The MTP sector is a significant contributor to the Australian economy, generating approximately $4.4 billion in gross economic value added (4.5% of Australia's total manufacturing gross value added), $4.0 billion in annual exports from manufacturing and employing 48,000 people across medtech (c.10,000), biotechnology, and pharmaceuticals (c.22,000), and health and medical research (c.16,000).
MTP value chain encompasses a vibrant sector with a diverse range of participants, each with a critical role to play in the sector's growth and success. This value chain comprises of universities, other research organisations, small and large local and multinational companies, investors, service providers, industry organisations, regulators, policymakers, and funders.
The sector has a vibrant ecosystem of start-ups and established companies. The Medical Technology Association of Australia (MTAA) notes that the Australian medical technology industry includes over 500 medtech companies with products listed on the Australian Register of Therapeutic Goods, while Medicines Australia and AusBiotech note that there are approximately 50 multinational pharmaceutical companies and more than 400 locally-owned medical biotechnology companies operating in Australia. Around one hundred medical technology, biotechnology and pharmaceutical companies are listed on the Australian Stock Exchange (ASX), with a combined market capitalization of c.$85 billion.
Australia also has a thriving research industry. The National Health and Medical Research Council (NHMRC) reports that Australia contributes c.3% of the world's published biomedical research. Between 2001 and 2010, Australia ranked sixth in the world in terms of overall output of health and medical publications. Australia ranked fifth in innovation in Scientific American Worldview 2016.
In Australia, R&D has both public sector and private sector dimensions. Public grants awarded into the MTP sector from the NHMRC and Australian Research Council (ARC) are estimated at c.$775 million in 2015,14 and industry R&D spend is estimated at c.$630 million per year.15 The MTP sector receives c.45% of grants awarded by the NHMRC and ARC, and accounts for c.14.0% of business expenditure on R&D within the manufacturing sector.
Despite this, shortfalls in funding at the pre-clinical and early stages of clinical development are common, and attracting private capital during these early stages is difficult. A proportion of potential MTP innovations never progress past the pre-clinical and clinical stages of development due to challenges in attracting funding, and these early exits from the innovation process are an impediment to the longer-term success of the MTP sector. More recently, the government has announced programs such as the $250 million Biomedical Translation Fund (BMT), and the $20 billion Medical Research Future Fund (MRFF), including the Department of Health's BioMedTech Horizons program, to attempt to bridge one of these gaps.
Learn more about funding in the sector.
The MTP sector is among the most innovative in the global economy – it is a major contributor to R&D both globally and within Australia. It has ranked in the top five in biotech innovation, three years running in Scientific American's Worldview.
The MTP sector has a high degree of local and international regulation and reliance on government policy, including reimbursement and procurement policy. Sector participants must consider innovations and investments in light of these regulatory hurdles. Similarly, government policies to do with reimbursement, tax and the strength of intellectual property laws can significantly affect innovation and investment within the sector.
In 2016, Australia's MTP exports maintained their position in the top ten exports for Australia, with combined MTP sector manufacturing exports increasing to $5.2 billion. Australia is on its way to becoming a leading player in the global market. With a population of 24 million, Australia relies on both the domestic and global markets to support the success of many MTP companies.
One distinct difference between the medtech and pharmaceutical markets is the length and investment involved in the commercialisation pathway, and therefore the extent to which globalisation becomes a necessity. The MTP sector lodged 242 patents since 2016, and around 27,000 publications circulated with a 3% increase since 2015, and c.3% published in collaboration with industry.
In pharmaceuticals and biotechnology, the drug and biologics development pathways are long and expensive. They may require between 10 and 15 years to complete, and the risk-adjusted average cost of bringing a new vaccine or medicine to market is cited as between US$1.5 billion and US$2.6 billion. Products must be commercialised at a global scale to deliver the required return on investment. As evidence of this, the large majority of pharmaceutical revenue in Australia is derived by a small number of multinational pharmaceutical companies that sell products developed for the global market. While innovation can start at a local level, often the commercialisation pathway will involve an Australian innovation being out-licensed or divested during pre-clinical or clinical development to a global partner that brings the development, regulatory, sales, marketing and distribution capabilities and resources to maximise its global reach and value as a product.
In medtech, the dynamic is often different. The development timeframe and cost for medtech products is typically shorter (between four- to 10 years, and c.US$30 million–150 million in the United States), and the product life cycle and investment return period are also shorter. As a result, small and mid-sized medtech companies are more likely to be able to take a product all the way through to an in-market launch in Australia, with the need for global partners to be limited to suppliers. As with the pharmaceutical and biotech subsectors, full value is only likely to be realised if global markets are accessed, either directly or through partnerships.