Biotechs will bail without bucks, warns Henney

There is no reason why an Australian biotech company couldn't be the next Amgen, says Chris Henney, the US scientist turned serial entrepreneur who has a seat on Adelaide company Bionomics' board of directors. But he warns they will likely have to move to the US in order to pursue their goal, in part because of the lack of capital available for company growth in Australia.

"If we can't grow these companies in Australia, because the market won't listen to us, it will be inevitable -- and it's already happening here -- that Australian companies will have to turn to the US markets to get the investments that they need and inevitably that will lead to a migration of companies away from Australia and to the US, " Henney told analysts at a Bionomics briefing this week.

"I think it will be a great shame if that happens, but I think the writing's on the wall if small companies can't get funding in a continuous way."

Henney said biotech companies needed three things for success -- great science, great people and frequent access to capital. But while Australia definitely had the first two, he said, the third was more difficult.

According to Henney, a number of factors contributed to this issue especially the preoccupation of the Australian investor market as a whole with short-term profits, and this has resulted in the fragmentation of the industry.

"What we have here are too many companies that are much, much too small, and I think culturally it is going to be hard to aggregate them," he said.

As an example, Henney pointed to one of the companies he founded, Immunex, which after 19 years with only one profitable quarter, sold for US$12 billion. Similarly, another company he founded, ICOS, has never had a profitable quarter in 10 years but its share price has risen from around $1.00 when the company was founded to at its peak to more than $60.00. "This company has never been profitable but has given a very nice performance to shareholders, in other words the market is recognising what the company is doing," Henney said.

But Henney said the onus was also on companies to communicate to shareholders what it was doing to add value to the company's assets. "We need to communicate what we're doing in a way that the street can appreciate, and can crack its value," he said. "We're not communicating to them well -- what are the events that add value?"

He pointed to Bionomics, which today has a share price less than it had when it listed in 2001, despite its advances. In comparison, he said, a company like Amgen after 25 years was bigger than Disney, and had a market capitalisation roughly equivalent to the GDP of Austria.

"You are missing some real opportunities if you don't fund these small companies with relatively modest amounts of money," Henney said. "My challenge to you is that we would very much like to have an Amgen in Australia and we'd like it to be Bionomics, but if we can't get these kinds of opportunities appreciated, and they are essentially under-appreciated, then it's inevitable that the company will have to go elsewhere."