There were a number of highlights in 2016 for the local biotech industry, including the announcement of the $500m Biomedical Translation Fund (‘BTF’) and the hosting of the International BioFest – the largest ever gathering in the Australian life sciences. However, a consistent theme amongst the local biotech industry remains the difficulty in attracting the right type of capital to the sector.

The good news? There are some indications that 2017 could be the year where momentum starts to build for uniting local capital with local biotech.

Why the optimism?

Three factors stand out for us:

1. BTF starts to deliver: Although the BTF was announced in early 2016, it was only in December 2016 that the fund managers for the BTF were announced. Now that Brandon Capital Partners, OneVentures Management and BioScience Managers have been appointed to oversee the BTF, there’s good reason to hope that a significant amount of the $500m available from the BTF will be deployed throughout 2017, delivering a significant boost to early stage biotech in Australia.

2. Back-door listings are back: When the ASX announced its proposed listing rule changes in May 2016, the news was not looking good for local biotech. Not only was the ASX proposing to raise some of the key ASX admission hurdles, but the ASX was also planning to make it harder to implement back-door listings. The good news is that the ASX has moderated its position on back-door listings and has also made smaller increases to the admission tests than originally announced. The net effect is that the ASX is still a viable option for early stage biotech companies seeking capital.

3. South Australia’s time in the sun: While access to capital is a significant issue for biotech companies across the country, it is particularly keenly felt in South Australia given the size of the local investment pool. 2017 could be the year where this starts to change, with the AusBiotech national conference coming to Adelaide. This will present an opportunity for emerging South Australian biotech companies to connect with the biotech investment community from around the country, and for interstate investors to learn more about this growth sector of the South Australian economy.

So what can you do to be prepared?

Biotech companies are often stuck oscillating between placing all their time and energy into research & development and regulatory milestones (until the cash is about to run out) and then frantically pursuing capital raising opportunities (during which time R&D and trials effectively stall). This can result in being forced to accept down-rounds or convertible notes on adverse terms due to the urgent need for capital.

Clearly, there are times when a cycle like this cannot be avoided, such as where achievement of the next regulatory milestone is the condition to obtaining the next round of funding. However, there are a number of matters that a biotech company can control in making sure that it is as prepared as possible to raise capital.

Our key tips?

1. Make sure that you have clear goals as to the type of investors you want in your business. Consider whether you should be seeking investment from private sources, (e.g. angel investors, VCs, private equity or the BTF) or whether your company would be better suited to the public capital markets. If looking for private investment, do your homework: find out the reputation of the potential investors, work out whether they will be the right fit for you and whether they will bring more to the table than just capital.

2. Check that your house is in order, and if it’s not then fix it. Make sure that your shareholders agreement is up to date, that your key contracts are properly documented and that your IP rights are protected.

3. Find out what initiatives are available to connect you with sources of capital. Whether that be participating in the AusBiotech conference or Australian Biotech Invest or connecting with your local angel investor networks, the broader your connections with potential investors the lower the risk that you will be forced to jump at the first investor who is willing to fund you.

If you’d like to know more about how we help our clients with ASX listings, capital raising, Shareholder Agreements, contracts or anything else mentioned in this post please contact us.