Lusia Guthrie, Chair at BioMelbourne Network

MedTech, Digital Health or Biotech? These terms relate to biomedical research, drug development and manufacturing, biotechnology, medical devices, and diagnostics, as well as healthcare products and delivery. All fall under the banner of “healthtech.” All are focused on providing improvements in our health, and in the health of people with various diseases and physical problems.

Melbourne, ranked as Australia’s most innovative city, has a wealth of talent and capability in this sector.

We are home to world class universities and research organisations. The Melbourne Biomedical Precinct is the name that planners use for the cluster of hospitals and universities throughout Parkville, Carlton, and East Melbourne. This area alone contains over 30 world class hospitals, medical research institutes, companies, and universities. More widely, Victoria has other knowledge-rich clusters and precincts such as the Clayton Innovation Cluster, with Monash University and CSIRO at its centre, and the Alfred Medical Research and Education Precinct.

Development of the healthtech sector requires strong support services. Melbourne’s valuable networks of law firms, finance companies, patent attorneys and industry advisors, as well as world-class design engineering firms, support companies and research organisations. And we have companies that design and conduct clinical trials of Australian and overseas products in our local hospitals.

The healthtech start-up sector is also doing well. The question is, how can we ensure it grows and thrives, generating health and economic benefits?

Healthtech by the numbers

A 2019 Victorian government report found the Victorian healthtech sector had 651 relevant companies, employing 23,000 people with a turnover of more than $12.7 billion. This represents 47% of Australia’s biotech activity. The sector also contributed an additional $10 billion to other sectors via purchasing of goods and services.

Across all sectors of its economy, Victoria attracts more than US$160 million in venture capital funding each year and has about 20,000 university-based researchers. Trade data from 2014-2018 shows growth of more than 250% in pharmaceutical exports, earning $2.2 billion in 2018, making this Victoria’s highest value manufactured export product. This success is due, in part, to sustained government support for the sector.

Data alsoshows that the capitalisation of Victorian companies listed on the ASX increased from $16.4 billion in 2006 to $43.9 billion in 2015. However, over that period, the capitalisation of Melbourne-based biotechnology company, CSL Limited, grew significantly, meaning that the remaining companies lost $8.8 billion market capitalisation.

Some brilliant Victorian companies are emerging, but we are still a long way from having more global companies on the scale of CSL, which is now considered to be one of the top three biotechs in the world.

Why we need to invest in every stage of the sector

The local Victorian healthtech sector is very good at the “front end” (research and development), and this is reasonably well supported by the Federal Government. However, we can do better in the middle and end games (product development, manufacturing and commercialisation). And this is where we need to focus resources.

While Melbourne is a great place for research, it remains challenging for start-up, early stage and medium-term companies to find funding for market development. Many companies developing products continue to partner with offshore companies that have funds and access to large markets.

Although there are positive aspects to this, the outcome is that we export too many partially developed ideas, jobs and potential tax revenues, as well as opportunities for local advanced manufacturing. Although science and medical researchers often leave Australia for experience and high-value jobs overseas, many do not return.

If we are to reap the economic benefits of our significant investment in research, we must focus on how we support translation of that research into new products in the market.

Impact of the Pandemic – an example of what we can achieve through collaboration

The COVID-19 pandemic highlighted both the excellence and the vulnerabilities in our healthtech sector. As we hear weekly, Australian researchers are making major contributions globally towards the development of vaccines and therapies to address COVID-19, including potential manufacture through CSL, which specialises in research, development, production and marketing of vaccines globally.

However, a key vulnerability has been identified in our supply chain for critical personal protective equipment (PPE) and other goods.

We recently demonstrated that we could pivot and collaborate to solve this problem. Our engineering firms collaborated with universities to design ventilators and other devices. CSIRO played a vital role in revealing new materials and inventions to assist local PPE production. Virtually overnight, Victorian manufacturers re-tooled and reorganised to switch on production of medical equipment and consumables.

The qualities exhibited – collaboration, agility, flexibility, creative and lateral thinking – show that the healthtech sector can deliver when it matters. We can solve problems, and we can manufacture locally.

How we can get more out of our investment in healthtech

Taking research through to product development and manufacture of a new drug or medical device is a long and expensive process. Because patient safety is key, development and manufacture of these products requires strict regulation and quality assurance. It is complex and there is a lot to know. The freedom and creativity needed during research is different from the skills and rigorous discipline needed for product development and manufacture.

Alongside researchers, we need to develop a cohort of experienced industry professionals, technicians, entrepreneurs and business executives who know how to take an innovation to the next stage to build a marketable product. This ecosystem creates job opportunities not just for academics and researchers, it creates jobs in industry, manufacturing, business, law and finance.

Australia is 2% of the global healthcare market. Local companies go offshore in order to recoup the millions they invest in technology development. Instead of licensing our research too early, we can encourage many activities in Melbourne that add value. For example, conducting clinical trials, designing and engineering products, developing manufacturing specifications and building prototypes in Melbourne. If manufacturing for global markets is too ambitious, we could negotiate to manufacture for Australia and regional markets here in Melbourne. Then if, and when we do export, it is a higher-value commodity than a technology licence when it leaves Australia.

Melbourne can be a fully integrated research, manufacturing, and supply ecosystem. Research creates the opportunity, but it takes time, a lot of money and a lot of people to turn the opportunity into reality.

This opinion paper is part of the City of the Future event 2, exploring focus are 2: Future Business.

Problem statement:
How might we encourage new industries and businesses to emerge and thrive in the city?