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COMMENTARY
A Site Selection Web Exclusive, September 2012
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The City of Convergence

Collaboration in Melbourne represents the future of innovation technology.

by MICHELLE GALLAHER,
CEO, BioMelbourne Network,
www.biomelbourne.org
COMMENTARY
Looking across the Yarra River at Melbourne
I
Michelle Gallaher, CEO, BioMelbourne Network
Michelle Gallaher, CEO, BioMelbourne Network

t's no secret that Americans love to visit Australia. As a tourist destination, Australia has it all: pristine beaches, snow-covered ski resorts, deserts and rainforest. While many Americans think of Sydney and its world-famous harbor, Melbourne is well on its way to overtaking Sydney as the largest city in Australia. As a capital city in the southern state of Victoria, Melbourne is an intellectual and cultural giant with a vibrant arts scene, as well as the biotech and high-tech epicenter of Australia. Melbourne is also the world's most liveable city.

Australia's Biotech Center

Melbourne is home to the largest cluster of life science companies in Australia, with 263 firms calling Victoria home. Over one-third of all companies listed on the Australian Securities Exchange's Life Sciences and Biotech Index are in Melbourne, and more than 40 percent of the annual National Health and Medical Research Council funding budget, the equivalent of the National Institutes for Health, comes to Melbourne research organizations. There are 231 products in development in Victoria, with 88 of these at the clinical stages of development.Each one of these statistics reflects growth from 2011, demonstrating the emerging sustainability of the Victorian life sciences sector.

Scientific American's 2012 Worldview Scorecard slotted Australia as the 10th most innovative country in biotech. BioSpectrum Asia listed the 50 fastest growing life science companies in the Asia Pacific region with the top 10 companies hailing from Australia — six of the top 10 were based in Victoria.

Victoria has invested and continues to invest heavily in securing its place as the center of Australia's innovation and manufacturing economy. While most of Australia remains obsessed with mining, Victoria has nurtured its science, information technology, engineering and advanced manufacturing sectors. We are now looking at ways to converge these highly skilled knowledge sectors and capitalize on the state's manufacturing expertise. However, a major challenge is that Victoria's manufacturing industry is wrestling with a high Australian dollar.

The Right Talent

Did you know Melbourne is considered a top three "Global University City" along with London and Boston? Many foreign companies choose Melbourne for its highly educated work force. Victoria has nine world-class research universities, and over 25 percent of the city's residents have a bachelor's degree or higher.

The new generation of PhD graduates from Victorian universities have access to a unique environment that offers opportunities far broader than most other cities around the world. The geographic concentration of innovation technology fosters collaboration and gives rise to multiple job opportunities in the emerging corridor between the traditional sectors of biotechnology and information technology.

Appetite for Funding

The fallout from the global financial crisis was certainly felt by the Australian biotech sector as many companies operated with extreme caution: conserving cash, delaying some major clinical developments and focusing exclusively on developing lead candidates.

Despite this outlook, a number of very positive outcomes have occurred in the past few years, including multimillion-dollar deals, regulatory approvals and acquisitions of Victorian biotech companies.

But there is a fundamental challenge in the biotech sector that continues to dampen bullish forecasting and optimism. The common denominator is access to adequate capital. Funding remains the greatest hurdle for the sector and the current Australian biotech market still demonstrates signs of significant financial stress, particularly for those at the earlier end of the development pipeline.

Companies receiving venture capital funding for the first time sharply decreased in 2012. The U.S. investment story was reflected in Australia, though on a typically smaller scale. Many industry observers suggested there is a close correlation between the Australian biotech index and that of the U.S., with a lag time of six to nine months. However, many expect positive results from Victoria's biotech sector, with a number of maturing biotech and clinical development programs to reach end points in the coming year.

Consolidation and Convergence

Two concomitant factors are shaping the future of the Victorian life sciences industry: consolidation and convergence. Several biotech companies in Victoria are consolidating while the innovation technology environment works to converge information technology, advanced engineering, clean tech and environmental sciences by utilizing platform technologies that are largely biotech aligned.

It helps that Melbourne has one of the largest IT clusters in the southern hemisphere, and is home to the National Operations and Test Facility for the Australian National Broadband Network (NBN), which is based at the Digital Harbour development in Melbourne's Docklands. This facility is the centerpiece of the National Broadband Network and the key interface with retail service providers, who will be using the network to provide high-speed services to business and residential customers across Australia. Research institutes such as National ICT Australia (NICTA) are developing applications that leverage the National Broadband Network to deliver solutions for treating various illnesses and medical needs.

IT strength in Melbourne converges beautifully with life sciences:

  • Melbourne is where IBM chose to open its first ever Global R&D "Collaboratory."
  • The Victorian Life Sciences Computational Initiative is set to be one of the world's five largest science supercomputer facilities, bringing Melbourne to the forefront of systems biology capabilities.
  • National ICT Australia's Victoria Research Laboratory has established an extraordinary bioelectrics laboratory in Melbourne that is playing a lead role in the development of a bionic eye.

In addition to the existing infrastructure, the state and federal governments are dedicated to incentivizing research-based industries. In June 2011, Australia announced its new R&D tax credit. The tax credit helped KPMG rank Melbourne as the most competitive city in the world for R&D. The credit is significant, amounting to an 88-percent lower tax burden for companies doing R&D in Melbourne when compared to the United States. This is a game changer for the innovation industries in Melbourne.

The next five years may be the most exciting times in Australia's technology future as the biotech, IT and engineering sectors collide, supported by first-class infrastructure and government policy. The innovation technology revolution is alive in Melbourne, the great science city of the South. The place where technology comes alive — and you might even get a suntan.


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