Happy together

By David Binning
Thursday, 24 April, 2003

When it comes to clustering, Australian biotech could take a few lessons from the nation's wine industry -- and not just the grapes, David Binning finds

A thousand years from now, archaeologists digging beneath the ice of this vast, by then frozen, continent will find the ruins of hundreds of small interdependent societies that once comprised scientists and practitioners of ancient and dark rituals such as law, finance and marketing.

Within these primitive clusterings, our distant posterity will learn of a watershed period in human history whereby competition and secrecy in biotech gave way to unity and cooperation, the bedrock for longevity and the gradual conquest of long-forgotten diseases and vulnerabilities.

Sound like a load of nonsense?

Well, while such utopian visions can leave reality out to dry, they illustrate the current dilemma facing the global biotechnology sector: how to cut between the two diverging paths of cooperation and competition to find the best way forward. For years, leading biotechnology experts from all over the world have led an urgent cry for scientists, industry participants and government to foster concentrated centres of excellence if a truly happy marriage between knowledge and business is to be achieved in Australia.

According to the Commonwealth's chief scientist, Robin Batterham, there is absolutely no doubt that in order for the Australian biotechnology sector to advance and achieve intonational competitiveness, the current drive towards establishing dynamic concentrations of industry must be accelerated.

Pointing to the clustering experiences in such places as Boston, Cambridge, Oxford and Edinborough, the scientific and commercial rewards for effective clustering are very impressive, Batterham says.

"When you look at R&D, how it gets through and its impact, what you find is that where you have critical mass, world-class excellence and cross-cutting from one area to another, working together, then the output, both in terms of science and of how it underpins commercial uptake, is quite extraordinary," he says.

And despite all the criticism of Australia and its ability to create for itself the opportunities being realised elsewhere, Batterham believes that Australia is beginning to reap the benefits of a genuine, albeit small, collection of outstanding clusters and visionary individuals.

The Commonwealth Department of Education, Science and Training is currently trying to map Australian centres of scientific excellence as part of a wider initiative to plot a course for the future with the findings expected to be made public late this year.

"I think that there is pretty good improvement -- we are starting to see performance comparable to the US," Batterham says.

Late last year the first ever study into research commercialisation in Australia revealed that relative to the US and Canada, indigenous research institutes had in fact been as successful, if not more successful.

The National Survey of Research Commercialisation was the culmination of a partnership between the Australian Research Council, the CSIRO and the National Health and Medical Research Council.

The survey collected information about patenting and licensing of IP arising from research being conducted within Australian universities, publicly funded medical research institutes and the CSIRO. It also collected information about the formation of start-up companies on the basis of that IP.

Australia, the survey concluded, is on track to generate from public investment in research over 250 new companies over the period from 2000 to 2004. Data on the generation of licenses and patents was also very positive, showing among other things a strong correlation between an institution's experience in managing IP and actual returns on these assets.

"I think that there's a lot of good happening at the R&D end of clustering and excellence," Batterham says. "You've got the Institute for Molecular Bioscience in Queensland, Bio21 in Melbourne and other centres. There's a string of small biotech companies being spun off and grown but it would be good to see more."

Importantly, the survey noted that key to meeting future targets in Australia would be closer ties between universities and commercial groups as well as major government grant schemes.

However, the way in which this is planned and implemented will be key. "You can't create a cluster just by saying 'let's do a cluster'," Batterham says. "You must create genuine centres of excellence."

Lyndal Thorburn, principal consultant with Canberra-based Advanced Consulting and Evaluation, agrees. "The word 'cluster' is always being misused," she says.

"Unfortunately, you get politicians declaring they have a cluster so as to draw attention to an area of expertise. The lesson is that you can't magically declare you have a cluster -- it has to come from some sort of inner strength.

"Networks and skills that actually create competitive advantage is what this is all about."

Thorburn believes that Australia is on the way towards emulating the main clustering success stories in Europe and the United States but that we remain 10-20 years behind, particularly in terms of developing sophisticated supply chain systems.

"At the moment, because our biotech firms are young and new, the supply chain is at the early stage of business development," Thorburn says.

"There must be quality systems in place spanning manufacturing, packaging, people on tap for distribution, marketing and advertising."

However, she says, there is definite evidence of change on the horizon.

"Five years ago you wouldn¹t find many people who knew much about IP and patenting in biotech. Now you will find larger numbers of patenting firms or legal firms offering these services."

Mark Bradley, head of ATP Innovations at Sydney's Technology Park in Redfern, also home to a new state government funded biotechnology incubator, is upbeat about the future for clusters in Australia while also admitting that they are relatively sparse and dispersed at the moment.

"If you say that geographic sectors can be small and discrete then we do have an extensive network of clusters in Australia," Bradley says.

He says that while state and Federal government funding programs for Australian biotech are moving in the right direction, the experiences of many clustering models overseas demonstrate clearly that money is only a small part of the equation.

In Germany, for instance, major investments have been made to foster cluster-style concentrations in Munich and around the Bavaria and Rhine-Neckar regions. Large numbers of start-up groups were formed, but few have gone on to be commercially successful.

"The problem with Germany was that they poured vast amounts of money into their biotech hopefuls without the presence of an adequate framework to manage the funding," Bradley says. "What it did was distort the market disciplines."

Likewise, the Singaporean government has been criticised for being too loose with its money in the development of clustering hopefuls such as the Biopolis.

"Whilst there are some interesting models around the world, we should be careful not to simply copy other models -- we must take into account our local qualities," Bradley says.

In vino veritas

Bradley and many others well placed in biotech look towards Australia's highly successful wine industry as providing the best example of how we should cluster our biotechs.

Literally hundreds of wineries dot the Australian landscape, 'clustered' in geographically specific areas which, over time, have seen strong growth and provided important support for several adjunct industries.

Years of competition, cooperation and more recently consolidation has seen success on the local front spill over onto the international stage with Australia¹s top vintners now ranking among the biggest in the world.

It¹s exactly what the Australian biotech sector wants to see happen.

"There must be a dialogue right through the value chain from concept to manufacture -- clusters will only form when there's excellence around," Bradley says.

What is essential, he believes, is a strong technology and or science base combined with a strong entrepreneurial culture. There must be easy access to a good work force, world-class physical infrastructure, "impeccable and transparent networks and links and a very supportive policy environment," he says.

"A cluster becomes a whole catalyst or engine room for development -- eventually it becomes self-reinforcing if done right.

If it¹s working then you¹ll get a certain amount of interdependence amongst certain groups." But moreover, Bradley is adamant that Australian biotech needs to think global: "I think almost every biotech worth its salt agrees it must be a global company from the outset."

One strategy that might be considered for Australia, he continues, is the establishment of one uber-cluster spanning the entire eastern seaboard and uniting the key centres of excellence throughout Queensland, New South Wales and Victoria.

"Could the eastern seaboard market itself as cluster of clusters to the global market? There are moves afoot here," Bradley says.

Many agree that Australia needs to develop a big picture approach if the local biotech sector is to gain any sort of competitive advantage internationally.

Advance Consulting's Thorburn believes that current industry initiatives designed to link research and commercialisation groups are working only ostensibly in that more effort must be made to create geographic concentrations which are organically attuned to the entire supply process, from both a local and a global perspective.

"I think that this point is being missed -- government programs are aimed at linking companies with R&D and financial suppliers, but they are missing all these other things that need to be supplied," she says. "There's a bit of the jigsaw missing here."

Leanna Read, managing director of TGR BioSciences, based in the Thebarton biotech district in Adelaide, believes that specialisation will be the key success determining factor for Australian biotechnology groups.

That, and a greater emphasis on more formal arrangements within and between clustered centres of excellence.

"I suppose I think more about clusters as things with a lot more meat in them from a formal point of view," Read says. Specialist areas such as IP and patenting are showing strong signs of growth, she observes, but the issue of more concrete relationships and objectives is still a major one.

"In a research sense there has been a need in the past for organisations to pool resources and work together with formal links to enhance critical mass."

TGR BioSciences was spun off from the CRC for Tissue Growth and Repair, fronted by Read. The company now also plays a part in the Australian Proteomics Analysis Facility (APAF), which is a cooperative group centering around Macquarie University and also involving the universities of Sydney and NSW.

One of Australia's most successful clustering stories to date is Melbourne-based Neurosciences Victoria, a collaborative non-for profit research outfit originally comprised of the neuroscience centres within Monash University, the University of Melbourne, the Howard Florey Institute, Brain Research Institute, Mental Health Research Institute and the National Stroke Research Institute.

Its brainchild was imminent Australian neuroscientist Edward Byrne, who, three years ago, while head of the Neuromuscular Research Institute at Melbourne's St Vincent's Hospital, convinced a handful of his peers to help establish a group which would attempt to present a united front of neuroscientific excellence in Australia with the aim of attracting international support and kudos for local neuroscience.

"New breakthroughs in technology such as magnetic resonance imaging have meant that the brain has been able to be studied while it is working," says NRV chief executive William Hart.

"The bottom line is to try and keep our eye on new treatments for diseases and the only way this happens is through collaborating with research and commercialisation groups."

One of NSV's biggest success stories has been the formation of the National Neuroscience Facility (NNF), following the award of a Commonwealth government MNRF grant last year.

NSV is the founding member of a new not-for-profit company, Neurosciences Australia, which will oversee management and operation of the NNF. The fast-materialising vision is for a nationwide centre of neuroscience excellence intended to drop the jaws of international investors and researchers.

"I look at that lot and say that's what happens when you have all the right elements in place," says Chief Scientist Batterham.

NSV demonstrates, according to TGR's Read, one of the fundamental principles for successful biotechnology clustering, that being the existence of strict, formal structures addressing research and business and everything in between.

"These kind of groups have formal structures with boards," Read says. "In the context of the Australian biotechnology sector they are long-term structures -- that's what makes then work and gives them that extra bit of oomph."

NSV now has government and commercial commitments of over $60 million to fund future neuroscience research.

Much of this commitment has stemmed from recent partnerships with German pharmaceuticals giant Schering and Japanese multi-industrial Nissho Iwai. Also, according to Hart, the group is in negotiations with several other local and international groups for shared research and commercialisation.

"The bottom line is that unless you have glue -- and glue means money -- in terms of marketing advantage of government funding its going to be hard to get things going," Read says.

Speaking from experience, Reid is currently trying to establish a cluster of women's health research/ commercialisation in South Australia but is finding things a little tough going: "This hasn't come off because there's no big carrot there."

Prof Richard Wettenhall, director of Melbourne University's Bio21 Institute, situated in the Parkville precinct, is extremely positive about Australia's achievements to date in the creation of clustered centres.

Bio21 is in contention to become one of Australia's main clustering success stories and combines the University of Melbourne, the Walter and Eliza Hall Institute, and Royal Melbourne Hospital. There are 10 member institutes of Bio 21 at the moment.

"Our objectives are, in a not-for-profit way, to incubate research that has commercial potential -- providing an environment for the incubation of start-ups and to provide them with accommodation," Wettenhall says.

"We saw that we were short on molecular analysis expertise but bright in chemistry, downstream processing and analytical processing.

"We have sought to balance all these elements and translate university research into outcomes."

Chief scientist Batterham, along with many, laments the ongoing difficulty many researchers and early-stage commercial groups have in securing finance and maintaining access to funds until ideas get off the ground and to market.

"One of the things that needs more attention within research institutes is that you need people on the ground that are very capable in the commercialisation process -- these people are very thin on the ground at the moment," he says.

However, absorbing the examples of NSV and Bio21, it is clear that when all the right elements come together, organisations can readily attract quite significant financial support if their message is articulated clearly enough.

NSV's endorsement by major multinationals is a very good start.

The US-based Atlantic Philanthropies has invested more than $30 million in Bio21 and has also contributed significant amounts of money to several other cluster-style initiatives throughout Queensland and Melbourne such as the Macfarlane Burnet Institute, the Baker Institute and the emerging AMREP cluster developing around the inner city suburb of Prahran.

"In terms of attracting major investors and or multinationals here, clustering is the smart way to go," says Batterham. "Commercial impact is what matters at the end of the day."

And key to this, most believe, is a move towards better cooperation without destroying the essence of competition.

As one imminent Australian scientist commented following the recently failed trial of an AIDS/HIV vaccine by Nasdaq-listed biotech VaxGen: "I could have told them their model wasn't going to work."

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