Over the past decade, and particularly in recent years, Australia has experienced a rapid rate of life science company formation. Australia now has more biotechnology companies relative to GDP that any country except Canada.
Typically, start-ups have been funded by a mixture of government support and investment from business angels together with a few venture capital firms interested in the sector. Much subsequent early-stage funding has come from less sophisticated investors subscribing to an initial public offering.
Following the rapid growth of early stage life science companies in Australia, many Australian companies are encountering a "funding and expertise gap" as they develop. This "gap" can be summarised in the following manner:
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A large amount of funding and support exists for early stage companies, creating a large number of high-quality early stage companies;
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These companies then confront a lack of mid-stage funding, itself a function of lack of scale in the Australian Market, a lack of supplication in the Australian market, the distance from international sources of capital, and low levels of government incentives for mid-stage funding.
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This lack of mid-stage funding, together with the Australian listed capital market's historical willingness to fund "exploration" business in the resources sector, has resulted in many Australian biotech's seeking public capital and listing on the Australian Securities Exchange.
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Whilst listing on the ASX provides companies with some important capital, the listed markets become impatient with the time taken to develop the biotech business, and typically companies that have listed early find it difficult to raise further capital on favourable terms.
There is an opportunity to get a significant increase in commercial success by immediately introducing global networks and capital to address the funding and skills gap in both the private and listed markets for mid stage life science companies.
