Imagination required to unlock Australia’s agri commercialisation opportunities
Australian universities are at risk of forfeiting millions of dollars in potential revenue generation due to a “risk-averse and unimaginative” culture which is holding agtech commercialisation back, says leading animal scientist David Hume of the Mater Research Institute, in Brisbane, Australia.
Generally speaking, Australia’s agricultural and animal science research is of a very high quality – if not world-class – but taking R&D outcomes beyond the laboratory and into the marketplace through what is known as a ‘commercialisation process’ is where Australian institutes fall short. This shortcoming could be starving the agricultural sector of revolutionary production outcomes available through leading agtech innovations. Without capital and a commercial mindset, Australian agricultural research institutes are at risk of not realising their potential.
This is a home truth for professorial research fellow David Hume of the Mater Research Institute at the University of Queensland (UQ).
Professor Hume is recognised globally for his expertise in genome sciences and immunology. He has decades of research experience at world-renowned establishments such as The Australian National University, Max Planck Institute in Freiburg, Oxford University, The University of Edinburgh and the University of Queensland. With his pragmatic approach to research and development, Professor Hume has executed major commercialisation projects in animal science and agtech.
Image: Professor David Hume
Limitations: underinvestment and short-termism
Professor Hume says that while Australia punches well above its weight, its biomedical and agricultural science R&D is drastically underfunded.
“Chronic underinvestment and a focus on short term gains has limited the impact of our science which is unfortunate because agriculture is one of our biggest industries,” he says.
“Australia should be a global leader but we clearly aren’t investing in the right space. While there may be progressive pockets in ag science, we’re nowhere near where we should be.”
Australia is not alone in this conundrum, Professor Hume cautions. During his 10-year tenure as director of the Roslin Institute at the University of Edinburgh – one of the world’s top animal and vet science establishments, initially made famous for creating Dolly the Sheep – Professor Hume knew it was time to address the short-term funding issues which were holding back Roslin’s game-changing technology from reaching the market.
Image: Dolly the Sheep was created at the University of Edinburgh's Roslin Institute
“The whole system of short-term funding via three year grant cycles, limited budgets, success in the 15-20 per cent range, and a lack of commercial acumen in the universities can and has been proven be solved by commercialisation,” he says.
“The only way forward is to create partnerships with major companies or align with investors to back a portfolio of ideas. The model we created in Edinburgh through Roslin Technologies Limited (RTL) did this. It was recognised at the time as the largest agtech commercialisation deal in Europe – and has evidently been successful.”
It’s the lack of capital that presents a significant challenge for many universities, Professor Hume reiterates.
“Without capital you don’t have the money to take an idea to a genuine proof of concept to attract significant investment. The idea behind Roslin Technologies was to attract a large amount of capital and then have that capital associated with a valuation of a portfolio of research that occurred in the Institute – essentially it was a portfolio investment,” he says.
“The unusual thing about Roslin Technologies is that agricultural innovation does not generally produce blockbuster drugs. Ag-related products or medicines typically have a high turn-over and low margins because farmers are trying to reduce their input costs as much as possible.
“As an evergreen investment, with Roslin Technologies, the investors recognised the long-haul ahead, but they were seeking a long-term engagement, a dividend return, and the chance to invest in genuine value-add spin-outs as they came along. It was a low risk investment but a game-changer in what’s possible because Roslin Technologies could then afford to invest in the further testing of new technologies that were not possible under the university funding framework. You could never get a grant to do any of that work.”
University tech transfer offices have a tough job to do. In order to realise the full potential value of new IP, they must mobilise outside capital in some form if they are to achieve anything, Professor Hume reiterates.
“Since the valuation of any one piece of IP will be highly speculative, it is much easier to value a portfolio as a whole – where risks will tend to balance out. It was that ‘whole portfolio’ approach which was the key to getting the Roslin deal done,” he says.
Commercialisation a solution
Although simply explained, Professor Hume acknowledges how challenging the commercialisation process is.
He says bluntly, “Agriculture is not the place for venture capital”.
“I think there is plenty of patient capital in Australia with various pension funds – we need to see patient money investing in agtech, and in order to make that viable, we need to see portfolios created by for example at places like the University of New England or University of Queensland, consisting of a wide portfolio of technologies none of which are ‘blockbusters’ but all of which can generate revenue.”
According to Professor Hume, two significant factors hold universities back from achieving this outcome.
“Firstly, the universities are incredibly risk averse and, secondly, they drastically over-value their IP – and always have done.
“University tech-transfer offices are a major impediment. They need to move away from seeking blockbuster developments and appreciate the reality of agriculture. They’re risk averse and that is intrinsic in a publically-funded organisation that can’t blow a million dollars on a chance.”
In an ideal world, Professor Hume says one of the major Australian universities in the sector could set up their own company like Roslin Technologies for an investment of approximately $50m to $100m, with the rights to invest in an entire portfolio of IP and to actually act as a real company, employ people, develop products, market and sell them.
“The simple model with Roslin was that the university owned half the company based upon valuation of its prospective and existing IP. That was workable. The alternative was half of nothing. You can still attract additional government funding or loans under this model,” he says.
“It does require engagement with investment experts that universities cannot themselves support – people who have the expertise to bridge the gap between science and investment. We know there are large funds, including Australian Pension Funds, who would consider ethical investment in well-developed and packaged science and ag initiatives. But we need to see some imagination in universities and develop an entrepreneurial culture, as seen in the US, if Australia has even half a chance of realising its commercialisation opportunities.”
In summary, Professor Hume praises Australian universities for the quality of much of their research, but recognises that this hasn’t always been translated into successful commercial products. If that gap can be closed, it will in turn generate more funding which will help future research and reduce dependence on public sector grants.