Australian biotech companies could see increased interest from large foreign players as many local companies emerge with mature and attractive drug pipelines, industry sources said.
The new Australian tax credit is also expected boost activity in the sector, as reported by this news service.
Listed and private companies with turnover of less than USD 20m doing R&D in Australia would, subject to certain criteria, receive a cash refund of 45% of their annual R&D spend. More than 80% of listed Australian biotechs meet these requirements.
The general consensus is that the Australian biotech industry has avoided the brunt of the financial crisis and continued to produce innovative and promising research, a local industry and academic source said. A New York-based R&D and drug development advisor agreed, noting that he had recently been approached to source anti-cancer, anti-viral and vaccine compounds from Australia.
There were at least six licensing deals done in Australia in 2011, which is a growing vote of confidence in the region and most of the big pharma players like US-based Pfizer (NYSE: PFE), Switzerland’s Novartis (NOVN: VX) and UK’s AstraZeneca (AZN: LN), have a presence there, he said. An Australian legal advisor agreed there could be more foreign interest in Australia in 2012, but that it could be more focused on licensing deals, rather than M&A, in the short term.
Phylogica (ASX: PYC), a USD 18m market cap peptide drug discovery company, has partnership agreements in place with Pfizer, AstraZeneca and Switzerland’s Roche (ROG: VX). Foreign interest is also coming from therapeutics companies like Pennyslvania, US-based Janssen Biotech, which also recently signed a partnership agreement with Phylogica, and Ironwood Pharmaceuticals (NASDAQ: IRWD) which signed a collaboration, research and licensing deal with Bionomics (ASX: BNO).
Globally, Roche was an early entrant in the space with its purchase of a stake in Genentech (NYSE: DNA), which it subsequently bought in 2009 for USD 46.8bn; and Pfizer entered the space in 2008 with its acquisition of Wyeth (NYSE: WYE) for USD 68bn, an Australian industry source said. Johnson & Johnson (NASDAQ: JNJ), which bought Crucell (NASDAQ: CRXL) in 2010 for USD 2.4bn, could be another potential partner or bidder for Australian biotechs, he added.
The Australian biotech landscape
Biologics are attracting interest because they have a longer patent life and are harder to copy than small molecule-based treatments, a second Australian industry source said. Companies developing products for the burgeoning aged population globally, an area in which Australia has expertise due to its aging population, are likely to be particularly appealing not only due to the sheer market size, but also because it is generally easier to pass safety criteria for treatments specifically for the aged population as opposed to the youth, he added.
Areas of interest include autoimmune, anti-viral (which often have a clear path to market as they are used in conjunction with existing drugs and there is already an established market), oncology, Alzheimers, and vaccines for diseases like malaria that have been difficult to combat to date, the sources agreed. Many biologics treatments for oncology, autoimmune and anti-viral diseases, and Alzheimers, are also aimed at an aging population, they added.
Australian biotechs that are advancing biologics treatments for aging population diseases and could emerge as attractive targets include CBio (ASX: CBZ), a USD 40m market cap developer of drugs for autoimmune and inflammatory diseases, the sources agreed. The company, which has just completed a Phase IIa trial, is looking for partners for further trials and commercialisation, CBio’s interim MD Helen Cameron told this news service.
Another is USD 11m Patrys (ASX: PAB), which is using natural human antibodies to develop cancer treatments in collaboration with Australia's USD 17bn market cap vaccine and plasma protein company CSL (ASX:CSL). Patrys was unavailable to comment at this time.
As reported, other potential investees include USD 22m market cap Viralytics (ASX: VLA), one of only four virotherapeutics companies in the world to have advanced to Phase II or III clinical trials, and BroadVector. Independently valued at between USD 40 and USD 50m, BroadVector is developing minimally-invasive biologics therapies for conditions related to an aging population and told this news service it was exploring a backdoor listing.
Among the largest and most advanced Australian biologics companies, in addition to CSL, are USD 2bn regenerative medicine firm Mesoblast (ASX: MSB) and USD 159m cancer company Prima Biomed (ASX: PRR). An early Australian biologics stand-out was Arana Therapeutics (ASX: AHH), which was bought for USD 259m in 2009 by Cephalon (NASDAQ: CEPH), which has since been acquired by Israel's Teva Pharmaceuticals (NASDAQ: TEVA).
by Louise Weihart and Surani Fernando in Sydney
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