weaknesses

The major weaknesses identified primarily relate to scale, fragmentation and external recognition.

The major concerns include:

There is only a small number of research institutions with total researcher numbers being dominated by CSIRO/AAHL.

Geelong is still has an emerging biotechnology sector.

There is currently a lack of critical mass in biotechnology, and research funding is inadequate (particularly in the health segment).

There is a need to secure a substantial boost to research funding and to scale up activities in all areas.

Geelong is not recognised as a biotechnology location and is still seen as an industrial area. This presents difficulties in recruiting researchers out of Melbourne (a comment was made that it is easier to attract an overseas researcher than to recruit someone from Melbourne).

The travel times to Melbourne institutions create some intellectual isolation.

Distance from Melbourne means that Geelong is not on the radar of investors.

The fact that biotechnology sites were scattered around a large city added to fragmentation and lack of contact among participants.

Geelong WeaknessesResearch Focus Research Funding LocationSmall number of research institutions

Funding is limited – need a substantial boost for future growth

Sites scattered around the City, but some co-location opportunities emerging with GTP

Specialisation across a range of activities

Lack of venture capital or local angels Intellectual isolation

Activities have been fragmented and small scale

Difficult to establish spin-of companies - first round investors in the capital cities - 'Proximity Rule' applies - investment within 30 km of head office

Can be difficult to recruit researchers who would prefer to remain in Melbourne

The current lack of critical mass in biotechnology

Difficult to compete for funding with established unis/ institutes

Travel times to Melbourne Institutions

Reputation/Recognition Limited funding for health-related research

Limited external recognition Biotech will need to compete with other areas of G21 funding

Geelong seen as an industrial area

Cooperation

Difficult to attract companies to Geelong

Not enough cooperation in past

Too many organisations that want to be involvedLimited awareness of research at other Geelong institutions

10.3 Opportunities

10.3.1 Geelong Opportunities

Major perceived opportunities were built around current capability areas.

A number of opportunities were identified for Geelong, and these are summarised in the table below and discussed in more detail later in this report.

A major development focus needs to be on building the current research specialisations through securing additional research funding.

The existing major research strengths were seen as being in:

Health-related research in diseases, drug treatments and pharmaceuticals.

Animal health – including diseases and vaccines.

Aquaculture has major potential along with some environmental applicationsSeveral of these strengths are based on the unique position of Geelong as a coastal city with a regional hinterland and a significant population base.

Most of the areas of opportunity relate to moving along the research and development chain. These include developing a scale-up facility in bioprocessing; developing GLP (good laboratory practice/pharmaceutical drug production) laboratories for student and industrial use; and the expansion of contract research.

Other areas of opportunity related to expanding research infrastructure including the Geelong Technology Precinct (as the key location for biosciences activity), developing stronger links between the major biotechnology players in Geelong and building partnerships with national and international businesses.

All of the major players have research strategies in place, were pursuing activities that had a high potential for returns and were within their existing capability.

Geelong OpportunitiesExpand on Existing Activities Infrastructure DevelopmentDevelopment of Barwon Research - to bring together expertise in biotechnology, epidemiology and clinical research ( ie. clinical trials)

Co-location of biosciences activities in GTP Stage 1

Expand existing research areas – through additional research funding

Future development of GTP (Technology Park Stage)

Fresh-water aquaculture Develop External LinksExpand health research - osteoporosis, diabetes and cardiology

Develop expanded links with pharmaceutical companiesclinical trials, contract research, research partnerships

GLP (good laboratory practice / pharmaceutical drug production) laboratories for student and industrial use

Strengthen external links - Werribee Food /Deakin Functional Foods

Expanded contract research Business AttractionDevelopment of bioinformatics Build recognition for Geelong Biosciences

capabilityDevelop a scale-up facility (bioprocessing ) at Deakin Target some major firms as part of an

attraction strategy – but significant infrastructure support is likely to be required.

Fine chemicals training for medium sized scale upDevices and diagnosticsEnvironmental biotechnologyDevelop Local LinkagesStronger linkages between major players – CSIRO/Deakin, Barwon Health/DeakinAquaculture –development at CSIRO , linkages to Deakin and PIRVic QueenscliffeSecure Additional FundingFocused approach to securing new research funding (including joint projects)Seek specific project funding under G21 umbrella

10.3.2 National OpportunitiesAs part of the Science and Innovation Mapping process undertaken by the Australian Government during 2003, a number of national opportunities were identified34. These covered: agrifood, environment, bio-medical, pharma and human therapeutics, diagnostics, clinical trial and platform technologies.

A major focus of these opportunities was on linking into global markets through contract research and trials and partnerships.

In the case of Geelong, the capability is spread across several areas - agrifood, pharmaceuticals and human therapeutics and clinical trials.

34 Mapping Australian Science and Innovation, Main Report Department of Education, Science and Training, November 2003.

Table 21. National Biotechnology OpportunitiesSector OpportunityAgri-food Nutrition in food

GMOs

Environment Environment remediationBio-degradable packaging

Bio-medical Nano-technologies, devices,

Pharma and Human Therapeutics Linkages between small firms and large pharmas- R&D, production, marketingPIIP Scheme R&D Outsourced research contracts from international companies

Diagnostics Diagnostic studies – for international companiesClinical Trials Special disease, seasonal trialsPlatforms Genomics, bioinformatics

Source: Mapping Australian Science and Innovation, Main Report Department of Education, Science and Training, November 2003.

10.4 Threats

The major threats identified related to the ability of Geelong to compete for research funding and to scale up its activities, and potential shifts in government research priorities.

The region was seen as having only a few key research leaders, the loss of whom would impact on future growth. While the GTP was seen as a major asset for the region, concerns were expressed about difficulties if market interest could not be secured for the next stages of development.

There were major concerns expressed that Geelong would not have the investment dollars in any competition with other regions to attract new biotechnology activities. In addition there was a concern that biotechnology would have to compete with other G21 Projects that may deliver more immediate payoffs in business and jobs.

Geelong ThreatsResearch & Project Funding Geelong Technology Precinct Failure to secure additional research funds Not able to attract key tenants to GTPLimits on Commonwealth funding Unable to secure developer interest in GTPChange in Commonwealth Government research funding priorities

Unable to scale up activities at GTP

Competition for funds – national and state research and project funds

G21

Shift in CSIRO priorities Loss of momentum for G21Research Leaders Competition for development funding from other

G21 ProjectsLoss of key individuals to other institutions/ regions Business AttractionLoss of local biotechnology champions Competition with other locationsRecognition of Geelong Loss of key businesses from the regionFailure to build biosciences recognition

11 Developing the Biotechnology in Geelong

In assessing the potential for growth in biotechnology in the Geelong Region, it is important to understand some of the key drivers of the sector.

11.1 Key Factors Supporting DevelopmentThe following table highlights a number of the key drivers that influence the development of biotechnology activity in a regional location. Buchan’s analysis along with a review of international business experience has identified these factors as important.

In overall terms, Geelong can be classified as an emerging biotechnology location. It has a base anchored by CSIRO and PIRVic, with significant expansion occurring at Deakin and plans for expanded research activity at Barwon Health.

At the moment a large part of R&D is at the discovery phase. Over time this will need to be expanded and activity also moved into the commercialisation phase.

Activity and resources are concentrated in the research and discovery phase. Any major expansion in the medium term will need to be built on an expansion in research and increased levels of commercialisation.

Table 22. Factors Supporting the Development of BiotechnologyFactor Geelong RatingProximity to academic excellence Medium/HighAvailability of skilled workforce MediumResearch leaders active in the region/driving cluster

High

Established infrastructure/co-locations Medium/HighTechnical support & services MediumGeneration of IP from institutions MediumSpecialist education and training HighConnections with larger life sciences companies LowVenture capital and business angels LowCommercialisation, patenting expertise MediumLifestyle attractions Medium/High

Source: Buchan Analysis based on review and assessment of sector and Geelong location

11.2 Proximity to Academic Excellence

Biotechnology firms have largely emerged from centres of excellence in CSIRO, universities and hospitals, government laboratories, medical research institutes and agricultural research institutes.

This has been the pattern worldwide, in Australia (and indeed in Geelong) where many of the biotechnology companies have developed from research arising in the public sector institutions.

This pattern was confirmed in a recent study35 of the pharmaceutical sector, and is a major reason why governments have increased funding for research in biotechnology – to provide foundations for discovery and development of new products, processes and technologies.

“The growth of the biomedical sector is mostly from Australia’s medical research base. Seventy per cent of biomedical companies formed in 2001 were spin-offs from research institutions. Most began with a group off focused scientists pursuing a single lead. These spin-off companies add significant value to discoveries, developing products to Phase II or early Phase III clinical trials before forming alliances with larger companies for final product development and marketing. They have a high risk of failure, but if successful, offer potential significant returns for founders and investors.”

Source: Pharmaceuticals Industry Action Agenda 2002

Geelong also has a strong foundation, with research projects focused in growth areas and teams with international reputations in their fields.

In Australia and elsewhere, research institutes with discoveries have pursued a variety of models to commercialise their research. These approaches include: licensing the technology for development by a third party, funding continued development of the technology by the institute prior to licensing; creating a joint venture or strategic alliance to commercialise; establishing a company to add further value to the technology; establishing a company to develop and take the technology to market.

The returns from commercialisation for institutions have been variable in Australia. Some institutes have been constrained because they lack the funds to sustain development over time, do not know how to value the IP (over-value or under-value) and have limited management and commercialisation skills and experience.

Geelong has some commercialisation experience that has been developed through the Deakin spin-off companies.

35 Pharmaceuticals Industry Action Agenda 2002

11.3 Business Model for Biotechnology FirmsTo create effective industry development programs, it is important to understand the business fundamentals of the biotechnology sector.

11.3.1 Timing Cost and Risk

The Biotechnology Sector has very long development and product cycle times.

Development TimesResearch, development and manufacture of therapies for human use are high-risk and high-cost, and can take between 10 and 15 years from commencement to completion. This contrasts with other sectors like ICT where product life cycles can be very short.

It is also a risky process – a large investment is required in development and regulatory approvals, only a small number of products reach the market and the major revenue streams tend to be focused on a small number of final products.

The potential for very large returns from proven discoveries that reach the market is the key driver of the business model for biotechs.

Researchers have to build partnerships with major firms to be able to survive the research and trials process. Partnerships have become increasingly important, with major life science firms establishing relationships to secure new technologies to develop36.

The following diagram illustrates the time scale from initial discovery to market entry for a pharmaceutical product in Australia.

A recent US study has highlighted the relationship between research projects and the number of products that are finally successful in the marketplace.

“Biotechnology is a risky business. Improved understanding of genetics has led to some novel and successful therapies, but relatively few research projects lead directly to new products. In a given year, the National Institutes of Health (NIH) will fund about 25,000 research projects. Researchers and private companies get an average of 5,500 patents for new biotechnology in a given year. Around 400 biotech medicines are in development, but only about 100 biotech-related drugs have reached the market in the past 30 years, with the top ten accounting for nearly all of the sales (Standard and Poors 2000).”

Source: Signs of Life the Growth of Biotechnology Centres in the US the Brookings Institution 2002 P9

36 Most of the major life sciences companies in Australia have licensing specialists who are looking for new discoveries to license or acquire.

Chart 7. Process of Pharmaceuticals Development

Development Cost and RiskThe following table from the Pharmaceutical Industry Action Agenda 2002 shows the cost/risks and rewards in the case of pharmaceuticals.

An initial discovery cost of $2 million develops into a cumulative cost of $300 million by the time the product gets to market (with major costs being incurred in Phases I to III trials).

The returns in terms of net royalty increase the closer the product is to market.

The probability of success increases dramatically beyond Phase II trials.

Table 23. Pharmaceutical Development Costs and Risk

Source: Pharmaceuticals Action Agenda 2002 DITR (Chart 12)

It shows that development costs are very high but the rewards for success are substantial. This is the major driver of the biotech business model. It also means that the capital requirements to support development are extremely high.

The net effect of this development cycle is a major requirement for patient capital.

11.3.2 Business StructuresThe business structures for biotech firms are similar worldwide. Biotech firms tend to be small and often remain small, with few growing to be fully integrated firms. Indeed, for many, their business plan is to remain small. The following summarises the types of firms.

Fully Integrated Firms - major pharmaceutical companies are integrated operations that conduct activity from research through development and manufacturing to global marketing of final products. There are few Australian owned firms in this category.

Partially Integrated Firms - some Australian firms in devices and diagnostics are partially integrated and are able to manufacture and distribute products through agents.

Virtual Firms – as a way of managing costs and maintaining flexibility, virtual biotechnology firms have emerged. These firms have only a few core staff and contract in most of the services (marketing, IP, commercialisation) that they need. This often includes ongoing research and development arrangements with the research institute from which the technology arose. Many of the small Australian biotechs operate on this basis. This model tends to anchor companies near their establishment locations.

11.3.3 Alliances and PartnershipsAlliances or partnerships between participants along the value chain are important.

Biotechnology firms have found partners in the major pharmaceutical companies that have both a strong appetite for new products and the capacity to acquire products or fund their development. Most of the major firms have established some relationships with biotechnology companies and research institutes in Australia (eg. GlaxoSmithKline and Bristol Myers Squibb, Merck, J&J).

A study by the Centre for Strategic Economic Studies at Victoria University of Technology shows that alliances are vital for pharmaceutical discoveries and technology.

“Alliances with global companies represent the prime development path for Australia’s biomedical companies and research institutions. Alliances incorporating licensing or other forms of collaboration are one mechanism by which the multinationals obtain access to new products, the Australian research and development sector creates a path to market, and the means by which all companies and institutions obtain skills and technology.”

Source: Centre for Strategic Economic Victoria University of Technology. The Role of Pharmaceutical Alliances - Summary

Alliances have been accelerating during the late 1990’s, with most of the major companies establishing units to seek out new products and technologies from universities and research institutes.

Chart 8. Number of Alliances by Type of Organisation Australia 1993-2001

Source: Pharmaceuticals Industry Action Agenda Local priority—Global partner 2002 P20

This is now a common trend in Australia and internationally and has created a pattern of “Davids and Goliaths”.

“Firms tend not to move between these two categories—small biotech firms, even extraordinarily successful ones, do not grow into large pharmaceutical firms. Instead, biotech research firms tend to sell or license their technologies to larger pharmaceutical firms, or to form joint ventures with them, or to sell them their entire companies. The different business skills required and the high cost of scaling up to global scale manufacturing and distribution usually discourage small research firms from growing internally. The result is huge differences in the apparent optimal scale of biotech research firms and that of pharmaceutical firms, appropriately referred to as “Davids” and “Goliaths.”


As well as being a development strategy for small biotechnology firms, partnerships have become a key strategy for large firms to acquire new technologies.

Most of the global pharmaceutical companies no longer rely exclusively on new products developed in-house. They also form partnerships and/or strategic alliances with other large firms, and with other specialist smaller companies. These arrangements include: the sourcing of products at Phase II or III trial stage from small firms or research institutions; contract research at the clinical trial stage; and contract manufacturing or joint ventures for sales and marketing.

The Brookings Institution has recently commented on the scope and scale of these activities.

The pharmaceutical sector and the biotech sector are characterised by very widespread intersectoral ties between firms. These ties take the form of cross ownership, licensing, joint ventures, and research agreements. Large pharmaceutical firms often invest in promising research at smaller biotech firms. Small firms obtain access to the pharmaceutical firms’ regulatory expertise and manufacturing and marketing capability. Firms frequently share technology: Recombinant Capital (2001), a research firm specialising in the biotechnology industry, reports more than 10,000 industry alliances during the 1990s.


11.3.4 Location FactorsSpin-out companies often remain close to their parent research organisation, maintaining a variety of links including joint research projects, contract research, teaching arrangements and placement of research students, use of laboratories and sharing of equipment.

This equally occurs in the major centres in the US as it does in Melbourne, and has major implications for business attraction activities.

“….. it seems clear that conventional industrial recruiting activities will be of limited utility. There is little evidence that biotechnology firms move from place to place. Biotechnology firms develop locally, drawing on the ready availability of talented workers, relevant research, and localised venture capital. Most firms are small, young, single-establishment firms that remain located in the metropolitan areas in which they are started. Consequently, metropolitan areas interested in biotechnology should focus on indigenous biotech development strategies.

Source: Signs of Life The Growth of Biotechnology Centres in the US The Brookings Institution 2002 p34

As we have seen, this is the location pattern in Melbourne, with most firms remaining near the institution from which their technology emerged.

A recent survey of Melbourne firms highlighted the importance of low costs, transport and infrastructure and proximity to R&D institutions.37

Chart 9. Ranking of Reasons for Choosing the Current Location – Biotechnology Firms Melbourne

Source Bioscience to Bioindustry A Role for Local Government in Biotechnology in Victoria, Aoris Nova January 2004

There are few footloose biotech firms looking around for a new home. An exception may be some of the firms producing or distributing devices. While these firms (particularly international firms) may not be tied to an institution, they may locate in one of the major regional clusters to be close to some of their major customers.

This has major implications for regions like Geelong that want to expand their biotechnology sector and highlights the need for a “grow your own” strategy through expanding the current research base.

37 Bioscience to Bioindustry A Role for Local Government in Biotechnology in Victoria, Aoris Nova January 2004. Note the lower the score the more important the factor.

11.4 The Need for Funding

“The high level of uncertainty of success and the great length of time required to develop biotech products make biotech development a costly proposition. Biotech firms need to pay for expensive medical research, laboratory facilities, and legal fees many years in advance of any likely sales revenue and with uncertain prospects of success. This reality makes large amounts of patient, up front capital an essential ingredient for successful biotechnology firms.”

Source: Signs of Life the Growth of Biotechnology Centres in the US the Brookings Institution 2002 p9

11.4.1 Raising CapitalInvestment funds are fundamental to the growth of biotechs. Biotechnology companies in Australia need to raise capital in a very small market. The recent science mapping project has highlighted this fundamental issue.

“In mature biotechnology sectors, such as the United States and United Kingdom, start-up companies are often supported by private investors, including business angels and venture capitalists, for around six to 10 years. These investors are frequently active participants in the company, providing business advice and networks to assist the company through its start-up years. If and when products are close to market, the company may consider options for listing on a stock exchange to obtain the funds to boost the company’s coffers for final development and marketing and provide returns for the private investors.

However, this type of support is less common in Australia, as the private investment market is not as large, sophisticated, or as comfortable with risk-taking as private investors overseas. A shortage of investor capital, particularly at pre-seed and seed stages constrains the growth of start-up companies, limiting their opportunities to develop or acquire diverse product portfolios. The biotechnology sector does not yet have a strong commercial track record, leading many in the investment community to perceive it to be an overly risky investment proposition. These factors present significant challenges to Australian biotech companies. “

Source: Mapping Australian Science and Innovation, Main Report Department of Education, Science and Training, November 2003. P318

A recent Australian study demonstrates the fundraising patterns of Australian firms.

Over recent years small biotechs have been going to the market for funding. A recent study by the Australian Graduate School of Management, examined the experience of a group of companies that raised funds through IPOs38.

The study examines 24 biotechnology IPOs on the Australian Stock Exchange (ASX) during the period 1998-2002 (an active period for biotech listings). It examined: the companies and their technologies at IPO; the extent to which financial and technological objectives were achieved; and how the companies changed their business models in the current market.

The 24 firms operated in the human health arena (15 drug discovery/genomics, five diagnostic, three medical systems/device firms, one chemical). In all but two cases, the technologies originated in an academic institution, medical research institute or CSIRO."39

38 Australian Biotechnology Do Perceptions and Reality Meet? David Sparling and Michael Vitale Australian Graduate School of Management UNSW September 2003 p5

39 Australian Biotechnology Do Perceptions and Reality Meet? David Sparling and Michael Vitale Australian Graduate School of Management UNSW September 2003 P5

Comparisons were also made with other firms raising funds in the market at the same time. It showed that the biotechs out-performed the other IPOs during the study period.

"From IPO to the present time shares in the recently listed biotechs (+67%) significantly outperformed those of US biotechs (-45%), Australian non-biotech IPOs (-36%), and the Australian stock market as a whole (-5%)."

Source: Australian Biotechnology Do Perceptions and Reality Meet? David Sparling and Michael Vitale Australian Graduate School of Management UNSW September 2003 P5

The analysis shows that funding was from a number of sources:

Early stage funds (pre-IPO) came from various sources including universities, government and contributions in time and money by research scientists.

After the transfer of technologies into the start-ups, funding was from a combination of government programs, venture capital, research and development syndicates, as well as continued university support in some instances.

Sparling and Vitale estimated that:

A total of $88 million from a variety of sources was invested in these firms before IPO.

Between 1998 and 2002, Australian investors provided more than $250 million to these 24 biotech firms.

The business model for most of the firms examined was to license their technology to a major pharmaceutical company – the development pattern that we examined earlier in this report.

"The business models identified in the IPO prospectuses for these firms reflect both the small size of the firms and the significant resources needed to take a biotechnology product through regulatory approval to an end product. All firms with a major or minor emphasis on drug discovery and development had a strategy of adding value to initial discovery research and then licensing the technology to a large pharmaceutical partner. Only the six firms in diagnostic or device businesses planned to take their products all the way through to the market. Two others planned to in- license promising pharmaceuticals from other firms."

Source: Australian Biotechnology Do Perceptions and Reality Meet? David Sparling and Michael Vitale Australian Graduate School of Management UNSW September 2003 P 10

Major concerns have been expressed about the impact of small scale and a narrow capital market on the development potential of Australian firms and the tendency to trap them in a “perpetual start-up phase”.

“Many Australian biotechnology companies are trapped in a perpetual ‘start-up’ phase of limited product portfolios and limited revenue. Start-ups often form around a particular product and their fortunes rest on whether or not that product is a success. Some companies are able to acquire or develop similar products, or have additional activity such as contract research, to provide income for further R&D. However, with limited available investment, Australian biotechnology companies are less able to expand their product portfolios.”

Source: Mapping Australian Science and Innovation, Main Report Department of Education, Science and Training, November 2003. P320

These Australian companies are small on a world scale and have limited resources to take products to market and to survive the costly regulatory approval processes, which we outlined earlier. It is likely that many will link up with the larger international companies that they have developed a research relationship with.

"Perhaps a more likely outcome is vertical consolidation–acquisition by a larger “upstream” company, for example a large pharmaceutical, and perhaps one with which the biotech has an established research or marketing relationship. Many Australian biotechs have such alliances already, and the knowledge shared in the course of working together could smooth the path to consolidation. "

Source: New Biotechs Face Mixed Future Michael R Vitale & David Sparling Australian Graduate School of Management September 2003 P 3-4

An understanding of business model and pattern of relationships and the sources of capital is fundamental to expanding biotechnology activity in the Geelong region.

This industry research in Australia and the US, highlights how research relationships develop into downstream business relationships and this is an important pattern for any major expansion for biotechnology in Geelong.

11.4.2 Venture Capital and Business AngelsVenture capital and business angels have been important to the development of innovation based industries.

There are no local venture capital funds or business angels based in Geelong. While Geelong is a large regional city and has a number of business leaders who invest in local businesses, ventures in biotechnology appear as risky and highly speculative.

Geelong businesses need to approach the capital city-based venture capital funds, and, in the case of an IPO vehicle, to raise capital in the market.

Even with a substantial scale up in research and commercialisation activity, a venture capital fund is unlikely to develop in Geelong. Tapping into the Australia market via Melbourne will continue to be a route to funds in future.

11.5 A Skilled Workforce

11.5.1 Research Leaders

Research skills are fundamental to the biotechnology sector. Most key research projects are developed around the reputation and experience of the research leader.

The presence of research leaders with an international reputation is fundamental to the development of the sector. It is critical for a regional research centre to recruit, develop and retain these leaders.

Researchers are attracted to the reputation of the leader and the institution, often in that order.

Biotechnology is a global market with many individual researchers having the opportunity to work in other countries. Higher salary levels in the US and Europe (and the scale of these markets) are attractive and it is often difficult to lure people back to Australia.

Recognising this, a number of government programs have been developed to attract key research leaders back to Australia. The Australian Government’s Federation Fellowships perform this role. The Victorian Government has recently introduced a similar program (VESKI Victorian Innovation Fellowships).

Geelong has a number of institutions and individual research leaders with international reputations in biosciences fields. The retention of these leaders is important for future growth.

11.5.2 A Skilled WorkforceGeelong has a highly skilled workforce. The table below shows the qualifications of persons working in Greater Geelong. The high incidence of higher degree qualifications reflects the strong education, health sector and research and development profile of the region. Of the almost 500 persons working in the region with doctoral level qualifications, one third had qualifications in natural and physical sciences and around 25 % had qualifications in heath areas.

Table 24. Qualification Level by Field - Persons Working in Greater Geelong 2001

Fields Doctoral Degree

Masters Degree

Graduate Diploma

Graduate Certificate

Bachelor Degree

Advanced Diploma and Diploma

Advanced Diploma & Associate Degree

Diploma Total

Natural and Physical Sciences

165 60 18 3 604 3 60 102 1,015

Information Technology 13 15 62 5 244 5 47 68 459Engineering and Related Technologies

31 62 31 0 612 9 320 457 1,522

Architecture and Building 5 13 10 0 168 0 42 90 328Agriculture, Environmental and Related Studies

3 13 17 3 85 0 82 78 281

Health 132 82 259 39 2,151 12 639 166 3,480Education 28 181 704 11 1,877 8 640 187 3,636Management and Commerce

11 159 139 39 1,118 19 461 542 2,488

Society and Culture 84 162 154 11 1,138 6 168 328 2,051Creative Arts 6 16 27 3 256 10 193 172 683Food, Hospitality and Personal Services

0 0 0 0 6 3 67 66 142

Mixed Field Programmes 0 0 0 0 0 0 3 0 3Inadequately described 0 8 9 0 160 0 20 33 230Not stated 12 5 6 0 35 8 35 49 150Total 490 776 1,436 114 8,454 83 2,777 2,338 16,468

Source: ABS Census 2001 Working Population Greater Geelong

As a region Geelong has an advantage in terms of having quality education and training programs delivered by Deakin and Gordon Institute.

While skills are important for the biotechnology sector, there have been few detailed studies of future skill needs, conducted at both a state and national level.

The industry surveys that have been conducted have largely focused on two areas: the need to attract and develop high level research skills including researchers from overseas; dealing with an identified gap in “development skills” in relation to management and commercialisation.

Recent research conducted by Buchan has shown that changes occurring in the industry are creating new skills pressures, specifically the need to recruit and retain additional well-qualified researchers and to broaden skills to encompass commercialisation. These pressures are largely the result of growth in two areas: growth of the public sector research institutes, driven by significant increases in funding for research in biotechnology and related fields; and increase in the number of private biotechnology companies and spin-off companies that are creating new job opportunities.

Within the sector in Victoria there are significant skill gaps and recruitment problems.

The survey by Buchan Consulting was part of a major study conducted for Box Hill Institute of TAFE, and showed that 50% of organisations interviewed had difficulty recruiting qualified people40. Most of the difficulties were experienced by smaller companies, with larger biotechnology and pharmaceutical companies and major research institutes having fewer recruitment problems.

Of those organisations that reported difficulties, the most common problems faced when recruiting employees were that candidates: could not meet the specific criteria or specialist needs of the organisation; lacked sufficient industry experience; lacked the required combination of scientific and commercial skills; and lacked the independence and confidence needed to work effectively in a laboratory environment.

The Buchan survey identified future training requirements in several areas: research (biotechnology degrees, upgrade training, and specialist training); laboratory related training (safety, quality, technical); information technology (bioinformatics, databases); and business/commercial (marketing, commercialisation).

Buchan’s discussions with Melbourne based companies confirmed that access to a highly skilled workforce is fundamental requirement. A major concern about Geelong is not being able to attract the right research employees.

While Geelong has 300 researchers, there are still some skill issues.

All research organisations in Geelong commented that it is often difficult to attract research staff and graduate students. Several research centre leaders commented that it is often easier to recruit an international researcher than it is to attract someone out of Melbourne.

In the case of Geelong, future skill requirements include:

-An ability to attract research leaders with an international reputation to head up research centres.

- A need to continually attract experienced researchers.

- A broadening of the skills base in commercialisation and business management.

40 ? Feasibility Study - Specialist Centre in Biotechnology Buchan, A Report to Box Hill Institute, Buchan Consulting November 2003

11.6 Research Leaders are Active in Driving Development

“Technology regions such as Silicon Valley, Boston, Austin, San Diego, Cambridge all developed with regional leaders in collaboration with university administrators taking aggressive measures to build facilities, encourage venture capital, provide amenities and the environmental quality demanded by knowledge workers.

Source: Commercialisation Discussion Paper Knowledge Commercialisation Australasia March 2003 P 4

There is recognition at CEO level and at Research Head level of the need to drive a major expansion in research activity. There is also recognition of the need for cooperation on joint research and other industry development activities.

Deakin has implemented a major expansion of its research activity, with biotechnology and the biosciences being priorities.

Barwon Health is planning to expand its research activity.

CSIRO is working on the establishment of the aquaculture centre.

Geelong has a major advantage in that the leaders of the major research institutions are supportive of the G21 biotechnology initiative.

11.7 Established Infrastructure/Co-locations

Geelong is not starting from scratch in biotechnology. It has a substantial investment in infrastructure and research activity.

Geelong has well-established infrastructure that supports biotechnology R&D.

Substantial capital investment has gone into building research facilities at CSIRO/AAHL (with the replacement value of the facility estimated at $500 million).

Deakin University has a substantial investment in science facilities and the GTP building and spends on average $3.3 million per year on capital investment in biotechnology facilities and equipment.

Barwon Health is currently implementing its plan to integrate its research centres.

An issue for Geelong, is that the sites are scattered across the region from City Centre (Barwon Health), Moolap (CSIRO/AAHL) to Waurn Ponds (Deakin) and Queenscliffe (PIRVic).

In addition, some of the key areas of biosciences, aquaculture and health research occur at Deakin’s Burwood and Warrnambool campuses.

The new GTP Building (and the long term plans for the Geelong campus) will allow for the co-location of a range of innovation activities(including biotechnology) at Deakin.

This level of infrastructure provides a strong foundation for growth in the region. Future joint research projects and the development of the technology park associated with the GTP could offer potential for further co-locations and the development of new research centres and manufacturing facilities.

11.8 Technical Support and ServicesIn broad terms, Geelong is large enough centre to provide a full range of services to most industries. for the local supply of services.

However the market is too small to support specialist services like IP and legal services, financial advice and venture capital. These are largely secured from organisations in Melbourne(and other capital cities). The local biotechnology cluster is not large enough to sustain a market for these services.

11.9 Intellectual Property being Generated from InstitutionsAll three major institutions are generating substantial IP:

Deakin has a strength in biosciences and with the IP being commercialised through ChemGenex Pharmaceuticals (including an international operation and research partnerships with major pharmaceutical companies) and Chirogen.

Barwon Health has several areas of established research, but there appears to be little commercialisation to date.

CSIRO has an international reputation for its work in animal health and has research and commercialisation partnerships with industry (eg vaccines).

11.10 Specialist Education and TrainingGeelong has a benefit in terms of having education and training programs at Deakin and the Gordon. In the case of Deakin its education strengths in biosciences are strongly linked to its research specialisations.

The Gordon Institute has geared its courses to servicing regional needs in laboratory technicians, environmental sciences, animals and pathology services. This reflects the presence of several major employers requiring these skills (CSIRO and Pathcare for pathology).

11.11 Connections with Larger Life Sciences CompaniesConnections with life sciences companies are major drivers of regional biotechnology clusters. While there are no current life science companies with an operation in the region, research and development linkages have been established by the Geelong research groups

There are some current connections with the major life sciences companies:

Conduct of clinical trials and other research at Barwon Health41.

ChemGenex has research linkages with major firms.

Chirogen has investor links.

CSIRO has commercial links for the development of animal vaccines.Most of the major life sciences companies have a division which manages clinical trials 41 For example there are research and trials relationships with all the major companies including Pfizer, Novartis, Pharmacia, Eli Lilly, Merke Sharp & Dohme, GlaxoSmithKline, Sanofi, Bristol Myers Squibb.

and licensing groups which seek identify new research and IP that may be suitable for development. The licensing groups are active in making contact with universities, research institutes and companies

These existing contacts and relationships provide a foundation for developing future research and comercialisation linkages. The further development of these linkages is important in attracting significant research support in the future and for creating the potential to attract a new major research centre to the region.

11.12 Commercialisation and Patenting ExpertiseThe Geelong market is not large enough to have specialist commercialisation and patent expertise. However research organisations have access to the full range of expertise in Melbourne.

At a practical level, the ChemGenex team has built up substantial business development, commercialisation, investment and IP expertise.

The presence of this practical expertise is a major advantage, as the company is willing to share this experience with others in the region.

11.13 Lifestyle AttractionsGeelong offers the major lifestyle advantages of a coastal city, combined with affordable housing options, quality education and other location advantages.

These advantages are being further reinforced with the strong population growth in the region and some of the initiatives being pursued as part of the G21 Strategy.

Geelong offers an attractive location for living and working. At the same time it is the only significant biotechnology hub located in a regional area.

Geelong is the only significant biotechnology hub located in a regional area in Australia.

12 A Growth Strategy

12.1 Growth Horizons

Our analysis shows that the Geelong region has the foundations on which to expand biotechnology. This expansion would be part of a long term strategy to build the sector.

For several key reasons, the development of biotechnology in the Geelong region has to be part of a long-term strategy. These are:

The long cycle in biotechnology to bring new discoveries to market.

The time taken to build research capacity and research reputations in new fields.

A need for long term investment in research capacity and infrastructure in the region.

The time required to build critical mass to make Geelong an attractive location for an additional major research centre.

We see the time periods for developing the sector as covering three phases

Phase 1 (Years 1-5) - Building Research Scale – this first phase over the next 5 years concentrates on scaling up research activity through an expansion of research funding and increased commercialisation.

Phase 2 (Years 6-10) - From Research to Production - this second phase continues the growth in research and development, while attracting related small to medium scale production facilities (scale up and bioprocessing). The GTP site will be important as a location for these activities.

Phase 3 (Years 11-15) - A Regional Bioindustry Centre - this final phase spans the period out to 2020. Geelong will have consolidated its position as biotechnology hub, with a spectrum of activity from discovery to production, and developed to a position where it has the potential to attract a larger scale production facility (eg pharmaceuticals or vaccines).

These phases are summarised in the following table.

Year Major Activities Targets

Phase 1

Year 1

2005

. Develop the biotechnology cluster and network

Develop marketing kit

. Improve cooperative activities

. Secure additional research funding(national and State)

. Develop a new entrepreneurs program

. Develop linkages with BioMelbourne Network

. Develop other networking programs with industry

Commence a business/research centre attraction strategy

Increase total research funding by 15% on 2003 levels

Years 2-5

2006-2009

Building Research Scale

. Secure additional research funding

. Establish Barwon Research

. Start up of Centre for Aquatic Animal Health

. New spin-off companies

. Extend links with major international companies(life sciences)

. Commence Development of Stage 2 of GTP(land development)

. Continue a business/research centre attraction strategy

. Attract/develop small/medium production facilities (bio-processing)

By 2009 Increase total external research funding by 60% over 2002/03 levels.

Increase number of researchers

Phase 2

Years 6-10

2010-2014

From Research to Production

. Attract an industry research centre

. Continue expansion of research centres

. Increase commercialisation

. Attract small/medium production

. Seek to attract a major manufacturing related facility

External research funding to have doubled over 10 years.

Target 500 researchers

Phase 3

Years 11-15

2015-2019

A Regional Bioindustry Centre

. Attract a major biotechnology related manufacturing operation

. Continue expansion of research activities

. Increase commercialisation and creation of successful spin-off companies

Target 800 researchers in Geelong biotechnology organisations

12.2 The Strategy

The growth of biotechnology in Geelong has to be driven in the medium term (ie. the next five years) by a “grow your own” strategy. There is need to build on the current foundations that exist by realising the major expansion projects on currently on the drawing boards and continuing to increase the level of research funding.

12.2.1 Local Growth This “grow your own” strategy will build the scale of Geelong biotechnology, while developing its reputation and industry linkages.

An attraction strategy would be commenced during Phase 1. However our expectation is that success in attraction is more likely to be achieved in Phase 2, after further critical mass and recognition has been built up.

This local growth strategy is driven by recognition that:

Most emerging biotechs are linked to their founder/partner institution and are highly unlikely to relocate.

There are few footloose major life sciences firms currently looking to relocate their R&D operations into a regional area. Many of the major firms that operate in Australia have state of the art facilities that they have developed or have existing partnerships that are likely to influence any future decisions on location.

At a global level, substantial incentives are being provided by some countries (eg Singapore, Taiwan) to attract research and development and manufacturing operations in biotechnology, pharmaceuticals and other knowledge intensive industries.

This is also the case in Australia. Indeed, the operations of some of the major pharmaceutical firms in Australia has been driven by the incentive programs associated with the Pharmaceutical Benefits Scheme that have operated since 1988. These programs have provided incentives for research and development, manufacture and export by international pharmaceutical companies42. Under the PII Program, in return for the Government’s investment of up to $300 million, the 9 pharmaceutical companies participating in the program committed to provide $1.5 billion in research and development and value added production, and create more than 1,000 jobs over five years to 30 June 2004. The new P3 Program has lead to new commitments to expand research and development.

Rec 1 That the focus of the development strategy for the biotechnology sector in the Geelong region be primarily on a “grow your own strategy” over the first 5 years.

42 These schemes are - Factor (f) Scheme, and its successor, the Pharmaceutical Industry Investment Program (1999). Both programs have been open to firms who sold final products to the Pharmaceutical Benefits Scheme and were designed to offset the impact of comparatively low prices received under the PBS. The programs have encouraged local manufacturing, exports from Australia, increase R&D and the establishment of partnerships with universities and research institutes. In September 2003, the Australian Government launched the Pharmaceuticals Partnerships Program (P3) aimed at fostering partnerships between multinational firms and local players. Successful applicants will be reimbursed 30 cents for every extra dollar they invest in local research. The Government will offer A$150 million over five years from 2004 and expects to attract A$500 million of new investment in research and development.

12.2.2 Strategy OverviewThe following diagram summarises the growth strategy within the context of the process for development of a biotechnology product. The value of the IP produced by research activity increases as the product gets closer to the market.

The objective of the Geelong biotechnology strategy is to consolidate Geelong’s research position and move Geelong along the value chain so that by 2015 it will be in a position to attract a manufacturing operation, having built up substantial research infrastructure and a significant commercialisation portfolio.

Concept Development

Product Development

Production & Distribution

Increasing cost

Increasing value

Proof of concept/prototype

Discovery

IP Protection

Regulatory compliance

Preclinical/clinical field trials

Scale up

Marketing and distribution

Build industry partnerships

Govt funding

Geelong Now

Geelong 2010

Geelong 2015

Manufacturing

Investors Venture capital Licensing Partnerships

12.2.3 Components of the StrategyThe growth strategy that we are recommending has a number of dimensions. These are summarised below and discussed in detail in the rest of this chapter.

Expanding the current research base

Increasing commercialisation of research

Marketing Capability

Increasing research funding Developing industry linkages and partnerships

Marketing Geelong's biotechnology capability

Expanding research infrastructure

Creating successful spin-off companies

Attracting a major player – research centre or manufacturing operation

Building research cooperation

Attracting a new research centreIncreasing commercialisation of research

Developing Skills Networking

Developing industry linkages and partnerships

Developing research skills Creating a local network

Creating successful spin-off companies

Developing commercialisation skills

Creating linkages with biotechnology and industry organisations

This strategy is consistent with the broader State Biotechnology Strategy being implemented by the Victorian Government43.

“The specific aim of the Victorian Government is to facilitate the development of biotechnology to deliver economic, social and environmental benefits to all Victorians. It does this by establishing a robust regulatory framework to ensure that ethical and safety standards are met and the community is well informed and confident about the directions of the industry. Developing networks and connections to bring people, research and ideas together. Investing directly in new infrastructure, research and skills development in partnership with industry and the research community. Encouraging and facilitating new local and international investment. Promoting Victoria and the industry internationally. “

Biotechnology 2004 Strategic Development Plan for Victoria 2004 P10

Rec 2 That the development strategy outlined in this report be adopted as the long term regional biotechnology plan for the Geelong and the broader G21 Region.

Rec 3 That Geelong City Council seek endorsement of the report from the research organisations and other major stakeholders and support for its key directions.

12.3 Expansion of the Current Research BaseThree of the key research organisations – Deakin, Barwon Health and CSIRO have plans in place to expand the level of research activity.

There is a need to continue to scale up the research base in Geelong and this is a key component of the development strategy.

Rec 4 That a major focus of the strategy be on scaling up the biotechnology sector in Geelong through securing increased research funding.

12.3.1 Deakin UniversityDeakin has been very successful in the last five years in securing competitive funding for research. Total research income has increased from around $5 million in 1998 to $17 million in 2002 and was estimated at $22 million in 200344.

Over this period, the Science and Technology Faculty increased funding from $2.3 million to $7.5 million. Major areas of growth have been in Engineering & Technology and Ecology & Environment. External research funding for Biological and Chemical Sciences increased by $1 million over the 4 years.

It is also securing some funds from most of the major sources including Rural R&D Corporations.

43 Biotechnology 2004 Strategic Development Plan for Victoria 200444 Information from Deakin University

Table 25. External Research Funding Science & Technology Deakin Uni 1998-2002 ($)

Area 1998 1999 2000 2001 2002Science & Technology 2,279,790 3,488,923 4,176,044 5,627,323 7,542,784

Architecture & Building 37,722 67,695 128,583 39,240 149,263

Biological & Chemical Sciences 836,683 1,458,018 1,458,478 1,972,386 1,867,675

Ecology & Environment 729,426 656,284 909,824 1,587,248 2,318,312

Engineering & Technology 637,792 1,114,761 1,479,401 1,968,168 3,019,586

Information Technology 38,167 192,165 199,758 60,281 187,948

Total Deakin 4,908,292 7,103,169 10,345,940 14,415,759 17,150,682

The expansion of research funding will need to be secured from: increased success with national competitive grant applications including ARC and NHMRC; increased funding from the national rural R&D corporations; increased industry funding ; increased contract research; and collaborative projects with other research organisations. (eg Deakin/CSIRO; Deakin/Barwon Health).

There also needs to be a continued pursuit of funding from the Victorian Government programs. Deakin has been successful with recent funding proposals and has secured funding under a recent STI round.

Deakin has a well-structured Office of Research that assists researchers with funding applications. The recently created BioDeakin is also providing a framework to focus efforts across the campuses and to develop stronger external relationships with industry and other research organisations in the field of biosciences.

12.3.2 Barwon HealthBarwon Health has a commitment to expanding its research activity through the development of Barwon Research and the extension of clinical trials45.

The bulk of the pharmaceutical industry’s expenditure on R&D in Australia is concentrated on clinical trials. Australia has several advantages when it comes to clinical trials: an ethnically heterogeneous population; high quality researchers; hospitals and universities prepared to participate in this type of research; availability of good statistics (and statisticians) to allow follow up of medical treatment; good adoption of IT strategies to assist with trial management; and a relatively low cost structure.

All of this means that clinical trials can be conducted in Australia to a high, internationally accepted standard at a relatively low cost.

Industry funded pharmaceutical R&D in Australia is approximately $250 million per annum and clinical trials account for at least 40 per cent of this spending, indicating a market worth more than $100 million per annum.

45 Clinical trials represent a significant component of research income. Data provided by Barwon Health shows that income from clinical trials was around $300,000 in 2003/04

There has been a steady increase in the number of clinical trials undertaken in Australia throughout the last decade.

Chart 10. Clinical Trials in Australia (TGA Notifications)

12.3.3 CSIRO The Australian Centre for Aquatic Animal Health is a proposed national research facility to develop and protect Australia’s growing aquaculture industries. The centre is currently going through a series of internal feasibility studies at CSIRO.

The establishment of the Centre would make Geelong a national centre for aquaculture research and provide for linkages with Deakin University which has research and teaching in related areas and the PIRVic Marine and Freshwater Resource Institute 46. It would make a contribution to increased researcher numbers, including national and international visitors to the site.

This project involves the development of a national research facility in an emerging industry. Australian aquaculture is forecast to become a $3 billion industry by 2010.

Research support in aquaculture is one of CSIRO's Flagship projects.47 The aquaculture project of the Agrifood Top 5 Flagship Program aims to transform the international competitiveness of Australian agrifood and to add $3 billion per annum through innovative agrifoods and processing technologies. One part of the program is focused on using advances in reproductive biology to boost the productivity of aquaculture systems.

The Centre will offer a biologically-contained aquaculture facility for the study of diseases of animals including marine and fresh water shellfish, molluscs and crustaceans.

The Centre would use CSIRO’s Australian Animal Health Laboratory’s existing capabilities in bio-containment and fish disease research and would involve the construction of secure aquarium facilities.

46 There would be a significant aquaculture cluster in the G21 Region, with CSIRO, PRIVic Marine and Freshwater Resource Institute at Queenscliff and Deakin’s interests in aquaculture.47 CSIRO has introduced a series of Flagships Projects - Preventative Health, Light Metals, Healthy Country , Agrifood Top 5 , Ocean Wealth, Energy Transformed

The Centre would be a national facility and have the opportunity to develop international projects in disease control and improvements in seed stock.

The establishment of the Australian Centre for Aquatic Animal Health, would position the G21 Region as a leading location for aquaculture research and development. It provides the opportunity to substantially expand on the current level of capability and is a priority biotechnology project.

12.4 Increase Commercialisation of Research There is a need to move Geelong biotechnology along the commercialisation chain. This will involve:

Continued expansion of the current Deakin companies and their activities.

Creation of new spin-off firms in technology areas with high growth potential (at Deakin and the other research centres).

Development of linkages with the venture capital funds and other potential investors.

Further developing linkages with the major life sciences companies.

Continued development of opportunities in relation to animal health and aquaculture through CSIRO.

While there are few firms in Geelong compared with those located in the biotechnology precincts in Melbourne, significant progress has been made48.

In addition, CSIRO in Geelong has commercialisation experience and employs a Business Development Manager. This manager is looking for new opportunities and has the ability to draw on the broader commercialisation expertise that exists within CSIRO.

The new Flagships Program and other CSIRO strategies are focused on developing more industry linkages and commercialising research.

A major direction of Australian Government policy as reflected in Backing Australia’s Ability 2 Statement is on extending industry linkages of research institutions and increasing the contributions to research funding by business.49

Achieving increases in commercialisation in Geelong will require the development of commercialisation and business management skills. There is the potential to develop skills within the sector by drawing down on the commercialisation and business skills that already reside in ChemGenix and Chirogen. These firms have indicated a willingness to share their experience with others in the region.

Some structured programs will be required to develop these skills, and these are discussed later in this report the section on skills development.

Increased commercialisation of research is fundamental to the future growth of the sector.

Rec 5 That a major focus be placed on increasing commercialisation of research.

48 The development of ChemGenex is an example of what can be achieved where good research and discovery is combined with commercial skills.49 Backing Australia’s Ability – Building our Future through Science and Innovation is a new package totalling $5.3 billion over seven years from 2004-05. This package, announced by the Prime Minister on 6 May 2004, builds on the initial 2001 Backing Australia’s Ability investment of $3 billion over five years to 2005-06. See http://backingaus.innovation.gov.au Programs are focused in 3 areas- Strengthening Australia’s Ability to Generate Ideas and Undertake Research, Accelerating the Commercialisation of Ideas, and Developing and Retaining Skills.

http://backingaus.innovation.gov.au/

12.5 Research CooperationThere is considerable potential for an increased level of cooperation among the major Geelong biotechnology players. Our consultations have highlighted a number of links. These range from informal links, through education and training to the sharing of some equipment and facilities.

The G21 process has brought together the CEOs of the key institutions, and has created a willingness to explore new areas of synergy and cooperation. As the growth of the sector has continued, the level of interaction has increased.

Future cooperation should include:

Expanded education and research training linkages.

Development of joint projects research and development projects (in areas including health, drug therapies and aquaculture).

Scoping of the potential for new joint research programs, the identification of funding sources and the preparation of joint applications.

Greater research cooperation is fundamental to growing the biosciences sector in Geelong.

Rec 6 That a major emphasis be placed on increasing research collaboration and joint projects among the research organisations in Geelong.

12.6 Attracting a New Research CentreA medium term objective for the Geelong Region is to attract or establish a regional research centre linked to one of the major life sciences companies.

The potential for such a centre will emerge as biotechnology activity in Geelong scales up and there is a progression from existing research partnerships.

The development of a biotechnology “pod” within the GTP site development would provide a suitable location that is linked to Deakin’s facilities.

We rate the securing of a major centre as a medium term proposition. It is more likely to emerge as a result of scaled up research activity and the establishment of successful partnerships which progress to a company deciding to set up an operation with its own researchers.

Dealing with international firms also raises the issue of location incentives. Current government policies in relation to the PBS have influenced pharmaceutical companies in their decisions to operate in Australia, both for research and development and for the manufacture of products.

Worldwide there is intense competition to bring global firms into research and technology precincts.

Developing an attraction package for a major research centre is beyond the resources of an individual university and would require financial inputs from State and Commonwealth Governments and some involvement of local government.

As noted earlier, a number of factors drive site location. These include availability of skilled researchers, existing linkages with research institutions, availability of suitable sites and infrastructure.

In our view there is a need to grow sector before this becomes a real option. The development on the industrial sites within GTP would also be important to attract a major centre.

There is a need to broaden the knowledge of Geelong and its biotechnology capability with current industry research partners. The active promotion of the region’s capability and assets will also be important.

Attracting a new research centre should be a medium term goal for the strategy.

Rec 7 That the attraction of a major new research centre be established as a medium term goal for Geelong.

12.7 Developing the Skills BaseResearch, innovation and commercialisation skills are fundamental to the development of the sector. Future skills development will require:

Expansion of teaching and research training in biosciences at Deakin.

Creation of greater linkages between Deakin and Gordon Institute in the development of relevant training programs.

Small business development program geared to science based industries - a program based on short courses in commercialisation and business development for researchers.

Young entrepreneurs program – a new program for selected young researchers from Deakin, CSIRO, Barwon Health, and PRVIC, including a mentoring program covering commercialisation and business development.

A key to commercialisation is to expose researchers early in their careers to a range of innovation skills and to equip them with an understanding of the process of bringing discoveries to the market.

Geelong has the right foundations for developing these programs. It has high quality education and training institutions (that cover science, business, and law) with the capability to develop these programs. It has several successful spin-off companies that are willing to be involved in transferring commercialisation knowledge to the next generation of scientists.

While the initial focus of the programs would be on biosciences, the courseware has the potential to be adapted to other sectors (eg engineering, ICT )

Geelong has the capacity to develop and deliver these skill development programs. To achieve ongoing critical mass for these programs, they could also be offered to organisations based in the Werribee Research Precinct.

In creating these programs the proposed Geelong Biotechnology Network may also be able to take advantage of Victorian Government initiatives.50

Special programs are required to develop commercialisation skills.

Rec 8 That special regional programs be established to develop commercialisation and business skills within the biosciences sector in Geelong. These programs should be developed by the proposed BioGeelong Network.

12.8 Developing Research InfrastructureSubstantial investment in research infrastructure is included in the medium term plans of the major institutions in the Geelong Region.

Deakin Campus development – the university has long term plans to develop Waurn Ponds as a science and research campus, with the transfer some of the commerce, humanities and health teaching to new sites at the Waterfront Campus.

Geelong Technology Precinct. – is an initiative to develop a major innovation industries park on land owned by the Deakin University. Internal feasibility studies have been completed, with the next stage involving the University taking a decision to hold discussions with potential commercial partners. The exposure to development partners will allow for a testing of the market and will help determine the industry targets and the staging of the development. GTP is the prime location for any expanded biotechnology activity in the region.

Barwon Health – is redeveloping its hospital precinct, with plans to better link its current research activities. This is the first stage of a plan for the creation of “Barwon Research” as a virtual research entity that clusters research in a similar way to the Baker Institute.

CSIRO has plans for substantial investment in its research facilities located at AAHL, including the development of the Australian Centre for Aquatic Animal Health.

As part of the development of the biotechnology network for Geelong, specific opportunities for new infrastructure can be scoped and funding sources identified. This also includes funding for development of the GTP.

Rec 9 That as one of the early projects of the BioGeelong Network an assessment be made of future infrastructure needs to expand the biotechnology sector in Geelong.

Rec 10 That the GTP be recognised as a key infrastructure project that is fundamental for the future development of biotechnology in the Geelong Region, including the attraction of research centres and production facilities.

50 The Victorian Government has programs to develop commercialisation skills. These include VicStart, the Victorian Government's new commercialisation-focused program under the Science, Technology and Innovation (STI) Initiative – Second Generation; creating an Entrepreneur in Residence program in local organisations, including venture capital firms institute/university technology transfer offices and biotechnology companies; continue support for the Young Achievement Australia Biotechnology Entrepreneurs program for postgraduate biotechnology students. See Biotechnology 2004 Strategic Development Plan for Victoria 2004 P28

12.9 Attracting a Biosciences Manufacturing Operation

12.9.1 Scale up FacilitiesIn Australia there are few opportunities for scale-up and many of the 300 biotechnology companies in Australia are likely to have trouble finding scale-up facilities for fine chemicals.

There is also a need in Australia for fine chemicals training for medium sized scale up. There is scope for offering scale up training and provision of process chemistry.

For example in Geelong, Chirogen's operation is small scale. According to the research leader, Professor Dakterneiks, more people will be interested in his technology internationally if scale-up processing could be demonstrated.

Deakin University and biotechnology firms that located in the GTP could use the infrastructure of a scale-up facility.

The development of small/medium scale bioprocessing is a major opportunity for Geelong.

These issues have also been identified in the Victorian Government’s 2004 Biotechnology Strategy.

Pilot-scale manufacturing

“The translation of biotechnology research into products in the medical and agricultural fields occurs through the manufacture of small molecules, such as aspirin, or large molecules derived from bioprocessing, such as insulin.

Bioprocessing is the production of material including protein based medicines, agricultural products and enzymes for industrial purposes using biological systems such as yeast, bacteria, mammalian cells and insect cells.

While Victoria has some capacity in bioprocessing and pilotscale manufacture, it is fragmented. The greatest need is for pilot-scale Good Manufacturing Practice capability to complete pre-development activities and to commence formal product trials.

A study commissioned as part of the 2001 Plan found there is a local and international shortage of bioprocessing capacity. If this shortage continues, access by companies wanting to commence formal trials will become difficult and more expensive. There are a number of benefits to be gained from building capability in bioprocessing. It would help Victoria capture the benefits of its research infrastructure and develop more cost effective methods for the manufacture of biological products.”

Source: Biotechnology 2004 Strategic Development Plan for Victoria 2004 P28

Rec 11 That the feasibility of developing regional scale up facilities at the GTP be investigated by the BioGeelong Network.

12.9.2 Good Laboratory Practice Facilities

There is a need to develop a pilot-scale Good Manufacturing Practice (GLP) capability for the completion of pre-development activities and to commence formal product trials.

Development of GLP laboratories for student and industry use would enhance Deakin’s capability.

The establishment of these facilities would increase biosciences activity in Geelong, but would need industry partners to establish and operate.

Rec 12 That the feasibility of developing GLP facilities at the GTP be investigated by the BioGeelong Network.

12.9.3 Large Scale Manufacturing OperationsAttracting a large scale manufacturing operation is a long term initiative, and to achieve this would require a substantial expansion of the biotechnology sector in Geelong51.

Manufacturing attraction would require a demonstration of the business case for location in Geelong and finding a footloose company or one that is looking for a new location.

In the case of pharmaceuticals, it is a $5.8 billion industry that employs 13,880 people, has exports of $2.3 billion and imports of $4.7 billion.

In Australia there are currently at least 10 companies (both local and multinational), that operate at least one secondary manufacturing facility supplying local and export markets. These include Fauldings, Bristol-Myers Squibb, GlaxoSmithkline, Pfizer, Pharmacia, Sigma, Roche, Alphapharm, Merck, AstraZeneca and Schering-Plough.

Table 26. Pharmaceuticals Industry in Australia

51 Victoria has secured a number of manufacturing facilities or seen expansion since 2001. GlaxoSmithKline - has opened a new $13m fine chemicals facility at its existing Port Fairy site; Vital Biotech, the first Australian biotechnology company to list on the Hong Kong Stock Exchange, is investing $3m in a new manufacturing facility; The Institute of Drug Technologies (IDT) is investing $2.5m in new manufacturing; Mayne has announced a $45m expansion of its facilities in Mulgrave; Cardinal Health will spend $6m expanding its facility at Braeside facilities. Biotechnology 2004 Strategic Development Plan for Victoria 2004 P16

Australia also has significant generics manufacturing sector52. Generics manufacturing (is generally lower cost manufacturing relying on R&D developed by the parent company and requiring less formulation work and bio-equivalence studies to prove comparability to the originator brand. A plant can be designed for short runs of niche products, so that it is not necessary to dedicate production lines to single products for extended periods of time.

At present Geelong would not present as a suitable location. There are other sites that are more attractive.

Sydney is home to the headquarters, research campuses, manufacturing and distribution centres for a number of the large pharmaceutical companies. Site location factors for manufacturing operations include good access to highway networks, good utilities and access to a skilled workforce.

For example, Australian Pharmaceuticals, an Australian distributor and contract manufacturer, has built a new state of the art facility at Parramatta in Sydney. Key determinants were logistics including site suitability, a metropolitan location, access to the M5 and the ability to recruit a skilled workforce

The attraction of a manufacturing facility is a longer term project, and is more likely to grow out of an expanded research and development relationship where the quality of research and the business environment have been demonstrated to a specific company.

This process will depend upon increased recognition of the regional capability by industry and also by the State and Commonwealth agencies (Invest Australia) involved in investment attraction.

The nature of the industry and the fact that it is a sought after activity (because it is seen as a knowledge based growth industry offering high quality jobs), means that influencing an investment location decision is likely to need substantial investment incentives. Governments in most potential biotechnology centres are now offering major incentives to attract research and manufacturing facilities.

Rec 13 That the attraction of a major biosciences related manufacturing operation be pursued as long term goal for Geelong.

52 Generics manufacturers include Sigma - Australian owned, Alphapharm - owned by Merck KgaA and GlaxoSmithkline

12.9.4 Small and Medium Scale Manufacturing OperationsWhile the development of a large scale manufacturer is a long term objective, there is potential for the development of smaller scale manufacturing operations. This may grow out of current research partnerships. Areas of development could include chemicals, devices or specialist pharmaceuticals.

Case Study: Biotechnic

In the course of this project we came across a small company, Biotechnic that has two employees it manufactures and distributes pharmaceutical hoses with full traceability and low leachability for use with processing vessels, and pilot plants for processing blood products such as transferrin, immunoglobulins and clotting factors that include cellulose-based affinity and ion-exchange chromatography media and systems. Biotechnic also makes a food-grade hose and has more than 100 clients, including international customers.

The owner/inventor has also developed a process for manufacturing chromatography media, which he has patented with his US partners. A planned scale up is planned which will require a new factory location in Geelong.

Rec 14 That the attraction of a smaller scale biosciences related manufacturing be pursued as a medium term priority for Geelong.

12.10 Marketing of Geelong Capability

There is a need to build recognition of biotechnology in Geelong. Research conducted by Buchan as part of this project shows that biotechnology activity in Geelong is not well recognised.

The G21 Region (measured by the total number of researchers and research expenditure) is the number seven biotechnology precinct after Werribee. However Geelong is not recognised as one of the precincts in the State Government‘s promotional material.

This reflects a number of factors including: the emerging industry status of biotechnology in Geelong (the major expansion at Deakin has occurred over the last five years); the scattered location of the facilities, meaning that it is a virtual cluster rather than a physical precinct; and the fact there are only two spin-off companies at this stage. These all contribute to a view of Geelong biotechnology as an infant industry.

The marketing needs to:

Position Geelong as a biotechnology hub and the only regional biotechnology centre in Australia

Build recognition of the region’s centres of excellence in research

Develop an awareness of its strengths as a biotechnology hub

Highlight the region’s biotechnology capability.

While the development and implementation of a marketing strategy will not in itself generate substantial new investment or research funding, it is important in shaping the future for Geelong in biotechnology.

The marketing strategy would have a number of elements:

Development of marketing kit for use in city promotion and use by the major biotechnology organisations.

A planned program to promote the biotechnology capability to potential research partners.

Promotion of projects and opportunities to potential investors.

Building political recognition of Geelong and its potential in biotechnology.

Using industry networks (including Ausbiotech and BioMelbourne Network) to develop a broader recognition of research activity and commercialisation potential of Geelong institutions.

Lobbying governments to support strategic development initiatives.

Rec 15 That a biosciences industry marketing program be implemented for Geelong Biotechnology.

Rec 16 That Greater Geelong City Council take the lead in developing the marketing materials.

12.11 Networking

12.11.1 Assessing the Need for a NetworkThere is already considerable interaction occurring between the Geelong based organisations. This occurs on both a formal and informal level.

There are existing research, education and training links between each of the major organisations. At the same time there is contact between some of the research leaders.

In assessing whether there is a need for a more formal network, a number of issues were examined. There are a number of key questions, the answers to which will determine the nature of the networking organisation that is required.

Is the current level of interaction sufficient?

What level of interaction/coordination is required to implement the regional biotechnology development strategy?

Could the strategy be implemented without a new mechanism for program development, coordination and implementation?

Is there a need for more formal networking structure or cluster program?

What organisations would need to be involved in the network or cluster?

Could one of the existing organisations take on the role of coordinator for the sector?We addressed each of these questions in our analysis and our findings are summarised below.

In summary our analysis points to the need to develop a formal cluster arrangement to work on some of the broader industry development programs that are identified in this report. In the absence of such an organisation, limited progress is likely to be made.

Key Question Major Issues Key Requirements

Is the current level of interaction sufficient?

There is significant interaction currently occurring.

There is a need for more interaction on industry development issues, emerging research opportunities and cooperation

Greater structured interaction is needed on long term industry development.

What level of interaction/coordination is required to implement the regional biotechnology development strategy?

Need for high level of interaction among the major players.

Major requirement is to secure additional funding for research and for infrastructure development.

- Involves organisations pursuing their own R&D agendas.

- Also involves joint activities eg. research projects.

Expansion of commercialisation activity.

Development of a commercialisation skills program.

Marketing of Geelong as a biosciences location

Need for some new industry programs to be developed covering:

- Research funding

- Infrastructure development

- Commercialisation

- Regional marketing

Could the strategy be implemented without a new mechanism for program development, coordination and implementation?

Geelong has advantage of substantial resources at several of the major institutions ( Deakin and CSIRO), involved in business development and research funding.

Strategy requires a range of programs – skills development, commercialisation, industry marketing, and business attraction that are beyond the scope of the individual organisations.

People are busy pursuing their own activities and do not have resources to apply to industry/regional initiatives.

A committee structure without any executive support would lead to ideas but little implementation.

Need for a vehicle to work on strategy, coordinate implementation, and assist the key biotechnology players, with expansion programs.


Could one of the existing organisations take on the role of coordinator for the sector?

There are a number of options: City of Geelong Economic Development Unit, Deakin University - BioDeakin, Committee for Geelong, G21 Secretariat.

Geelong City – not structured to manage and implement a specialist industry program. Also part of the strategy may at times be involved in lobby the City on issues

BioDeakin – is a unit of Deakin, difficult for it to play a broader regional industry development role.

Committee for Geelong – has limited resources for program implementation. More focused on industry strategy issues.

G21 Secretariat – is moving to a project implementation role. Working across a wide range of policies. It is not necessarily structured for detailed specialist program implementation.

A separate organisation needs to play the coordination role. It needs to be able to work with all of the organisations – facilitate collective action, provide support to the individual members, and broker joint research and business opportunities.

It has to have the confidence, respect and trust of all of the major biotechnology organisations in the region.

Existing organisations could not take on the role.

Separate entity is required to interact and support all organisations.

Current organisations do not have the specialised resources.

An element of “independence” is required to ensure the trust of all organisations.

Is there a need for more formal networking structure or cluster program?

A formal cluster would provide a vehicle for developing cooperation, identifying new opportunities and creating new industry development programs.

It would provide the resources and the executive time to develop and implement specific programs.

Geelong Biotechnology Network (BioGeelong) is the recommended model

Network would act as facilitator and have staff resources.


What organisations would need to be involved in the network or cluster?

Membership would include core biotechnology members and regional and business supporters:

Core Membership:

Deakin University/BioDeakinBarwon Health (research)CSIRO/AAHLPRVIC Marine Sciences CentreGeelong Technology PrecinctChirogenChemGenex PharmaceuticalsGordon InstituteSuppliersMembership would be extended to include customers and suppliers to the sector Regional/Business Support

G21 CouncilsCommittee for GeelongAustralian Industry Group(has an interest in biotech)VECCI

Membership would comprise 3 categories:

- Core Members

- Suppliers/Customers

- Regional and Business Supporters

12.11.2 Benefits of a ClusterAs we have seen, there is a current group of research organisations that form the basis of an industry cluster in biosciences in Geelong.

The following are some of the benefits of creating a more formal cluster organisation. The cluster can stimulate interactions between the organisations, enable best practice to be diffused and can identify new innovation opportunities (that individual organisations may not be able to identify on their own).

For the cluster to be effective it needs to have a real and meaningful agenda and a series of programs that it is facilitating.

It must deliver value to the members that cannot be realised through their own individual efforts or through the current informal links.

Key Requirements for a Cluster

Benefits Requirements ManagementDiffuse best practice Cannot be an artificial construct Needs active managementCreate critical mass Needs to have a real foundation

for cooperation Identify and pursue new opportunities

Interactions create dynamism

Complementarities, synergies, exploitation of opportunities, shared costs/facilities

Activate – leverage existing assets and associations

Stimulate innovation opportunities

Formal networks/informal associations/joint ventures

Focus on achieving outcomes

Facilitate commercialisation

Facilitate new partnerships

12.12 A Geelong Biotechnology Cluster

“ The 2004 Strategy shifts the focus of the State’s efforts further along the value chain. The overarching theme of the 2004 Strategy is connectivity: building greater alliances, partnerships and connections within science and technology sectors (agricultural, medical, environmental, chemical, nanotechnology, informatics and devices). These linkages are important to build critical mass locally, to facilitate international partnerships, to leverage other governments' investments in science and technology and to 'leap-frog' competitors.”

Biotechnology 2004 Strategic Development Plan for Victoria 2004 P 24

Our analysis indicates the need for an organisational structure to deliver the regional industry development strategy. The foundations of this cluster are already present in Geelong.53

This new organisation would be BioGeelong - the Geelong Biotechnology Network.

Rec 17 That a Geelong Biotechnology Network (BioGeelong) be established as the vehicle for delivering the regional biotechnology strategy.

53 This section scopes the nature of the Network. There is still a need for a business plan for the Network to be prepared, as a separate exercise.

12.12.1 Objectives and ActivitiesBioGeelong would have the following key objectives:

Facilitate an expansion in research funding for biotechnology in the region.

Assist with the development of new regional, national and international business partnerships.

Encourage greater commercialisation of research.

Assist in the expansion and development of biotechnology infrastructure.

Assist in the marketing of the Geelong region’s biotechnology capability.The cluster organisation would be the main vehicle to assist the delivery of the strategy identified in this report.

The following table outlines the objectives and examples of the types of activities that it would be involved.

Objectives Examples of Activities

Facilitating an expansion in research funding going to Geelong organisations Encouraging interchange of ideas among the

network members

Conducting innovation workshops to explore research synergies

Assisting in the development of joint research programs

Identification of new funding opportunities and development of proposals

Assisting in lobbying of governments for research support

Assist with the development of new regional, national and international partnerships Researching potential industry partners

Working with network members in developing partnership proposals

Identification of ways of leveraging current industry partnerships

Advice to network members on business partnership development

Creation of linkages with industry organisations (eg BioMelbourne, Ausbiotech

Encouraging commercialisation activities Development of an industry briefings program

Advice on applications for funding under government programs (Commonwealth and Victoria)

Brokering of relationship between Geelong research institutions and other organisations

Development of commercialisation training programs for the industry

Assist in the development of biotechnology infrastructure Work with GTP on identification of biosciences

tenants for the Stage 2 development

Secure support for other expansion initiatives (eg Deakin Science Campus; CSIRO expansion)

Assist in the marketing of regional biotechnology capability Development of Geelong Biotech Marketing Kit

Promotion of Geelong Capability(with Councils and other groups)

Assist organisations in developing their promotional information

Development of a Geelong Biotechnology Directory

Coordinate media coverage of Geelong Biotechnology stories (working with network members)

Promote Geelong capability to major government agencies

12.12.2 Membership of the Cluster OrganisationMembership of BioGeelong would comprise three categories:

Core Biosciences Members

Suppliers/Customers

Regional and Business Supporters

A list of potential members is outlined below.

Table 27. Potential Members BioGeelong

Core Membership Suppliers Regional/Business Support

Deakin/BioDeakin Biotechnology users G21 Councils

Barwon Health (research) Suppliers –products/services Committee for Geelong

CSIRO Australian Industry Group

PRVIC Marine Sciences VECCI

Geelong Technology Precinct

Chirogen

ChemGenex Pharmaceuticals

Gordon Institute

12.12.3 ResourcesInitially the network would have one staff resource. The role of this person would be to develop the key programs and implement the business plan for the network.

A collocation with one of the member organisations would allow for some administrative support to be provided by a host organisation.

There are several options for staffing:

Recruitment of an executive officer

Secondment of a person from one of the member organisations

Appointment of a consultant (for a period of up to one year) to provide interim management and to set up of the network and its initial programs.

The person or organisation selected would need to have a number of skills: qualifications in science, particularly biosciences and business; an understanding of the biotechnology sector including research and commercialisation; experience in establishing and implementing business development programs; experience working with business and research networks; and an ability to develop relationships with research based organisations and businesses.

12.12.4 LocationThere are a variety of locations that could be the base for the Network Office. These are: Geelong Economic Development Unit, G21 Secretariat, and Geelong Technology Precinct.

The GTP location would provide the strongest linkages to the biotechnology sector in Geelong and would be the preferred location.

Rec 18 That the BioGeelong – the Geelong Biotechnology Network be located at the GTP.

12.12.5 Funding the NetworkAs part of the development of a business plan, a full operational budget would need to be prepared. Funding could be obtained from:

G21 Council contributions, with the main contribution from the City of Greater Geelong

Core Members contributions

State Government Funding - IIRD’s Regional Innovation Clusters Program

Rec 19 That the funding for the Network includes member contributions as well as funding from relevant government programs.

12.12.6 Governance of the NetworkA governance model for the network organisation would be developed as part of the detailed business plan.

This would cover organisational structure (including advisory board.), management reporting and financial controls.

12.13 External Linkages

There is a need for Geelong to strengthen its linkages with a number of government agencies and industry organisations. These are outlined below.

The Network would target these organisations in collaboration with Network Members to build stronger recognition of Geelong and to develop new ideas for support54.

54 Geelong has the SmartGeelong Network, which mainly promotes the education, training and research capabilities of Geelong. Formed in 1999 , it is an initiative of the Geelong Chamber of Commerce and receives financial support from the City of Greater Geelong, the Australian Government and individual member organisations. www.smartgeelongnetwork.com.au

http://www.smartgeelongnetwork.com.au/

Organisation Description LinkageIndustry OrganisationsBioMelbourne Network Business network based at

Committee for Melbourne. Involved in international business development , international marketing and industry programsMembership based organisation (CEO level)

Provides links to businesses, investors, research institutesE-newsletter to 1300 personsOpportunities to present at industry seminarsParticipation in business missions

Ausbiotech National industry association representing biotechnologyMembers cover business, researchers and educationActs as national voice on policy

Participate in seminar programsContent into magazineParticipation in international programs

Government AgenciesBiotechnology Australia Commonwealth Agency

responsible for biotechnology policy

Build awareness of Geelong capability

Invest Australia Commonwealth Agency Involved in attraction of international investment to AustraliaHas a specialist unit covering biotechnology

Create awareness of Geelong capabilityDevelop case for Geelong as an investment location

Austrade Commonwealth Agency responsible for trade facilitationHas a specialist unit focused on biotechnology

Create awareness of Geelong capabilityParticipation in Austrade seminars and mission (inwards and outwards)

Regional Development Victoria (IIRD)

Agency responsible for regional development in Victoria. Includes location subsidies for new investors

Investment incentive packages for attraction of new investors (eg Companies to GTP)Other regional program funding (including cluster support)

Office of Science and Technology (IIRD)

Agency responsible for delivery of science programs , including delivery of biotechnology sector development funding

Develop senior level links to strengthen case for research /commercialisation support to Geelong biotechnology

National Competitive Grants Agencies - ARC, NHMRC etc

Provides research funding Geelong researchers have existing links through applying for funds.

Rec 20 That the Network establishes links with key industry organisations and relevant government agencies.

12.14 BioMelbourne NetworkThe BioMelbourne Network has indicated that it is keen to become involved with Geelong. There are opportunities to participate in the industry seminar series to present Geelong biotechnology. There is a strong awareness of Geelong through the Director’s past involvement with Deakin University.

The Network was established by the Committee for Melbourne following a 1998 report by the Boston Consulting Group. The network is modelled on similar networks in Boston and San Diego and is designed to be a trade development and business investment attraction agency focusing on the Melbourne and Victorian biotechnology

sectors. It has received seed funding from the Victorian Government.55 It is a membership based organisation.

BioMelbourne Network undertakes the following activities:

Investment attraction and business development;

Marketing and promoting Victoria as the Australian Biotechnology capital, both nationally and internationally;

Biotechnology industry development programs; and

Joint activities with stakeholders including the Committee for Melbourne, Victorian Government and AusBiotech.

12.15 Linkages with Werribee Technology Precinct

Linkages between Werribee and Geelong need to be explored in more detail. There are some potential synergies and the basis for research cooperation.

At the same time some of the commercialisation development programs to be developed by the proposed Geelong Network, could include participants from the Werribee Technology Precinct.

The Werribee Technology Precinct (WTP) covers 925 hectares and includes branch campuses of The University of Melbourne and Victoria University of Technology, R&D providers and providers of contract research. The total workforce of about 350 is mainly employed in several larger research organisations.

The Precinct has a strong animal biotechnology base through the Victorian Institute of Animal Science and the School of Veterinary Science of the University of Melbourne.

Victoria Institute Biotechnology (VIB) The VIB is a joint venture between the Austin Research Institute and Victoria University located at the University’s Werribee campus. To differentiate VIB from Melbourne (Parkville, Monash strip) where biotech has a heavy emphasis on the research side, the VIB is aiming to position itself about midway between a research institute and manufacturer of pharmaceutical-type products. It will focus on processes for manufacture. Focusing broadly on the production and analysis of proteins, the VIB seeks to become a Centre of Excellence in antibody engineering for diagnostic and vaccination purposes.

A feasibility study in 2002 suggested that the WTP was positioned to become a hub of excellence in biotechnology including veterinary applications, agribusiness (food and related R&D) and environmental sustainability.

The rate of development of the precinct, which has been reserved for scientific and educational purposes, has been slower than expected, This has been attributed (at least in part), to the absence of a body to coordinate networking.

While Geelong should develop its own network organisation, the potential synergies with Werribee need to be explored at a practical level. This should be further explored during the development of the business plan for the Geelong Network.

Rec 21 That as part of the development of the Network, the potential for linkages with organisations in the Werribee Precinct be further examined.

55 In November 2003, the Victorian Government announced $750,000 funding for the BioMelbourne Network

13 The Way Ahead

13.1 A Long Term Strategy

Our analysis shows that there is a strong foundation for the further expansion of biotechnology and related areas of biosciences in Geelong.

While the sector is small in scale in comparison with size of the major industry precincts in Melbourne, it is specialising in areas that provide considerable long term potential.

The key focus of the development strategy outlined in this report is on “growing you own” through an expansion of research funding and increased commercialisation.

The strategy outlined in this report has taken a 15 year perspective, with 3 distinct phases identified.

Phase 1- Building Research Scale – this first phase over the next 5 years concentrates on scaling up research activity through an expansion of research funding and increased commercialisation.

Phase 2 - From Research to Production – this second phase continues the growth in research and development, while attracting related small to medium scale production facilities. The GTP site will be important as a location for this.

Phase 3 - A Regional Bioindustry Centre – this final phase spans the period out to 2020. Geelong will have consolidated its position as biotechnology centre, with a spectrum of activity from discovery to production, and developed to a position where it has attracted a larger scale production facility.

13.2 Taking the First StepsOur analysis shows that achieving growth will require the momentum that is embodied in the expansion plans of Deakin, CSIRO and Barwon Health to continue, and this needs to be combined with increased cooperation.

Cooperation is required to realise emerging opportunities and to deal with some of the constraints identified in the SWOT analysis.

A new vehicle is needed to deliver this industry cooperation on an ongoing basis. There is a need to build on the current regional cluster through the establishment of a formal Geelong Biotechnology Network. The functions of this network are outlined in this report.

The establishment of the network is the first step in implementing the strategy outlined in this report.

The implementation timetable should aim to have the Network in place and functioning at the beginning of 2005, with the first major programs also commencing in early 2005.

13.3 Establishing the Network

13.3.1 Geelong Council Taking a Lead RoleThere is a need for action to be taken on the development of the BioGeelong Network. It is appropriate for the City of Greater Geelong to continue to take the leadership role in this.

Council should be supported by an industry taskforce that would provide assistance in establishing the network.

The next steps would involve:

Forming a Biosciences Industry Taskforce to consider this report.

Securing additional funding for the establishment of the Network.

Development of a detailed business plan for the Network.

Setting up the Network and commencing on the Year 1 projects

Rec 22 That a Bio-Industry Taskforce be formed to consider this report and to develop the network.

13.3.2 Key TasksThere are several key tasks that would need to be completed. These are:

BioGeelong Network Business Plan - development of a three year business plan for the network.

Development of an investment attraction strategy for Geelong Biotechnology

Development of a biotechnology infrastructure projects plan

Appointment of a Facilitator of the BioGeelong NetworkPreparation of the business plan is fundamental to commencing the implementation of the development strategy outlined in this report.

Geelong Council should take the following initiatives.

Funding for Developing the Network

Seek funding for the development of the BioGeelong business plan. ($30,000)

Seek funding for the development of an investment attraction plan.($10,000)

Seek funding for the development of a biotechnology infrastructure projects plan. ($10,000)

Appointment of ConsultantsSelection and appointment of consultants to complete the projects related to developing the industry cluster/network.

Creation of the NetworkFollowing the completion of the business plan, Council would perform the following roles:

Securing of Victorian Government funds and other funding for the network

Selection and appointment of the facilitator of the network

Establishment of an advisory board

Management of the NetworkOngoing management of the Network, including financial monitoring and reporting

It will be important that the Geelong Council take the lead role in the development of the BioGeelong Network.

Rec 23 That the City of Geelong continue to take a lead role in managing the next stages of implementation of this report including the development of the BioGeelong Network.

Rec 24 That the City of Geelong seek funding from the Victoria Government for the development of the BioGeelong business plan; an investment attraction plan and a biotechnology infrastructure projects plan, under the Regional Innovations Clusters Program.

Rec 25 That following the completion of the business plan, Council seek additional funding for establishing the network.

14 Recommendations


Timing Page

Strategy DirectionsRec 1 That the focus of the development strategy for the biotechnology sector in the Geelong region be primarily on a “grow your own strategy” over the first 5 years


Ongoing 90

Rec 4 That a major focus of the strategy be on scaling up the biotechnology sector in Geelong through securing increased research funding


Ongoing 93

Rec 5 That a major focus be placed on increasing commercialisation of research


Ongoing 96

Rec 6 That a major emphasis be placed on increasing research collaboration and joint projects among the research organisations in Geelong


Ongoing 97

Committing to the StrategyRec 2 That the development strategy outlined in this report be adopted as the long term regional biotechnology plan for the Geelong and the broader G21 Region

Short Term Geelong Council, other G21 Councils, Deakin, CSIRO, Barwon Health

Sept 2004 93

Rec 3 That Geelong City Council seek endorsement of the report from the research organisations and other major stakeholders and support for its key directions

Short Term Geelong Council Sept –Nov 2004

93

Establishing a NetworkRec 17 That a Geelong Biotechnology Network (BioGeelong) be established as the vehicle for delivering the regional biotechnology strategy

Short Term Geelong Council Feb 2005 108

Rec 18 That the BioGeelong – the Geelong Biotechnology Network be located at the GTP

Short Term Geelong Council, Deakin

Feb 2005 112

Rec 19 That the funding for the Network include member contributions as well as funding from relevant government programs.

Short Term Geelong Council, Deakin, CSIRO, Barwon Health

Feb 2005 112

Rec 20 That the Network establish links with key industry organisations and relevant government agencies

Short Term BioGeelong Network

Feb 2005 onwards

113

Rec 21 That as part of the development of the Network, the potential for linkages with organisations in the Werribee Precinct be further examined

Short Term Geelong Council, Bio Industry Taskforce Business Plan Consultants

October 2004 114

Rec 22 That a Bio-Industry Taskforce be formed to consider this report and to develop the network

Short Term Geelong Council, Deakin, CSIRO, Barwon Health, other G21 Councils

August 2004 116

Rec 23 That the City of Geelong continue to take a lead role in managing the next stages of implementation of this report including the development of the BioGeelong Network

Short Term Geelong Council August 2004 117

Rec 24 That the City of Geelong seek funding from the Victoria Government for the development of the BioGeelong business plan; an investment attraction plan and a biotechnology infrastructure projects plan, under the Regional Innovations Clusters Program


September 2004

117


Timing Page

Rec 25 That following the completion of the business plan, Council seek additional funding for establishing the network


December 2004 117

InfrastructureRec 9 That as one of the early projects of the BioGeelong Network an assessment be made of future infrastructure needs to expand the biotechnology sector in Geelong


Nov 2004 99

Rec 10 That the GTP be recognised as a key infrastructure project that is fundamental for the future development of biotechnology in the Geelong Region, including the attraction of research centres and production facilities


2005 onwards 99

Skills DevelopmentRec 8 That special regional programs be established to develop commercialisation and business skills within the biosciences sector in Geelong. These programs should be developed by the proposed BioGeelong Network


Feb 2005 99

Business Attraction & DevelopmentRec 7 That the attraction of a major new research centre be established as a medium term goal for Geelong


2005 -onwards 98

Rec 11 That the feasibility of developing regional scale up facilities at the GTP be investigated by the BioGeelong Network


March 2005 100

Rec 12 That the feasibility of developing GLP facilities at the GTP be investigated by the BioGeelong Network


June 2005 101

Rec 13 That the attraction of a major biosciences related manufacturing operation be pursued as long term goal for Geelong

Long Term BioGeelong NetworkGeelong Council

2007 onwards 102

Rec 14 That the attraction of a smaller scale biosciences related manufacturing be pursued as a medium term priority for Geelong


2006 onwards 103

Marketing and PromotionRec 15 That an ongoing biosciences industry marketing program be implemented for Geelong Biotechnology

Short/Medium BioGeelong Network, Geelong Council

Feb 2005 104

Rec 16 That Greater Geelong City Council take the lead in developing the marketing materials

Short Term Geelong Council October 2004 104

Appendix 1 References

Australian Biotechnology: A National Strategy. Australian Government. July 2000.

An Industry Training Plan for the Delivery of Training in Biotechnology, 2003. A Report for Box Hill TAFE Acuity Technology Management.

Australian Biotechnology Report. Ernst & Young and Freehills. For the Australian Government. 2001.

Australian Biotechnology: Progress and Achievements. Australian Government. July 2000.

AusBioInfo News - www.ausbioinfo.com. Australian Biotechnology News.

Beyond Borders Global Biotechnology Report. Ernst & Young. 2002.

Backing Australia’s Ability – An Innovation Action Plan for the Future. Australian Government. 2001.

Bioscience to Bioindustry A Role for Local Government in Biotechnology in Victoria, Aoris Nova January 2004

Biotechnology Strategic Development Plan for Victoria. Department of State and Regional Development. 2001.

Biotechnology 2004 Strategic Development Plan for Victoria 2004, Victorian Government, June 2004

Benchmarking Study of R&D Costs in Selected Segments of Australian Biotechnology Final Report. Ernst & Young, Hay Group, Strategic Industry Research Foundation, January 2001.

Biotechnology in Australia. Federation of Australia Scientific and Technological Societies. Occasional Paper Series, Number 1. Jan 1999.

Biotechnology in NSW: Opportunities and Challenges, NSW Innovation Council, August 1998.

BioFirst - NSW Biotechnology Strategy. NSW Government. 2001.

Borderless Biotechnology Report 2003, Deloitte Touche Tohmatsu. 2003.

Commonwealth and State Government Programs Supporting Innovation in Firms. Department of Industry Tourism and Resources. January 2003.

Co-operative Research Centre Compendium 2002. Department of Education, Science and Training. 2002.

Cooperative Research Centres. Commonwealth Department of Education, Science and Training website. www.crc.gov.au.

Deloitte Biotech Index – 6th Edition. A review of key biotechnology stocks listed on the Australian Stock Exchange. October 2001.

Engineering ‘in Synch’. Science and Engineering Vocational Education and Training - Implications of the Synchrotron. Chisholm Institute. June 2003.

Establishment of a National Biotechnology Organisation. A Feasibility Study for Biotechnology Australia. Buchan Consulting. 2000.

Feasibility Study - Specialist Centre in Biotechnology. Buchan Consulting November 2003.

Highlights of Victorian Biotechnology and Bioscience Based Industry. BioAccent - David Fayle and Diana Fayle. 2001.

Longitudinal Study of Innovative Australian Firms. Innovation Analysis, Innovation and Industry Policy Division. September 2002.

http://www.crc.gov.au/

Mapping Australian Science and Innovation, Main Report Department of Education, Science and Training, November 2003.

Mapping Australian Science and Innovation, Working Paper - Business Innovation, Department of Industry Technology and Resources December 2003.

Mid-term Review of the National Biotechnology Strategy 2002. Biotechnology Australia. 2002.

Queensland the Smart State - Investing in Science: Research, Education and Innovation. Queensland Government October 2003.

Smart Geelong Smart Future – Smart Geelong Network Brochure.

Technology Facts 50 – Technology Industry Survey. Deloitte Touche Tohmatsu. 2003.

Victorian Biotechnology and Bioscience Based Industry Report, by David Fayle, BioAccent. June 2002.

Victorian Biotechnology Industry Report Thorburn & Hopper September 2003

Victorian Biotechnology Directory 2003. Advance Consulting & Evaluation and Aoris Nova for the Department of Innovation, Industry and Regional Development. May 2003.

Appendix 2 Geelong Technology Precinct

OverviewThe Geelong Technology Precinct (GTP) is based at Deakin’s Geelong Campus.

The precinct concentrates on core research capabilities in materials, biotechnology, chemistry, and environmental engineering, combined with regional strengths in manufacturing and agri-processing.

Stage 1 of the GTP consists of a newly refurbished 8000m2 research and commercial facility together with existing biotechnology and other research capabilities on-site.

Future stages in the development of the precinct will include co-location of commercial businesses and major research initiatives on the adjoining 56-hectare site.

Key Features of the precinct are:

8000m2 research and commercial facility, including 850m2 of hi-tech laboratories 1150m2 of networked offices & workstations, 1000m2 of high profile demonstration space , 4500m2 of quality industrial space;

Open plan areas designed to encourage communication include meeting venues and a stylish 'R&D' Cafe

Technology infrastructure including library, high-speed data links, demonstration and testing equipment, and other complementary research facilities

Accommodation and conference facilities (447-person student accommodation, 93-person conference accommodation with 200-person management conference centre)

Stage 1 TenantsThe activities included in the Stage 1 of the GTP range across these areas of specialisation.

Activity Description

Advanced Materials Research Advanced manufacturing and performance of materials, materials manufacturing, intelligent systems and advanced fibres, textiles and polymers

Materials for textiles, metals and automotive manufacturing

Victorian Centre for Advanced Materials Manufacturing (VCAMM)

Development of high-performance materials (include steel, light metals and composite materials) for automotive and aerospace

Textiles Research Textiles and fibres research group works with natural and synthetic fibres. It covers a wide range of fields such as chemistry, fibre metrology, dyeing, polymers, extrusion, processing, and conductive polymers.

National Centre for Cool Climate Wine Science Teaching and research winery. Research focus is on canopy management, clonal selection and integrated disease control

ChemGenex Pharmaceuticals ASX listed biotechnology company, which focuses on gene discovery and validation. It incorporates the commercialisation of in-house intellectual property together with a fee-for-service technology platform

Chirogen Pty Ltd Chirogen is a biotechnology R&D company. Its proprietary platform technology enables the production of pure single enantiomer compounds for the pharmaceutical, agrochemical and specialty chemicals industries

Water Resource Management Environmental engineering, combining expertise in industrial systems, environmental technologies, catchment and ecosystem management.

Mobile Architecture and Building Environment Laboratory (MABEL)

World's first mobile facility to offer integrated on-site measurements of power, sound, light and comfort for buildings.

Aims to improve building design and energy efficiency for the purpose of achieving environmental and economic savings.

International Fibre Centre (IFC) Training and education in the fibre and textile industries.

A collaborative partner in Deakin's advanced fibre research.

Cooperative Research Centre for Cast Metals Manufacturing (CAST)

Joint research program with Ford.

Focus on light metals to decrease vehicle weight and reduce fuel consumption and exhaust emissions.

Source: Deakin University Website Accessed June 2004

Appendix 3 Werribee Technology Precinct

Werribee Technology PrecinctIn the report 'Melbourne 2030 – Planning for sustainable growth' Werribee is identified as a Principal Activity Centre and the Werribee Technology Precinct as a Specialised Activity Centre.

The advantageous aspects of the site were seen to be access to economic and social development in the eastern region of Melbourne, support from the two universities, the opportunity for expansion and land availability offering potential for social interaction through ancillary uses (eg accommodation, recreation and cultural activities).

A feasibility study in 2002 suggested that the WTP was positioned to become a hub of excellence in biotechnology including veterinary applications, agribusiness (food and related R&D) and environmental sustainability.

The Werribee Technology Precinct covers 925 hectares and includes branch campuses of The University of Melbourne and Victoria University of Technology, R&D providers and providers of contract research. The total workforce of about 350 is mainly engaged in subsidiaries of larger research organisations.

The Precinct has a strong animal biotechnology base through the Victorian Institute of Animal Science and the School of Veterinary Science of the University of Melbourne. It is seen as an opportunity to create a mix of uses in a community rather than a 'sterile drive in – drive out science park'.

The rate of development of the precinct, which has been reserved for scientific and educational purposes, has been slower than expected, and has been attributed, partially at least, to the absence of a coordinating administration or governance body.

A sustained ability to attract a skilled professional workforce has been identified as a challenge to growth of the precinct, while its assets are regarded as the estate itself, the stakeholders and their support for the project.

According to the head of the VIB (see below) the groups at the WTP currently hold monthly precinct seminars between the various sites. People are (gradually) talking and assisting one another where synergies are identified. Money has been set aside (by Victoria University) for a dedicated Precinct Web site to increase the precinct profile. Occupants are discussing gaining value from shared resources such as large items of equipment, library services etc

Victoria Institute Biotechnology (VIB)The VIB is a joint venture between the Austin Research Institute and Victoria University located at the university’s Werribee campus. The ARI plans will re-locate researchers on completion of the new building, expected to open in August 2005.

The joint venture entity includes a commercialisation entity to cover any discoveries arising from the joint venture.

To differentiate VIB from Melbourne (Parkville, Monash strip) where biotech has a heavy emphasis on the research side, the VIB is aiming to position itself about midway between a research institute and manufacturer of pharmaceutical-type products. It will focus on processes for manufacture. Focusing broadly on the production and analysis of proteins, the VIB seeks to become a Centre of Excellence in antibody engineering for diagnostic and vaccination purposes. A substantial fermentation facility designed into the new building will offer the capacity to produce large amounts of proteins very quickly. Biotechnology products, which incorporate a lot of added value to physically small units, are expected to be relatively easy to export from, say, Avalon.

LinksVIB is keen to make links with industry as soon as possible to be able to do protein analysis etc on products that are already on the way to commercialisation. They have not looked at synergies with Geelong but would be interested in doing so.

Their focus on antibody engineering may put them in competition but is likely to be synergistic with CSIRO's extensive research program on animal vaccines. It would be important for the two organisations to avoid head-to-head competition.

Food Sciences Australia (FSA)FSA is a research-based business, a joint venture between CSIRO and the Department of Primary Industries.

FSA activities as regarded as being on the fringe of biotechnology. FSA tends to enter the picture after any biotechnology has been done. They are mainly involved in food processing. Trends include the development of nutriceuticals, both for the delivery of health benefits and the prevention of disease. The FSA's interests are the extraction of valuable materials from food products or waste streams, the creation of products with an active ingredient and the protection of active ingredients during processing.

The research budget of $35 million is spread over sites in Sydney, Brisbane and Melbourne. Melbourne employs 100 people, or 45% of the total and is estimated to receive about 45% of the budget (about $16 million).

The approximate breakdown of the budget is 50% from government, 25% from semi-government and 25% from contract research.

LinksThey have had virtually no interaction with AAHL to date and limited interaction with Fibre and Textile Technology in relation to analytical chemistry techniques. FSA has a regional connection with Geelong as a lot of their staff live there.

Links with the University of Melbourne are through co-supervision of students and FSA staff taking courses at the University.

The FSA has done projects with Agrifood Technology and has the potential to work with the State Chemistry Laboratory (an institute within the DPI at the WTP). From the FSA point of view, not much has been achieved in the way of interactions with groups located within the precinct, despite attempts to address this.

The FSA works on a project with Deakin University, funded by the Geoffrey Gardener Foundation, called 'Closing the Loop – a holistic approach to dairy waste', in a group led by the DPI that includes about six research providers and 20 companies in the dairy industry.

About 25% of the FSA's interactions are with dairy companies in the region west of Geelong.

Appendix 4 Public Sector Biotechnology Research and Development

Australia has developed a strong public sector research base in biotechnology and related fields – that include health and medicine, agriculture and environmental sciences. The main contributors to Australia’s primary research output are CSIRO, universities, research institutes, government funded research facilities and cooperative research centres.

These public research facilities are the employers of postgraduate and graduate researchers and support staff.

They have also been the source of much of the technologies under commercial development, through spin-off companies, licensed technologies and joint R&D activity.

CSIRO CSIRO is one of the world’s largest and diverse research organisations. The CSIRO is ranked third in the world for the frequency of citations for its publications on environmental science and fourth in the field of agricultural research56.

Major areas of biotechnology related research include programs in health, agriculture and the environment.

CSIRO biotechnology activity involves 3,300 staff located at a total of 60 sites in Australia and overseas.

Major research projects are in the areas of plant growth and development, new diagnostic therapies for cancer, drug targeting and delivery and gene therapy.

CSIRO launched its National Research Flagships initiative in April 2003. The initiative brings together science and industry to tackle key challenges in areas including preventive healthcare, light metals, water, food, oceans and energy57.

Biotechnology is a major component of a number of the Flagships including healthcare, water, agrifood, oceans and environment.

Some of the activities at CSIRO, at the Australian Animal Health Laboratories in Geelong, in animal health and marine science and aquaculture are under the Flagships umbrella.

Australian UniversitiesAustralian universities receive operational grants from the Australian Government, with competitive grants for medical and other research provided by the National Health and Medical Research Council (NHMRC) and the Australian Research Council (ARC).

Through direct funding and the competitive grants, universities receive around half of the public funding available for biotechnology research in Australia.

A number of universities are leaders in the teaching of biotechnology and are also involved in significant research programs including the commercialisation of research. These include the University Melbourne and Monash in Victoria.

Research InstitutesAustralian research institutes are often affiliated with major public hospitals, universities, and health related CRCs.

Some of the larger institutes include the Walter and Eliza Hall Institute, the Howard Florey Institute, the Baker Heart Research Institute and the Murdoch Children’s Research Institute, which are all based in Victoria.56 USA Journal Science Watch. 200257 CSIRO Media Release – National Flagships April 14 2003

Many of Australia’s biotechnology start-up companies originated in research institutes. For example, in the 2001 financial year an estimated 70% of new start-ups were from research institutes58.

Most major institutes have business development units that work with researchers to identifying at early stages, projects and ideas that have commercialisation potential.

Major National Research Facilities (MNRF)MNRFs are significant nodes of scientific information, expertise, facilities and/or collections of specimens.

MNRFs are part of a strategy, implemented by the Australian Government, to encourage partnership investment in national research infrastructure among all tiers of government, universities and public and private research agencies.

In 2001, $100 million was allocated to facilities involved in biological science. Successful applicants include the Australian Proteome Analysis Facility and the Australian Genome Research Facility.

Rural Industry R&D CorporationsThe Rural Research and Development Corporations (RRDCs) are focused on increasing Australia's rural R&D effort.

Central to the RRDCs are partnerships between industry and Government to implement R&D.

In 2002–03 the Australian Government contributed around $170 million to fund the activities of the R&D corporations, with industry providing a similar amount.

With other third party contributions, expenditure by Rural R&D Corporations is about

$365 million59.

Cooperative Research Centres (CRCs)

The Cooperative Research Centre Program brings together in partnerships, researchers from universities, the public sector and industry.

The CRCs undertake long-term, collaborative research and development ventures and bring together researchers and research users from universities, the public sector and business.

CRCs were conceived as a major vehicle, to improve the performance of R&D and to build strong collaboration between industry and the research sector.

The program has several objectives that focus on enhancing:

The contribution of long-term scientific and technological research and innovation to Australia’s sustainable economic and social development.

The transfer of research outputs into commercial or other outcomes of economic, environmental or social benefit to Australia.

The value to Australia of graduate researchers.

Collaboration among researchers, between researchers and industry or other users, and to improve efficiency in the use of intellectual and other research resources.60

58 Australian Biotechnology News 200259 Mapping Australian Science and Innovation Working Paper Business Innovation Department of Industry Technology and Resources December 2003 p 9460 Co-operative Research Centre Compendium 2002. Department of Education, Science and Training.

CRCs are generally funded for 7 years, in a system that sees Australian Government funds matched by partners in the centre. The Program has funded more than 90 CRCs across Australia.

Most CRCs are small with an average annual budget of $7 million.

There are 64 CRCs and around one third are directly involved in biotechnology.

Industry has committed more than $1.4 billion over the life of the program.

Most CRCs operate on more than one site and usually operate across State borders.The following table provides details for all CRCs that are utilising biotechnology. As most CRCs collaborate with researchers and organisations across State boundaries, we have used the location of the main research body to classify the State in which the CRC operates.

Of 64 CRCs currently funded in Australia, 24 have a focus on biotechnology, mostly involved in either agriculture or medicine.

Of these 24 biotechnology CRCs, seven have the administering institution in Victoria.

Table 28. CRCs in Australia by State and Industry – 2002Co-operative Research Centre’s Location by

StateManufacturing TechnologyCRC for Microtechnology VICCRC for Bio products VICAgriculture and Rural Based ManufacturingAustralian Cotton CRC NSWAustralian Sheep Industry CRC NSWCRC for Cattle and Beef Quality NSWCRC for Innovative Dairy Products VICCRC for Molecular Plant Breeding SACRC for Sustainable Aquaculture of Fin Fish SACRC for Sustainable Production Forestry TASCRC for Sustainable Rice Production NSWCRC for Tropical Plant Protection QLDCRC for Value Added Wheat NSWCRC for Viticulture SAEnvironmentCRC for Australian Weed Management SACRC for Biological Control of Pest Animals ACTMedical Science and TechnologyCRC for Asthma NSWCRC for Cellular Growth Factors VICCRC for Chronic Inflammatory Diseases VICCRC for Cochlear Implant and Hearing Aid Innovation VICCRC for Diagnostics QLDCRC for Discovery of Genes for Common Human Diseases VICCRC for Eye Research and Technology NSWCRC for Tissue Growth and Repair SACRC for Vaccine Technology QLD

Source: Co-operative Research Centre Compendium 2002. Department of Education, Science and TrainingSince the commencement of the program in 1990, a total of $7.3 billion in cash and in-kind support has been committed under the program. This includes $1.8 billion from universities, $1.8 billion from the Australian Government and $1.3 billion from industry contributions. 61

Biotechnology Centre of ExcellenceThe Biotechnology Centre of Excellence (the National Stem Cell Centre) – funded by a $44 million grant from the Australian Government brings together Australia’s expertise in embryonic and adult stem cell technology.

The central node of the National Stem Cell Centre is located in the Monash Biotechnology development in Victoria. It will house up to 200 scientists in state-of-the-art facilities, which will include standard cell production suitable for clinical applications.

61 Mapping Australian Science and Innovation Working Paper Business Innovation December 2003 p 95

Appendix 5 Location of Biotechnology Firms by LGA

City of Melbourne (59) City of Melbourne(59) City of Yarra(24)Acrux Limited Innovonics Advanced Surgical Technologies AgSeed Research (Division of Monsanto)

Kryokor Ag Genomics

Angiostar MedSeed AMRAD Corporation Ausgenics Melbourne IVF bio Revive Auspep Mercy Tissue Engineering Bioscreen Australian Genome Diagnostics Monsanto Australia Cardiac Science Australia Autogen MuriGen Carlton and United Breweries Bio Nova International Neurosciences Victoria Cerylid Biosciences BioDiem Optech Diagnostic and Surgical Compumedics Biogreen Orica Australia Cytopia Biota Holdings* Pargenex Pharmaceuticals Dynamic Hearing Biotechnology Ventures Pharmasafe Florigene Bonlac Foods PinnacleVRB Gene Type Calibre Biotechnology PlantTech Gene Type Cardiac Science Australia ProBio International Genetic Technologies Corporation Cell Therapies Schumacher Pharmaceuticals ImmunAid Centre for Development of Cancer Therapeutics

SciBAC Mabtech

Cervax Seed Grain Biotechnology Australia

McFarlane Laboratories

CogState Shedden Uhde Monash IVF Cryptopharma Siemens Ultrasound Pacific Medical CSL Solagran QIAGEN Cytoscreen Starpharma Pooled Development Rarecellect Dendritic Nanotechnologies Technology Commercialisation Silbase Scientific Services Eiffel Technologies Thomson Scientific Instruments Simons GeneType Diagnostics Epi Tan Thorgard Pharmaceuticals ES Cell International TocoviteEvoGenix Viralstar Hatchtech Vita Life Sciences Hepatope Vital Health Sciences Hexima

City of Monash (33) City of Knox (14) City of Wyndham (9)Aus Bio Applied Biosystems Animal Reproduction Company Bayer Australia (Health Care Operation Centre)

Baldwin Medical and Veterinary Australian Starter Culture Research Centre

Biogenome Bayer Australia Diagnostics Group Clone International Coloplast Chemicon Australia Cottee Health Pharmaction Copyrat Connetics Australia Environmental Biotechnology (Systems) CryoLogic Devices (Australia) Australia Nufarm Diamed Australia DNA Solutions Nugrain Excalibur Laboratories Fairmont Medical Products Peerless Holdings Felton Grimwade & Bickford GlaxoSmithKline Australia Plantic Technologies Gallay Scientific Institute of Drug Technology Gambro Kodak(Australasia) Pty Ltd Getz Bros &Co.(Aust) Medical Concepts Australia Ingenko MiniFab (Aust) Invetech Southern Dental Industries Invitrogen Australia Trewavis Surgical Instruments Laerdal City of Hume (8)Maccine Agriculture Victoria Services Mayne Pharma Anadis Medos Company Applied BiotechnologiesMet-App Cognis Australia Mimotopes Crystal Healthcare Monash Mouseworks CSL Bioplasma Mondo Medical Micronized Foods Olympus Australia Southern Dental Industries Optiscan Imaging Premier Bionics Prostate Diagnostics Pulmosonix Science Supply Australia Shimadzu Scientific Instruments Varian Australia Vision BioSystems XRT Limited


Appendix 6 Location of Metropolitan Research Institutes

Major Research Institutes - City of Melbourne

Major Research Institutes - City of Monash

Major Research Institutes - City of Yarra

Major Research Institutes - City of Wyndham

Source: Bioscience to Bioindustry A Role for Local Government in Biotechnology in Victoria , Aoris Nova January 2004

Appendix 7 Government Funding Programs

There are number sources of government funding that can be accessed to develop the biotechnology sector in Geelong. These are in addition to the national competitive grants funding (and other national program funding) that is pursued by individual institutions.

The key programs are:

Regional Innovations Clusters Program

Victorian Endowment for Science Knowledge and Innovation (VESKI) Fellowship

Science Technology and Innovation (STI) Initiative Infrastructure Grants Program

Regional Partnerships (Commonwealth Government)

Victorian Government

Regional Innovation Clusters ProgramThe Regional Innovation Clusters Program (RIC) of the Office of Science and Technology was created to foster clustering as a key tool in regional economic development. It is a $2.9 million, three-year program to develop and strengthen 'potential, emerging, and existing clusters in rural and regional Victoria'.

Biotechnology in Geelong already meets a number of the criteria that define a cluster according to the RIC Program. These include the sharing of geographical location, specialised infrastructural requirements, common labour markets and similar threats and opportunities.

Geelong biotechnology would be classified as a Potential and Emerging Cluster with potential for the establishment of a network of organisations, and for the participation of Deakin University and the Gordon Institute of TAFE.

In order to apply for assistance to the RIC Program, it is necessary to identify a local champion from participating organisations to drive the cluster and provide financial and in-kind support.

Current and future collaborative activities must be described, for example between Deakin, PIRVic and CSIRO/AAHL in the area of aquaculture. The involvement of universities (Deakin), TAFE colleges and research organisations is important.

An emphasis on the development of technology and, where appropriate, new skills to support such development, is desirable.

Geelong already has a biotechnology and aquaculture base, meeting two of the Government's nominated industry sectors, and there is demonstrated support from the City of Geelong and other G21 Councils.

Eligible projects under the Potential and Emerging Clusters category include the engagement of a cluster coordinator/facilitator, development of a feasibility study/scoping report for the development of a cluster, development of a cluster governance arrangements and of a vision and action plan.62

The Regional Innovation Clusters Program provides for grants of up to $50,000 on a $3 (Government) to $1 (cluster) basis (Potential and Emerging Clusters), where the cluster contribution may be cash or in-kind.

62 This Opportunities Study has been part funded under the RIC Program.

Victorian Endowment for Science Knowledge and Innovation (VESKI) Fellowship

VESKI seeks to facilitate the return of expatriate Victorians who have been successful in science, technology and design, and assist them in developing their expertise and contributing to Victoria's future.

VESKI is relatively new, with the first phase involving the awarding of 2-3 VESKI Victorian Innovation Fellowships for research in Victoria for up to five years. They are funded at up to $100,000 per annum with matching funding (rather like the Commonwealth Government’s Federation Fellowship program).

Science Technology and Innovation (STI) Initiative Infrastructure Grants Program

This program is delivered by IIRD. Round 3 of the program commenced in June 2004. Funding is available in the following categories:

Physical capital - purpose-built facilities, laboratories, machinery and equipment;

Human and social capital - skilled personnel, including scientists, engineers, R&D managers and entrepreneurs together with the supporting networks; and

Structural capital - governance structure, management and administrative arrangements.

There are a number of areas that are being focused on in Round 3. These are:

Building new capabilities in priority sectors that catalyse new levels of R&D innovation, commercialisation, and industry development.

Enabling new levels of collaboration and cross-disciplinary interaction between researchers and industry. Projects should reflect strong partnerships and can be public/public, public/private, and private/private ventures.

Demonstration of sustainable benefits to industry and the research community where the pooling of resources, skills and capabilities is actively encouraged.

Facilitating earlier involvement between industry and the research sector to encourage joint investment in projects that focus on the application and demonstrations of research.

Attracting and retaining internationally recognised researchers, and supporting Victorian industries to become internationally competitive.

Deakin has been successful in recent years in securing several STI grants.

Commonwealth Government

Regional Partnerships

Through Regional Partnerships program the Commonwealth Government funds projects that focus on:

Strengthening growth and opportunities by investing in projects that strengthen and provide greater opportunities for economic and social participation in the community.

Improving access to services by investing in projects that, in a cost effective and sustainable way, support communities to access services.

Supporting planning by investing in projects that assist communities to identify and explore opportunities and to develop strategies for action.

Assisting structural adjustment for communities by investing in projects that assist specifically identified communities and regions to adjust to major economic, social or environmental change.

As well as funding regional development strategies funding has been provided for development of regional infrastructure, and for incentives to attract new investment to a region.

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