Australian pharma and life science companies look to Asia for investors and partners as market action ramps up says MinterEllison

4 mins  06.08.2019

There are clear opportunities in the Asian region for Australian pharma and life science companies looking to secure investors for funding and collaboration partners for research and commercialisation says James Hutton a leading capital markets and M&A partner at MinterEllison.

There are clear opportunities in the Asian region for Australian pharma and life science companies looking to secure investors for funding and collaboration partners for research and commercialisation says James Hutton a leading capital markets and M&A partner at MinterEllison.

On the flip side, Mr Hutton says Chinese and other regional investors and industry players are also actively courting Australian pharma and biotech companies.
This is leading to increasing inbound and outbound Australian investment activity according to the firm.

Mr Hutton, who advises health sector clients on M&A deals, says regional investors and trade players are attracted by the quality of Australia’s scientific research, knowhow, and potential clinical outcomes.

“We’re seeing some companies in these sectors receiving Chinese or other regional approaches regularly – as often as every two weeks. Great interest is being shown to secure opportunities to invest and/or partner including by introducing Australian technology/products through China’s regulatory system pathways” he said.

High Profile Pharma Deals

Mr Hutton pointed to a number of deals struck in calendar 2018 including:

  • $1.87bn (USD 1.41bn) takeover of liver cancer treatment company Sirtex Medical by Chinese private equity house CDH Investments and China Grand Pharmaceutical and Healthcare [HKG:0512]
  • $29.6m investment in oncolytic immunotherapies company Viralytics by China’s Lepu Medical Technology [SHE:300003]. Viralytics was subsequently the subject of a $502m takeover of Viralytics by Merck [NYSE:MRK]
  • strategic partnership deal regenerative medicine company Mesoblast [ASX:MSB; NASDAQ:MESO] struck with Tasly Pharmaceutical Group [SHA:600535].

Activity Continuing in 2019

This activity was continuing into 2019 with a range of sub-sectors including in relation to larger industry plays in hospitals, surgery groups to more specific plays in areas such as regenerative medicines including stem cells.

James Hutton also said potential targets in relation to life science/biotech did not necessarily have to be companies with Phase III products, which are invariably more expensive.

“Sometimes Phase II or Phase IIB targets are attractive enough - depending on the asset it may be deemed to be sufficiently de-risked,” he said. “Chinese players have also come to partner with public institutions including universities to secure early commercialisation opportunities as they think long-term and that means we are seeing heightened levels of research.”

Mr Hutton pointed to the University of Melbourne’s signing of a memorandum of understanding (MOU) with China’s Beijing First Biochemical Pharmaceutical to fund research in Australia. The Chinese company is funding certain elements of the University’s biotech research with the potential for researchers to leverage commercialisation and market access opportunities in China, according to the University’s announcement in October 2018.

“In terms of potential suitors, we are seeing interest from both Chinese PE/VC and strategic trade investors, especially those already with health- and medical-related businesses,” said Mr Hutton. “Most suitors would like to own some equity in the Australian companies, with non-incorporated joint ventures and licensing deals also quite common. Those bidders already seen in deals over the past few years will potentially remain in play but there always seems to be an investor or company that we have not particularly heard of popping up. Those investors, however, are invariably large regional players in their own markets. It is hard to predict where investors will come from.”

Turning to the regulatory front, James Hutton said many deals in the pharma and life sciences space were typically below the Foreign Investment Review Board’s (FIRB) review threshold in terms of size.

“Because of this, they are less likely to be turned down if they do not involve sensitive data or security matters,” he said. “Such deals can also be less likely to trigger scrutiny by the Australian Competition and Consumer Commission (ACCC) where the relevant sector may be fairly fragmented.”

Recent outbound activity

In terms of recent outbound activity from Australia into Asia, two ASX-listed players with late-stage assets or products that have secured both Chinese and Japanese investors are:

  • $708m market cap Mesoblast, which has partnerships with China’s Tasly and Japan’s JCR Pharmaceuticals [TYO:4552]
  • $509m market cap dendrimer product maker Starpharma [ASX:SPL], which has partnerships with diversified Chinese group Shenyang Sky and Land Latex Co and Japan’s Okamoto Industries [TYO:5122]

In addition:

  • Australian bionic eye company Bionic Vision is reportedly looking to IPO following prior investment from Hong Kong-based investment firm State Path Capital.

“There are also a number of examples of ASX-listed companies in the life sciences sector taking roadshows into locations such as Japan and Hong Kong – a reflection of the strong market action in the region. We only see that continuing into 2020,” said Mr Hutton.

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https://www.minterellison.com/articles/pharma-and-life-science-companies-look-to-asia

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