Podcast

Australian life sciences companies need to be born global

Michael Cunningham
By:
insight featured image
We’ve never been more aware of where our pharmaceuticals and medical products come from, or how long therapeutics take to develop from research to product.

Michael Cunningham, National Head of Life Sciences is joined by Dr Dan Grant, Managing Director and CEO of MTPConnect, Australia's industry growth centre for the medical technology and pharmaceutical sector. They explore the opportunities outlined in the Government’s Medical Products Roadmap. Supporting the sector needs more than just funding. Competition and hurdles ahead for our burgeoning life sciences sector include the war for talent and access for funding. But what an opportunity ahead of us to not only innovate and grow this critical sector but to improve health outcomes for patients here and overseas. The legacy of COVID will be a stronger life sciences sector.

Available on Apple Podcasts, SoundCloud, Spotify or within your browser

Click to read transcript

Therese Raft

Welcome to Navigating the New Normal – Grant Thornton’s podcast exploring trends in business and the marketplace.

Today I am joined by Dr Dan Grant, Managing Director and CEO of MTPConnect, and Michael Cunningham, National Head of Life Sciences at Grant Thornton. Dr Dan Grant has spent more than 25 years in senior roles in the pharmaceutical, higher education and medical research sectors. Michael is an audit partner in our Melbourne office advising a variety of clients in the life science space. Today we’re talking about vaccines, the modern manufacturing initiative and the future for Australian life sciences in a post COVID-world. Welcome Dan and Michael!

Dr Dan Grant

Thank you

Michael Cunningham

Thank you

Therese Raft

Now there are two big themes in the sector at the moment. The medical products roadmap, which was released just a few weeks ago, and vaccines. We will touch on vaccines a little bit later. But first I wanted to ask you about the road map. The vision for the medical products sector is to leverage our comparative advantages. What are some of the things that we already have going for us here in Australia?

Dr Dan Grant

Yeah, look, I think it's really interesting, an interesting question. But I think probably first we need to make it really clear that when we talk about manufacturing, we're not just talking about the production of goods, not just talking about making the final product, but rather we're covering that whole spectrum of activities, from discovery through to the manufacturing of products through to sales and marketing.

And in Australia, we've got outstanding experience and capabilities in that sort of high value preproduction component of manufacturing. You only have to look at our medical research institutes and universities to see the strength of our research capabilities. Seven of our top universities ranked in the top 100 of the QS World University rankings. Um, 40 or 50 independent medical research institutes, all focused on, or largely focused on the development of drugs, therapeutics and devices. So we've got a really strong basic medical sector built upon, um, some fantastic infrastructure in our hospitals and universities and then supporting that, of course, is our MedTech, biotech, pharmaceutical sector in Australia, with about 1300 companies identified as playing in that sector, 135 of those are on the ASX. Um, those 135 companies have a total market cap in excess of $200 billion. So we have a substantial industry sector already present in Australia. And of course, people would be very familiar with some of the leading companies in that sector. The CSL’s, Cochlear’s and ResMed’s of the world.

CSL – a company with a market cap of somewhere in the order of $121 billion – very much front and centre in the vaccine manufacturing, um discussion or activities happening in Australia. Cochlear, the Cochlear Implant Company spun out of the University of Melbourne or based on technologies coming out of the University of Melbourne – $13 billion market cap. Of course, ResMed with technologies coming out of the University of Sydney, um, now with market cap of about $27 billion. But you but you don't have to be a listed company, to…or one of the big three…to actually be recognised as contributing to Australia's MedTech successes. Medical Developments International and the little green whistle that everybody sees on Bondi Rescue; a fantastic example of a technology being developed in partnership with CSIRO, now being used around the world to treat acute pain. And then there's a whole host of other smaller companies that perhaps aren't as familiar. But companies like Inflazome. A company that was built around technologies coming out of the University of Queensland, recently licensed to Roche or sold to Roche for 380 million Euros. So a host of others, Viralytics, Vaxxas, Elastagen, Certa Therapeutics, Spinifex. All of these companies have had substantial commercial outcomes that that have supported our sector. And then again, you don't have… you don't have to be a company either. You only have to think of Professor Ian Fraser and Gardasil and the success story that's come out of the University of Queensland. Um, you know, soon to see Australia being the first country free of cervical cancer in the world, all based around technologies Ian developed at the University of Queensland.

And there's a whole host of other success stories that are happening in our sector that really bode well for Australia as we get behind the modern manufacturing initiative.

Michael Cunningham

Yeah, thanks, Dan. There's not a lot I can add to that, Therese. But I will say it is… it is an economically significant sector. It contributes about $5.5 billion to the Australian economy. Dan covered some of the stats there. But it is a sector in Australia that punches above its weight globally, quite often ranked high up there in the global rankings for biotech sector and medical sector. And there's a significant potential to grow the medical products sector further by leveraging some of the things that Dan spoke about. We have a highly skilled workforce, proximity to emerging markets. Some of the stats are saying, and it's articulated in modern manufacturing roadmap that 65% of the aging population will be in Asia and Southeast Asia, and we're very close to those markets. We have, and Dan covered some examples there, we have a reputation for high quality products, world leading science, research and innovation capabilities.

Therese Raft

Well, I think you you've both given so many examples, many of which I've never heard of before. And I think a lot of people listening wouldn't be aware of just the scale of the life sciences sector in Australia. So we clearly have some great bones to work with, and you've touched on a couple of things, but I would like to dive into this a little bit deeper. How do we then take this to the next level? Has the roadmap outlined the right priorities?

Dan Grant

Perhaps where I can start to say that yes, we have…we have good bones to work on. But, and there's always a but, and we have not been as good at translating research into products as perhaps we would like to. If you look at the Global Innovation index in 2020-21, Australia ranks about 23rd in the overall Global Innovation Index. We were 20th and 2018, so we're slipping a bit. Um but if you dig down into that a little bit further, since about 2014, Australia's ranked consistently somewhere between 10 and 12 in the world in terms of innovation inputs. So we're putting a lot of efforts into innovation. But we're seeing that our innovation outputs are fallen and we were ranked 22nd and 2014. We're down to 31st in 2020 and whether this measure is really a good indication of innovation outputs in our specific sector, it may or may not be, but clearly we don't want to see our innovation outputs going in the wrong direction. So I think we've got a bit of work to do in terms of helping to see the research that we're conducting, the innovations that we're developing really being translated into outcomes. And when I talk about outcomes, I think probably make it clear up front that really as Michael has said, there's economic outcomes, there's job outcomes, but first and foremost there are patient outcomes, and it's really important to remember that in our sector, if we're not seeing patient outcomes, improve patient outcomes, then there will be no economic returns, will be no job growth. So patients first, always. We can get the translation right I think will be well positioned to continue moving forward in the future.

Michael Cunningham

And just adding to what Dan just said, I think the modern manufacturing and particularly the medical products roadmap does cover off a number of priorities that are quite positive for Australia. It's too often that medical product ideas are shipped offshore to businesses with greater capacity commercialise and manufacture. So industry supported by government – need to work together to keep more of the manufacturing and jobs in Australia and to capture more economic value locally and then as Dad said, it needs to be patient first, which will help drive that economic value for the country and future jobs.

Therese Raft

So it's interesting that you both kind of touched on patients, and I can't help but notice that Australia is a very big country with not a big population. So is that something that is potentially going to hinder the sector in some ways?

Michael Cunningham

Yes, Therese. We have many small companies, as Dan mentioned, there's so many small companies in the sector that have great ideas. So the translation pathway in Australia can be difficult and expensive. Medical products are highly regulated. They have long development timelines, require access to quite specialised skills, facilities for design, testing and manufacturing. So what we see in Australia, the good ideas quite often get taken offshore and there needs to be that continued support by government, but definitely led by industry, to translate those ideas to commercial outcomes and manufacture products here in Australia.

Dan Grant

I might just add that Australian companies need to be born global. They need to be focusing on global markets. We are a small country in population, and so the real opportunity is for these companies is to focus globally – to make sure that they get their products on the Australian market as well, but focus globally. And I think the other thing to consider is there are different opportunities depending on the part of the sector that you're referring to. So pharmaceutical biotechnology type programs – they typically get licensed by multinational pharma companies fairly early on in the development peice, somewhere preclinical or early clinical development. For the audience, who is not familiar with the pathways of developing pharmaceuticals, work is done in a preclinical environment before these products have been tested in humans. And in testing them in humans, there's three phases. Phase one, two and three. Typically, these products get acquired or licensed by a multinational sometime around phase one or phase two. But the MedTech sector is quite different and large MedTech companies like to acquire technologies after they've been sold on the host’s market. And so in Australia we have a much easier or perhaps um, maybe easy isn't the right word, but we have a good opportunity to see our MedTech companies actually getting the product on the market in Australia first and then taking them globally.

Therese Raft

Could you give us an example of a MedTech product?

Dr Dan Grant

An example would be Cochlear’s Cochlear implant, the device implanted to restore hearing. ResMed’s CPAP machine. The little green whistle I mentioned earlier. But also hip replacements – the artificial joints that people have. A whole host of devices. And of course, there are ranges of devices that people develop in different classes, everything from tongue depressors through to implantable medical devices.

Therese Raft

We have touched on some stumbling blocks and as you said, there are all the best laid plans have them. What are some of the other areas that could potentially trip the sector up as they kind of go through this two, five, ten year plan that has been put forward to them.

Michael Cunningham

I think, Therese, a number of the stumbling blocks have been, or barriers to scale, have been articulated in the modern manufacturing roadmap. And that's been put together by government and industry leaders. And so it's quite often there's…although we have strong skills and capability in Australia…they have identified a number of gaps. Borders are closed at the moment. That's a problem for now. But in the future, it's trying to attract and retain the talent and also bring the talent up through our schools and universities to help companies progress in these areas. Regulation is an area that's been touched on – making regulation easier to navigate. Obviously, it's super important that we have strong regulation to make sure our products are acceptable on the global stage. That's certainly an area that can trip companies up. One of the other areas is energy costs. So making energy affordable for manufacturing companies across the board, not just in the medical products space. And then competition for capital. So the sector can be capital intensive, particularly manufacturing, require multiple rounds of fundraising along the way. The sector is a global sector and money can go to different countries, so trying to attract that capital and make the economic environment conditions the right place for investors to invest.

Dr Dan Grant

Look, I reiterate much of that. I think the, you know, one of the key things that is a stumbling block relates to skills and there are some key skills that are missing. Skills related to, um, ISO accreditation, clinical trials capabilities, a whole host of areas. But one of the key things that's missing – it's not so much capability or capacity – but rather experience.

And so when you when you look to see what jobs are available in the sector, you often see that there are jobs available. But they're looking for experienced people, and we are challenged to find enough experienced people with the skills to commercialise technologies, with the skills to do clinical trials. Um, a whole host of experience gaps exist, and I think we have to work very hard in Australia to make sure that we leverage existing programs to bring that experience to Australia and the Global Talent Visas program is an example of one of those programs that is very useful. But we also have to start to try and make sure that we're retaining industry here and retaining manufacturing. And we've seen a number of pharmaceutical plants in Australia close recently, and I think we need to do more to make sure we don't lose those capabilities because with those go the skills that we need to really push the MMI forward.

Therese Raft

So it sounds really multifaceted. And if we talk about the companies themselves, you've mentioned some big Australian brands already, so like CSL and Cochlear. But if you're a smaller company in this space, are you going to reap the same or similar benefits as the big players from this renewed focus from the government?

Michael Cunningham

I don't think so. So as I think that smaller companies can absolutely benefit from the renewed focus as we mentioned that most of the sectors made up by smaller companies and organisations and it's really important that those smaller companies have a clear focus and plans in place to take their product from development through to commercialisation. It's important to identify the skills, internal and external. Most of time they'll be external skills required at the various stages of the company's life cycle, and the funding required for each phase. A company that is clear in its focus and can articulate what they are doing to support the medical product growth strategy in Australia, they'll be able to access the funds that they need to help them achieve what they're out to do.

Dr Dan Grant

I would agree with that and I think that again we need to come back to what manufacturing really is all about, and it's not just production. And so if you look at that sort of the U shaped curve of value versus the lifeline or life cycle of production – that bit that happens before production, the preproduction component, adds a huge amount of value, and many of our smaller companies are sitting in that preproduction area. And again, you only have to look at some of the successes we've had. Groups like Elastagen who were sold to Allergan for $120 million. Fibrotech a number of years ago – $80 million upfront, to Shire. Or ImpediMed, a device company coming out of Queensland University of Technology. You know, there's just a whole host of these companies that have done very well in this space, and I think that we've got a great potential to really leverage the Modern Manufacturing Strategy and see those…see a new cohort of those types of companies get onto the market and actually do very well.

Therese Raft

So I would assume that competition must be quite fierce. An example I am aware of is I think an estimated 150 clinical trials for potential COVID-19 vaccines – is that the sort of competition that most life sciences products, or certainly vaccines in the pharmaceutical space is facing?

Dr Dan Grant

Look, I think that any industry that you're in is bound to be competitive now. We're in a global marketplace. I think COVID-19 has shown us all that it doesn't really matter where you're sitting at the moment. People are accessing markets around the world, whether it's through Amazon, to source products or to sell products. And so I think there is a huge amount of competition. Science is moving very fast, and I think Australians, Australia in general, has to really make sure that we hit the ground running with this new Modern Manufacturing Strategy – that we don't delay because competition is fierce. Everybody is looking for that Tech bump post COVID and medical products will be on everybody's mind moving forward.

Michael Cunningham

Yeah, I agree with Dan there, Therese. So competition is not just trying to get a product to market, but it's also the things around that. There's competition for the skills. Competition for funding. So we're seeing a lot of companies lining up to IPO on the ASX at the moment in the medical products and biotech space, and so access to that capital is very competitive.

Therese Raft

And I did promise right at the beginning of the podcast that we talk about vaccines and on vaccines... I know the development and the rollout of the COVID-19 vaccines was expedited to an extraordinary degree. Post COVID. We're all vaccinated or we continue to be vaccinated like we do for the flu every year. The question for you both. What is the legacy COVID leaves behind for the life sciences sector?

Dr Dan Grant

So that's an interesting question. And I guess, from my perspective, the thing that COVID has done for the life scientists sector in Australia, perhaps around the world, is that it's made the general public very much aware of the processes and challenges of developing drugs, vaccines, medical devices. And I think never before have Australians in general understood the concept of a clinical trial, understood what it takes to get, or at least has a general idea of what it takes to get a new therapeutic or vaccine approved by the regulator. All of these things are a result of the focus that has been placed on vaccines and during COVID. So I think there's a legacy there of increased awareness, um, which I think is really good. I think that we've also seen companies pivot and transition to doing business in different ways, and I hope that we don't see that changing. We've seen the uptake of telemedicine during COVID – big switch from this time last year until till now, with the number of patients being able to access their GP’s by telephone. Fantastic opportunity to start to see that we're providing equitable access to healthcare across our regional, remote and rural communities. We’re seeing people work differently, working from home, leveraging technologies. All of these things, I think both well for our life sciences sector.

Michael Cunningham

Yes, Therese, I think we saw certainly a number of clients, and Dan touched on this, we saw a number of clients that were able to quickly adapt to the situation and produce ventilators, PPE equipment to assist the national supply shortage. Other clients are able to modify their diagnostic technologies to test for the coronavirus. So companies show that they were resilient and nimble and could adapt quickly to a situation. So that's something that we don't want to lose. But I think it's important for companies to be prepared for those sorts of situations. I know no one was prepared for the coronavirus, but be prepared for a disaster and planning’s super important for companies, all companies, to try and navigate and allow them to be nimble when these situations arise.

Dr Dan Grant

One of the things that was really encouraging that we saw over May, well – March through May, June, July – was the level of collaboration that occurred between industry, between governments, both State and Federal, and between researchers. And with everybody focused very much on trying to ensure that Australia weather the COVID challenge very well. And I think you only have to look at, for example, the number of taskforces that were set up by the by the government in partnership with the MedTech sector to understand how these companies all got together with ACCC exemptions to be able to share their order books, to be able to disclose what was and wasn't being potentially shipped into the country just to make sure that we have access to ventilators, we had access to ICU equipment. We had access to masks and gloves. PPE. The other thing that was really interesting was the desire by Australia's manufacturing sector in general to willingly pivot to help in that cause. And I think that that was good and bad. It was good in that fantastic number of companies stepped up and wanted to help in the response. It was bad in that it revealed that perhaps many of these companies weren't quite prepared in terms of quality management systems and other requirements to be able to contribute as much as they’d like. And so I think that's an opportunity for us is to make sure that as we move forward, those companies that have put their hand up to help, we need to help them upscale, if you like, to be ready for the next crisis so that they can contribute, but also making them ready to contribute to manufacturing in general, you know, as it relates to the medical roadmap.

Therese Raft

So there's some definite silver linings here. And how are you feeling with the road map in hand? Are you feeling optimistic about the future for the sector and where it's all going to be going next?

Dr Dan Grant

So I might start Michael, just because I'm often very optimistic. I am optimistic about where we're going. I think that again, you know, we've got a community that now understands what this sector is all about and there's a great interest in the sector. We've got researchers who have really worked hard in challenging times to contribute. We've got industry that's worked well with government and with researchers, and I think there's a great opportunity. And now, with the focus on manufacturing reflecting again that whole spectrum of activities from preproduction, production and post production that allows us to really focus on one of those sectors – medical products – that has great potential to contribute to Australia's economy by delivering patient outcomes. And so Michael mentioned $5 billion plus GVA to the economy each year. Medical products, medical technologies, drugs represent the eighth largest export from Australia, and there's no reason why we can't grow that. Clinical trials represent a substantial service export, with more than a billion dollars’ worth of clinical trials conducted in Australia each year from multinational pharmaceutical companies and device companies. All of those things we can leverage and we can grow, again focused on having patient outcomes, and with patient outcomes will come economic growth, jobs growth.

Michael Cunningham

I agree completely with Dan. I think Australia has already seen as an advanced market, and an advanced medical products industry, and it's only onwards and upwards from here – certainly with the renewed support from government and the willingness to collaborate and work with industry to continue to grow the sector for Australia.

Therese Raft

Michael, when you're talking to your clients, how are they feeling about the opportunities ahead of them?

Michael Cunningham

I think they’re certainly optimistic. As we said, they can see that there is good pathways. There's good support for the sectors, particularly with a number of clients looking to raise money to start their trials, start the clinical and preclinical trials that they are starting to be optimistic about the sector. And certainly with all the focus that the sector’s had here and globally, it's a great opportunity for them.

Therese Raft

Well, Michael and Dan, thank you so much for your time.

Michael Cunningham

Thank you very much.

Dr Dan Grant

A please, thank you.

Therese Raft

If you liked this podcast and would like to hear more, you can find and subscribe to Grant Thornton Australia on Apple Podcasts or Spotify.