Biota’s worrying reflection

Should the Australian business community be happy or sad to see one of its biotech pioneers ink a merger deal with a US company and move its business from Melbourne to Maryland?

It’s a tough question to answer.

There will be many happy that the company has done a deal that should lead them to greener pastures. While Biota’s ability to develop flu-fighting drugs is known throughout the world, access to capital has always been a problem. A listing on New York’s Nasdaq exchange should help solve that problem.

The flipside of this is that Biota will be the one that got away for Australia’s biotech sector. A company with a 30-year history will soon pull up stumps and leave, convinced it has lost the battle to get the support of Australian investors.

Biota chairman Jim Fox was philosophical yesterday.

“It’s not about Australian science leaving Australia. It’s about how to better commercialise Australian science and provide returns to our Australian shareholders.”

Those Australian shareholders have seen the value of their shares fall from a peak of $7 in 1999, when Biota’s flu drug Relenza was the talk of the world, to under $1, where it has languished for some time.

Biota’s shareholders will now become shareholders of the US company, which is currently called Nabi Pharmaceuticals but will shortly be renamed Biota.

I’m not sure all if Biota’s shareholders will relish that prospect, but I’m also not sure that as a business community we should be too pleased about what this move says about Australia’s biotech sector.

While it is often said that Australian biotechs are great at science but not great at commercialising it – indeed, some say Biota falls into this category as it has failed to get more than relatively small royalties from its drugs – Fox is raising questions about the ability of biotechs to commercialise in this country.

Yes, Australia’s capital pools are smaller than those in the US. But does the Biota move also say that investors in Australia are, in the main, wary of the biotech sector?

We can argue all we like about whether Biota is a great or even good biotech company, but its longevity – 30 years is a very, very long time in the biotech game – does at least show it is a stayer.

If a company like this can’t get the support it feels it needs from Australian investors, what does that say about our biotech sector? What hope has the next great biotech got?

I don’t have the expertise to answer these questions. But I do hope they are being asked today – in labs, in universities, in government departments and in venture capital and private equity firms.