HIGH FLYERS THINK TANK
Biotechnology and the future of Australian agriculture
The Shine Dome, Canberra, 26 July 2005
Biotechnology: Research and development
by Dr Ian Edwards, Chair, AgBio Advisory Group, AusBiotech Ltd
I have been asked by the Academy to take a helicopter view, if you like, of research and development. And I have been asked by Biotechnology Australia to also make no apologies for stressing some of the commercial aspects of development, because we are talking about that very important 'D' in R&D.
I chair the Ag-Bio Advisory Committee, and we in AusBiotech represent about 2600 members, both individual and corporate, about 26 per cent of whom are in agriculture. So when one talks of the biotechnology industry as a whole, bear in mind that ag-bio is a sector thereof.
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By way of introduction I would like to say that the biotechnology and life sciences industry is currently no. 2 in the world, with a value of about $US366 billion. But it has been projected that by 2030 biotechnology and the life sciences will be the leading global industry. It will pass information technology at that time, and it will be the leader through to 2100 and beyond.
The total value of biotechnology (all classes) in Australia is currently about $1 billion. That includes, of course, medical and pharmaceutical. But I think what is quite important is that it is worth about $50 per capita in value, versus its value in countries like Finland ($220), the USA ($150) and the UK ($80). So I would like to say that one of the more sobering aspects is that we are a small country in terms of population base but we are also rather low in terms of per capita investment in R&D. And that is a factor we have to live with.
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The agricultural biotechnology industry, I think we must accept, is a cottage industry. And some of the teething problems are not too surprising. We are, also, far from the current major markets for ag-bio. Some would say yes, there are tremendous regional opportunities in the future in the Asia-Pacific region, and I think once we can really get a handle on controlling intellectual property there will be some tremendous opportunities.
I believe our science is competitive internationally, for example in terms of research publications, but lack of capital is one of the major limiting factors that we have to face.
We need to improve the rate of growth in our industry, I believe, and also to demonstrate greater commercial success. In this regard, we do have a core of emerging companies here in Australia, but of the listed companies only two or three are actually in agriculture.
International partnering, I believe, is going to be vital to the future of our growth.
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Today I would like to share three key objectives with you. The first is to take that helicopter view, if you will, of our global position and some of the competitive advantages that indeed we have here in Australia. The second is to look at some of the key issues facing our R&D industry today. And the final one is some future directions.
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By way of a start, let's look at our global position and competitive advantage.
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We do very well in terms of innovation. We are great at innovating, here in Australia. If we look at research publications per million of population and compare that against the USA, the UK and Canada, we can see that we do very well. So we probably box above our weight in those terms; we are great to innovate.
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We have some competitive advantages and, I believe, some areas of excellence. I have tried to highlight just a few, and I am sure many of you would have many more bullet points that could be added.
We are certainly a world leader in molecular marker technology, not only in cereals but also in pasture crops, oilseeds, pulses and sugar.
We are a world leader in insect-resistant and herbicide-tolerant cotton. And I believe that success in our industry has come about as the result of a tremendous private-public partnership. I think it has really been a key success factor.
We have an opportunity to lead internationally in transgenic tropical crops. The Queenslanders love to tell us that 40 per cent of Australia lies within the tropics, and indeed we have a chance to lead in that area. That is exploiting a natural advantage we have, and if you compare us across the world, in terms of tropical countries and tropical agriculture focus, you see that we have got a tremendous opportunity there.
We are a leader in the application of genomics to food quality, also in the beef industry. And when the bovine genomics project comes to fruition, I think, there will be some very exciting possibilities there. Also in dairy, sheep, and the very fast-developing area of aquaculture.
We are a leader in animal molecular diagnostics and vaccine development.
So I think we have a lot to be proud of, in terms of how we innovate and how we move forward.
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Don't worry about all the detail here. In terms of gene technology in crops, we have a list here of 11 different crops in which the Office of the Gene Technology Regulator has given licences for deliberate release into the environment – or field testing, if you will. But of that list there are really only two points I would like to make.
Firstly, note the very broad range of traits that are involved there. Some, indeed, are food traits; a number are environmental, others relate to a whole range of topics. But I have put in yellow the only two crops that we are able to commercialise: cotton and carnations. Canola has been approved by the Office of the Gene Technology Regulator (OGTR), but we have no commercial production. (I will touch on that one a little bit later.) But we do have a broad array of gene technology.
Now, some might argue, 'Look, GM is only one component of biotechnology'. True, but if we look around the world today at where the revenue is being generated, I am here to tell you that that's where it's coming from, in the initial phases. There are going to be many more, down the road.
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Expenditure on R&D is quite interesting. If we in Australia compare ourselves against the USA, the UK and Canada, and look first at that column showing gross expenditure on research and development (GERD) as a percentage of our gross domestic product, we see that we come last of those four countries. As compared with the USA, with 2.72 per cent of gross domestic product, we are down at 1.62. We do not spend enough on R&D.
It becomes even worse when you look at the right-hand column, showing business expenditure (BERD) as a percentage of GDP. There, not only are we way below the OECD average but we come very low. Quite frankly, until state governments provide better incentives for private enterprise to invest in biotechnology research, and provide a clear pathway to market, this is hardly surprising. That is one of our challenges, and I will get to that.
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There is another aspect that I would like to point out. Let's take a look at our biotechnology industries in Australia, versus those in the USA. If you look at sales revenue in the USA, you see that they generate $47 billion, as compared with ours at $1.7 billion. I think that is a little higher than some estimates I have seen, even. But the average per US company generates about $32 million in revenue; we are at about $3.6 million. If you look at R&D expenditure per company, you see that a US company typically spends about $9.7 million in the biotech field – and that includes big and small, all together. We spend about $1.3 million.
So wherever you look across that table, not worrying a whole lot about the detail, there is a 10x factor. What does it point to? It re-establishes what I said, that we are a cottage industry. We are extremely small. We have approximately 400 companies involved in biotech, with about 15 employees per company.
So that is a snapshot, if you like. We have great advantages here.
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I think before moving on to this one we should mention that we are very cost-effective in doing research. We can do R&D here in Australia 20 to 50 per cent more cheaply than in Canada or the UK, for example. This is a competitive advantage we have – we have got a highly skilled work force. But we do have some key issues that challenge us.
I like these quotes. The first is: 'Great spirits have always encountered violent opposition from mediocre minds' – I might use the words 'closed minds' rather than be quite as cocky as Albert Einstein there. But I do like this one – and this is so true of where we are today in Australia: 'If a man waits for certainty before taking the next step he will die standing on one foot.' We have got a lot of state politicians who are dead on one foot already. And it is only going to increase. That's the no. 1 challenge we have.
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The key issues that I would like to address are, firstly, the need for a clearly defined pathway to market – those two quotes lead me in to this, of course – for the products of gene technology, based on sound science, careful regulation and market appraisal. The second is the need for publicly funded research to increase the delivery of products and technologies that have real commercial value. I was very pleased that Alan Finkel addressed that issue in his talk. The third one is the need to develop alliances or partnerships that will fund a 12–15 year product development life cycle. That is one of the challenges we have. This is not Starbucks coffee; it takes time.
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The best way I can summarise issue no. 1, the path to market at present, is that state moratoria have had the following consequences.
Firstly, they have undermined Australia's competitive position in international agriculture. Canadian canola producers today have a 16 per cent production advantage over us. Fact.
Secondly, it has decreased significantly in private investment in R&D. This is in the venture capital market, it is in overseas investment, and it is in two of our majors, Monsanto and Bayer, cutting back.
Thirdly, it has reduced farm income and denied canola producers a choice of technology use on their farms. Now, this is no crack at Craig Cormick, but although you can run a lot of surveys, technology adoption throughout history hasn't come from opinion polls. It comes from allowing innovative people to start, and giving them a chance. Otherwise, we wouldn't have had the car, we wouldn't have had electricity, we wouldn't have microwaves. That's just a fact of life.
Our states have also undermined the OGTR, which was established to provide product safety and a vibrant industry. We have states now second-guessing decisions that are made by the OGTR in full consultation with the states in the first place. So that is a challenge.
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The federal government has given support. The Minister, Warren Truss, in speaking to the Victorian Rural Press Club, has made it clear that farmers are quickly falling behind. I won't go through the quote that you see in this slide.
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The Grains Research and Development Corporation (GRDC) showed a lead as well, saying in October 2004, 'Australian Agriculture is likely to pay a heavy price for its politicians lack of vision and resolve.' So we as researchers can do so much good work, but at the end of the day we need good policy to accompany good science.
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The second issue is the need for more commercial focus. We have top-quality basic research within the public sector; we have growers and RDCs that fund research, but there is little commercial development beyond the RDC model – and that is a challenge. With a few notable exceptions, international collaboration is limited, and a more commercially-focused international partnering is something we need. And one must pose the question: how much strategic thinking goes into the choice of biotechnology R&D projects in public institutions? I think Alan Finkel drew attention to that too, in his very good talk.
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We need a commercialisation model, and the only thing I would say is that as the top part of the large arrow on this slide – technology development – goes forward, so product commercialisation and all the decisions that are required must go in tandem. There needs to be proof of market interest, proof of potential and acceptance by our customers. That must be done hand in hand with research going forward.
This is a simple, basic model, but it is something that means that research cannot be linear. It has got to be broad-based, and we have got to look at the market as we go through.
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We have here issues for a company regarding how it typically develops from a research base to government grants, to venture capital. Too many list on the Australian Stock Exchange far too quickly; they usually go under, because the market crucifies companies that do not meet their goals. We have licensing and partnerships, the successful ones, indeed, have overseas expansion. And we have had some successes there.
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Looking to the future, and by way of conclusion, I would say that Alan Kay put it correctly when he said, 'The best way to predict the future is to invent it.' I think as scientists we like that. It is a fairly bold statement that would get some a little uncomfortable, but I think we need to do that.
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Reducing the levels of natural toxins, such as allergens, will be a key strategic thrust, I think, in the future – providing simpler, faster methods to locate pathogens, toxins and contaminants. We want safety in our food, and I think that is going to be a major area. And extending the freshness of our food and the range of choice will be quite important.
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Biotechnology Australia sponsored a capability study earlier this year, and some of the key areas that came through, firstly in food crops, were that we need designer crops with multiple traits for specific, value-added products; we need to consider utilising the total biomass. For example, cotton as a crop is fibre, food and feed. We need to exploit our significant biodiversity to source novel traits. And we need 'consumer friendly' GM products. Craig certainly alluded to that in his talk, when it comes to acceptance.
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In fibre crops, drought resistance keeps coming up as a need. There is thought of the biorefinery that uses lignins; high throughput screening systems to look for useful mutations will be a strategic thrust; and the role of trees in catchment management, salinity management and carbon cycling will be very important.
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A brief word on the animals: future directions will include transgenic animals with improved meat quality and productivity; in 'phenomics', the link with genomic research will enhance quality; improved diagnostics will be a key thrust; and certainly more efficient and environmentally friendly management systems will be a trend of the future.
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To conclude: our R&D is certainly world class, but financial resources are limited and we need to focus on our strengths. Secondly, we should aggressively exploit areas where we have a competitive advantage, for example in tropical agriculture. Thirdly, public research cannot be 'quarantined' from the commercial world, and better business models are needed. Fourthly, the path to market for GM products should be independent of politics, and we need to dismantle the current control by the states. Finally, international partnering will be crucial if we are to successfully transfer Australian technology to the global marketplace.
