Why do Australian medical inventions get commercialised overseas?

It’s not just money. Or scale. It’s also the science. Or lack of science, actually. Well to be totally accurate, lack of scientists. But there are reasons to be optimistic about the medium-term future of the Australian biotech industry.

When former cancer researcher Professor Andrew Wilks and chemist Dr Christopher Burns invented the drug now called Momelotinib in 2001 at Cytopia, a biotech company founded by Wilks, they didn’t know it would be only the second Australian drug discovery ever to be approved by the US Food and Drug Administration.

Used to help treat anaemia that can accompany the blood cancer myelofibrosis, Momelotinib is a new type of JAK inhibitor (the standard treatment for myelofibrosis, which worsens anaemia) that may be able to improve anaemia and reduce the frequency of blood transfusions.

“In 2009, we began clinical trials of the drug, along with another drug we discovered,” Burns tells Cosmos. “It cost millions just to get it through Phase 1 in cancer patients, and then the financial crisis hit and money disappeared from the sector. There just weren’t a lot of investors willing to support an Australian company.”

At the time, there were only five other companies working in the myelofibrosis space globally. Unfortunately, with no funding to progress to Phase 2 clinical trials, and, according to Burns, “not as good as beating the drum and hyping up what we were doing as our competitors” it was decided that Cytopia would be sold, along with their drug rights, to Canadian company YM Biosciences for US$10m in 2009.

There just weren’t a lot of investors willing to support an Australian company.

Christopher Burns

“They’d raised money a few years before but had had a drug failure (meaning it didn’t pass clinical trials). They had a lot of money and no drug, and they liked what we were doing, so they bought us out,” Burns explains.

He stayed on for another few years after the acquisition, heading a team of five in Australia and continuing his work on Momelotinib. In 2013, YM Biosciences was bought by US pharmaceutical company Gilead Sciences for US $487.6m.

“This is the sad part of the story for us, and for Australia, how much more the Canadian company made just a few years later,” Burns says. “We can always put it down to the global financial crisis, but there was more to it.

“The people who make the decisions were overwhelmed by our competitors and how they spoke about their open drugs, and wouldn’t listen to us even when we pointed out how our compound was better and would likely be successful.”

Hard to commercialise drugs at scale in Australian market

Globally pharmaceutical revenue is about US$1.48tn, of which US$603.40bn is generated in the US alone.

Australia’s revenue in the pharmaceuticals market is projected to reach about US$9.78bn in 2023, with cancer drugs making up its largest component (at US$1.81bn).

And while disruptions in global supplies of medical equipment during the pandemic and Ukrainian war illustrated the importance of Australia having some sovereign capability to domestically manufacture products and drugs, commercialisation remains a far away dream for most.

“There are a few issues in Australia that prevent widespread commercialisation,” Burns says. “We need to build our sector more, which will require both government support and investment from companies and individuals. This means we need people willing to support the investment of biotechs, which have a longer lead time than, for example, mining does ­­­but so many rewards”.

He believes this is partly because there aren’t enough people in Australia who can “understand science and critically evaluate the science side of the investment.”

We are missing that crossover between understanding science and the business of drug development

Christopher Burns

This applies to both investors and researchers, who Burns thinks have largely adopted a “publish or perish” mindset, which dictates that “doing commercial research with a commercial outcome is substandard, and that therefore the quality of the science is not as good”.

“We are missing that crossover between understanding science and the business of drug development and that’s hurting innovation at the basic science stage,” he says.

But there’s another view – that Australian companies don’t have to aim for the global level success, they can be extremely healthy and maximise profits with only a little more development activity.

The Director of the Monash Institute of Pharmaceutical Sciences (MIPS), Professor Chris Porter, says Australian biotechs should seek to develop their drugs as far as possible through the discovery and development pipeline if they want to maximise their profits and chance of success.

“You’ll get a much better licence deal if you develop the drug further before you sell it,” Porter says. “The more developed it is, the more value it holds, which gives drug developers more power.

“This leads to increases in the value of the asset (i.e. the drug candidate) that might be returned to Australia when a deal is done with a pharmaceuticals company.

“The idea is that these returned profits can be ploughed back into a start-up company that does the deal, allowing it to grow, generate more high tech jobs, and ultimately do more research and development, leading to more candidate drugs, more deals,” he adds.

You’ll get a much better licence deal if you develop the drug further before you sell it.

Chris Porter

The ultimate goal would be to enable companies to grow big enough to actually develop their own products all the way through clinical trials, and to market their own medicines. Currently, the only Australian company that does this at scale is CSL.

For that to happen, Porter acknowledges that both private and government spheres need buy-in. He points to MedChem Australia, a new national collaboration between Monash University, Walter and Eliza Hall Institute of Medical Research (WEHI) and the University of Sydney (funded by the MRFF and the Therapeutic Innovation Australia), which will aim to accelerate promising early-stage drug discovery projects towards clinical trials as an example.

“Through MedChem, early drug discovery programs will have the opportunity to work with national experts in medicinal chemistry,” Porter explains. “Historically, Australia has not been great at supporting biotechs, and this reflects both a lack of funding to support development,  and a lack of trained and experienced people to lead these activities.”

Unfortunately so much government support, which has increased over the years, also tends to focus on early-stage drug and device development rather than the crucial middle stages – Phase 2 and 3 clinical trials – and on the end of pipeline aspects such as manufacturing.

“It’s great that we have money for startups to help them take those first few steps in the product development process. But follow up incentives as they begin to scale and grow also need to happen, as that costs a lot more,” Burns says.

For instance, the Biomedical Translation Fund (BTF) provides early stage biomedical companies with venture capital ($250m Commonwealth capital, and $251m in private) through licensed private sector fund managers.

According to a spokesperson for the Department of Industry, Science and Resources, “the fund managers go through a rigorous assessment process … along with strict eligibility criteria, [part of which] is related to location and proximity to Australia to ensure long-term health benefits and national economic outcomes.”

For Orthocell CEO Paul Anderson, the situation is not quite so bleak. Orthocell, a regenerative medicine company, has recently launched its bone regeneration product into the US and has announced plans to also expand its nerve product there. 

Anderson’s strategy is a little different: while Orthocell will maintain a manufacturing base in Australia, he’s spent years forging partnerships and connections in the US to gain a foothold in the world’s biggest pharmaceutical market.

Australia is increasingly seen as doing two things well: innovation and manufacturing.

Paul Anderson

“Our plan is to commercialise overseas but manufacture in Australia,” he says. “From a global attractiveness perspective, Australia is increasingly seen as doing two things well: innovation and manufacturing,” he says.

With new markets emerging in India and China, Australia is well-placed within the Indo-Pacific to capitalise on this, Anderson says. “Both those countries have had issues in driving product development to its end phase, because of COVID19, geo-political issues or IP issues.”

Orthocell has two products already approved by Australia, European and American regulators. Anderson believes there’s no reason an Australian company cannot develop drugs and medical devices locally and export overseas.

“The US is the world’s biggest market – you just have to be there in some way, shape or form,” he adds.

Porter agrees that the picture in Australia is changing for the better. While the biotech space still needs ongoing and increasing investments to help it grow, he says judging Australia’s sovereign capability by the drugs we have on the market today would be inaccurate.

“The state of drug discovery innovation today will only be evident in marketed drugs 10-15 years down the track,” he says. “We must remember the drugs today reflect the innovation environment of 20 or so years ago.”

As for Burns and Wilks, despite their earlier setback, they both continue to remain highly active in the drug discovery and commercialisation space.

The drugs today reflect the innovation environment of 20 or so years ago.

Chris Porter

Burns is now the CEO and Managing Director of Amplia, a biotech developing drugs that amplify the effects of other, standard treatment drugs (such as those used to treat pancreatic cancer); and Wilks is the co-founder and CEO of SYNthesis Group, a fund that invests in early stage therapeutics, from discovery through preclinical proof of concept.

And while he has moved on from Momelotinib, Burns believes that we need to maintain the “level of optimism that has come out of Covid”.

“There is money out there, and, especially in the vaccines space, there is great stuff happening,” he says.

“Now we just need to continue to build the sector out more if we are to have sovereign capacity.”