Chinese interest in the Australian biotech sector is relatively new, with the first major cross-border deals (Biosteme’s AU$1.6B acquisition of Swisse Wellness and Luye’s AU$938M acquisition of Health Care) being inked in 2015. Australia and China have complementary needs in the biotech space. Australia has no shortage of innovative biotech companies which are creating groundbreaking solutions and attracting Chinese attention. However, the pathway to commercialisation in this market can be challenging due to the relatively small size of the domestic market and risk-aversion in the local investment community.
In China, central government encouragement has motivated investors to look offshore, and Australia is already benefitting from this move and punching far above it’s weight – despite having a biotech sector roughly 5% the size of the United States’, Australia attracts about the same amount of investment. So what does Chinese venture capital want from Australian biotech? How can Australia secure a larger piece of the Chinese VC pie?
- World-class academic institutions: Australia’s biotech hotspots are clustered around our leading universities and hospitals , including Melbourne’s Parkville precinct, home to the University of Melbourne (and the Bio21 Institute), the Royal Melbourne Hospital, the Walter and Eliza Hall Institute of Medical Research and CSL (ASX: CSL); or Darlinghurst in Sydney, where the St Vincent’s Centre for Applied Medical Research has neighbours in the Garvan Institute for Medical Research and the Victor Chang Cardiac Research Institute.
- The right advisers: according to data from Bloomberg, Chinese firms announced or completed USD 8 billion in cross-border deals in 2016. The growth of the Chinese market and Australian expertise provide a range of opportunities – but a lot of that success is predicated on having experienced advisers by the side of each party to help maximise commercial opportunity and minimise political risk. Problems still exist with perceptions of weak intellectual property enforcement, for example. On the investor side, how do they do their scientific due diligence? Advisers with an appreciation and understanding of Chinese language and culture will also serve start-ups well.
- A mature start-up ecosystem: incubators and idea labs for Chinese investors to work directly with biotech companies are gaining traction in the US. If a company has experience working with China, seed investment is possible; however companies may prefer to wait for later funding rounds.
- Strategic thinking: Chinese funds want to broaden their horizons, both in the sectors they invest in and in cross-border prospects, and tap new technologies that, when matched against China’s healthcare challenges, make an exciting investment opportunity. Australian biotech companies need expanded markets and large-scale research options. Partnering with Chinese venture capital is a significant inroad for both parties.
Director CT Johnson leads Statecraft’s expertise in cross-border deals. A Mandarin speaker, CT is able to match-make Australian operators with Chinese investors. For a preliminary discussion of your circumstances, call CT on +61 2 8080 0060 or email ct.johnson@statecraft.com.au.
