Why biotech won't happen overnight
AUTHOR: Deborah Tarrant DATE: 08.12.05 ISSUE 3, 2005

The biotechnology sector, with its voracious capital requirements, extensive timeframes for scientific development and growing ethical sensitivities, offers unique and compelling challenges.
Opportunities for managers, scientists, regulators and venture capitalists are emerging as the biotech revolution is poised to rival the recent information technology explosion in its impact.


One of the major concerns for the biotech sector globally is developing competent individuals who have the capacity to combine science and business.
Illustration: Gregory Baldwin

The need to understand not only where potential opportunities may lie in fields ranging from human health to agriculture, food, and material science but the driving forces and issues of the biotechnology sector is giving impetus to a course that combines the management expertise of AGSM with the scientific knowledge of UNSW, and offers an important international perspective.

The 10-week Managing Biotechnology course designed by AGSM’s Professor Michael Vitale and UNSW’s Emeritus Professor Peter Rogers, who have been joined this year by Professor Nicholas Mottis of the French business school, ESSEC, focuses on the processes and skills for managing both the development of biotechnology-based products and the organisations responsible for bringing those products to market.

One of the major concerns for the biotech sector globally, according to Professor Mottis, is developing competent individuals who have the capacity to combine science and business. “In Europe, there are still too few project managers who really understand how to make the links between scientific innovation and the market. There are many more such managers in the United States, where the biotech sector is more mature.”

Much attention has been focused on star scientific research and breakthroughs in biotech, in particular the human genome project and its implications for genetic disease, stem-cell research, genetically modified crops, new pharmaceuticals and biomedical devices where some Australian companies have already made great inroads. However, leveraging scientific discoveries demands specific management skills to go through the phases of capital raising and dealing with the business community and, eventually, bringing products to market. Increasingly, science graduates are considering biotech management or consulting as a career option, observes Professor Rogers.

There are clear similarities between the Australian and the European biotech sectors – and the pressing question still surrounds the survival and development of many small companies in a high-risk environment, Professor Mottis observes.

"Companies are being formed when there is just a research project, before there's a product or even a product concept."
Professor Michael Vitale

“It’s a very innovative domain with social and political issues that have to be addressed. In the development of new drugs and medical devices, there are always very sensitive questions about the end product.”

While developing awareness of the skills required to manage biotech companies is one of the clear aims of the course, it is also highly relevant for the financial and investment community, and for regulators.

Creating the alliance between business, government and science is key, according to Professor Vitale, whose recent research has shown many Australian biotech companies were forming too early, but commercialising too late. “Companies are being formed when there is just a research project, before there’s a product or even a product concept,” he says. Raising money for an organization at this stage is risky. “Either no one will invest or they will do it under such stringent terms and conditions that it becomes difficult for the company to develop.”

These ventures are often seen as high risk, and Australians can act as if they are very risk averse, Professor Vitale notes. (He points out the irony that more than three times the amount of venture capital invested in Australian biotech last year was wagered on the last Melbourne Cup.) It has been widely reported that Australia’s investment in scientific research falls well below the OECD average.
One objective of the course is to bridge the gap between scientific and business communities.

Professor Vitale suggests the currently limited investment in biotech is too thinly spread. The solution may lie in focusing Australia’s biotech endeavours in a particular area as New Zealand has done with agricultural biotech. The Managing Biotechnology course shows the breadth of the sector covering the domains of white biotechnology (industrial), green (agricultural) and red (health and medical).

One of the critical areas for the viability of this sector is promoting a broader understanding of its specific features, in particular the extensive timeframes involved in developing and testing products, which historically have deterred venture capitalists from investing in biotech, say the course organisers.

The urgent need for capital remains crucial and the immediacy of that need presents a sharp contrast to the long-term product development periods. “When a new drug is developed, it still takes somewhere between 10-15 years to test it and to bring it to market, and it may cost $700-800 million across that timeframe,” explains Professor Rogers.

One objective of the course is to bridge the gap between scientific and business communities by exploring the background reasons for biotech companies requiring “patient capital”. The protracted timing means companies must find ways to add value along the track, to enable venture capital companies to get their money back on the way.

In Australia, the comparatively small size of the biotech sector prompts frequent discussions about alliances and mergers as companies grapple for the funds to move to the next development phase, but very few such combinations have in fact taken place.

A wide range of ethical issues also are raised by biotechnology, among them is the debate over large pharmaceutical companies holding the patents on high cost drugs which are most urgently required in Third World countries to treat malaria, HIV and influenza.

Competing pressures and ambiguities emerge between the development of potentially life-saving drugs juxtaposed with the importance for treatments to be closely monitored for longer-term problems.

The course offers MBA students the opportunity to explore broad scenarios of where new opportunities lie and provides background in science as well. Insights are delivered through case studies and guest speakers from industry. “Our aim is deliver sufficient scientific insight, so the students have some language, but they don’t need to be molecular biologists to understand what’s going on”, explains Professor Rogers, whose fields of research encompass the environment and agriculture. His most recent research has focused on biotechnology-based strategies for conversion of renewable agricultural and forestry resources to fuel ethanol and fermentation chemicals.

While the course has been designed for MBA students with a view to broadening their awareness of global career possibilities, its scope covers wider interests. “It asks students to consider the issues from all perspectives: How would you feel if you were a producer, a consumer, a citizen, a regulator – and what would you do?” asks Professor Vitale.

Essentially, the most compelling aspect of biotechnology is that it’s about modifying, enhancing and preserving life. What makes it so engaging is also what makes it highly challenging. The three lecturers concur that biotech is a sector that has featured great highs in scientific discovery and business community interest immediately following significant breakthroughs, and great lows. Reasons for these are also examined.

Biotechnology is a field that generates passion in people, Professor Vitale reports. “There’s a dedication to promotion of the sector, even when there is no conceivable personal gain. People are passionate about it because it’s not just about cold science. It’s about real effects on real people,” he says. “It can change people’s lives.”