Biotechnology is a field of endless possibilities.
It holds the potential to cure cancer, solve world hunger, and potentially reverse climate change. Products resulting from biotechnology are already allowing humans to live longer, healthier lives; to be more environmentally sustainable; and to produce more with fewer resources.
As a scientific field of endeavour, biotechnology might be equivalent today to what personal computing was in the 1980s; sitting on the precipice of exponential growth.
According to Grandview Research’s Market Research Report, the APAC market is anticipated to grow at pace primarily due to changing healthcare infrastructure in the region which supports and drives demand for biotech products.
So what does this mean for Australia? Are we too far removed from the big players like the US and Europe? How can we leverage the potential commercial reality resulting from an impending biotechnology explosion? Do we understand the potential economic upside a biotech boom could have? The below suggests at the macro level, we do:
1. De-Risking the Australian Economy
It’s fair to say that the end of the resources boom and the decline of traditional manufacturing has left Australia in a precarious economic position. Although our banking and professional services sectors are still tracking strongly, economic growth in other industries has been weak or negative.
Biotech’s domestic value-add (the measure of the industry’s contribution to the economy) is expected to grow by 2.6% annualised over the 10 years through 2022-23, slightly above the expected annualised GDP growth of 2.5% over the same period, according to IBIS World 2017. This forecast suggests the industry is slightly outperforming the wider economy.
2. R&D tax incentives
Australia is also a highly attractive environment for R&D operations, with a cash refundable tax credit of up to 43.5% of eligible R&D expenses available from the Department of Industry, Innovation and Science.
The Government has a strong history of investment to support the infrastructure needed for a world-class healthcare industry. It has established a new Future Industries Fund targeting medical technologies and pharmaceuticals as one of several strategic priority sectors.
3. Growing household wealth
Demand is growing for products commercialised from biotechnology research. Rising incomes and wealth, and an ageing population will promote demand for biopharmaceuticals to improve quality of life, combat ailments associated with old age and extend lifespan.
Key areas include regenerative medicines and those tackling lifestyle issues, such as obesity and diabetes.
For a country like Australia, with an educated, English-speaking population; world-class research and scientific institutions; an established political and regulatory environment; and a culture of entrepreneurial flair; biotechnology represents a unique opportunity for national economic transformation.
With the attraction to biotechnology growing, investor appetite appears to be growing as the sector outperforms. But most people still don’t know what to look out for and what pitfalls to avoid.
So what makes a good biotechnology investment? In the next article, I’ll discuss the attributes to look out for and those to avoid.
This article was contributed by David Greene, author of The Biotech Investor Club, a free online resource dedicated to biotechnology.
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