International Entrepreneurship and Management Journal 1, 149163, 2005 c 2005 Springer Science + Business Media, Inc.

Manufactured in The United States.

Emerging Australian Biotechnology Companies: Globalizing or Just Playing?

JUAN VIEIRA DAMIAN HINE UQ Business School, University of Queensland, Australia damian.hine@techman.uq.edu.au

Abstract. The biotechnology industry is seen as one of the most globalized. It is also an industry dominated by SMEs in most countries. It would be expected then that these biotechnology SMEs themselves would be global in their focus. It is the intent of this research to understand the globalization issues that are encouraging biotechnology companies to go global, whether these companies really are truly global companies, and if not, at which stage of the globalization process these companies are operating. The study is undertaken using secondary quantitative data on all the publicly listed biotechnology companies in Australia that have undertaken some form of internationalization, based on 2003/4 annual reports. The main conclusion from the research is Australian biotechnology companies are still in an immature stage of development in the globalization process. The companies market strategies are directed at protable countries and regions, such as the USA and Europe. This neglects other markets that are more accessible and can provide much needed early income streams. The internationalization effort of Australian biotechnology companies is only partial and could not be considered to be a true globalization effort. Keywords: globalization, biotechnology, market strategies

The biotechnology industry is seen as one of the most globalized, given the broad application of its products in human health, agriculture and industrials. It is also an industry dominated by SMEs in most countries, as the industry is immature in all countries but the US. It would be expected then that these biotechnology SMEs themselves would be global in their focus. While immature, Australias biotechnology industry is notable for its strong scientic and institutional base, while its commercialization efforts are still edgling. It is the intention of this research to understand the globalization issues that are encouraging biotechnology companies to go global, whether these companies really are truly global companies, and if not, at which stage of the globalization process these companies are operating (Srinivas, 1995). This study assesses the actual strategies of emerging biotechnology companies to dene the stage of their globalization effort, as well as whether this effort is truly global or only a partial globalization strategy. It is a thesis of the authors that the myth of globalization is not supported by reality. As a consequence the research question upon which this study is based can be dened as: Those Australian biotechnology companies already identied as internationalizing are only undertaking a partial globalization
Corresponding

author. Damian Hine, UQ Business School, University of Queensland, Australia.

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strategy. This partial strategy will be evidenced in a concentration on wealthy industrialized countries in North America and Europe, while man y countries and regions where demand exists are being neglected. Globalization is a central theme not only in biotechnology, but in many areas of entrepreneurship. A global focus covers all continents, whereas internationalization is a more narrow strategy and hence should only been seen as a stepping stone toward globalization (Srinivas, 1995). If rms within an industry are only internationalizing rather than globalizing, then market inefciencies will remain a feature of the industry.

Globalization Globalization has many different connotations. A broad interpretation of the concept of globalization is a new form of social organization, a borderless word in which we will live as citizens in a global village (Green and Ruhleder, 1995). In such a borderless world, the fortunes of individuals, rms, industries and even nation states are so intertwined with ongoing events in the global economy that it becomes almost impossible to dene the nation state without reference to the broader economy (Baylis, 1997; Brown, 1997; Dunning, 1997). To assist in the denition of globalization for this research study, a useful starting point is the work done by Srinivas (1995). He denes four stages of the globalization process as a rm goes from its domestic base to global operations. The four stages are; domestic, export, international/multinational and global. These four stages will be used to dene in which stage of the globalization process the companies researched are. Both internationalization and globalization entail a notion of exchange or, more concretely trade (Sharma and Roy, 1996). The most common ways of measuring degree of internationalization are export intensity and the country-market spreading (Sullivan, 1994). Clearly complete globalization requires an extensive country market spread and is indicative of mature rms in mature competitive industries in which product diffusion has been successful. For many SMEs they are in the early stage of globalization, export. For the purposes of this research study, the concept of globalization will be considered at its minimum, the exporting activities of the SSE and at its maximum, the truly global organization. Its must be accepted that most SMEs will not have the resources to reach the two higher stages in globalization. The concept of globalization can then be integrated with this, as it is through the globalization efforts of individual rms that the entire economy becomes more globalized and plays a more signicant role in international markets (Green and Ruhleder, 1995). Some researchers have viewed not only raw data on sales to measure globalization, but have broadened their vision to include leadership in management and also management attitudes towards globalization. This approach asserts that managers levels of global orientation can be assessed by determining the strength of three at least partially related attitudes: international orientation and commitment, global awareness and cultural awareness and sensitivity.

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There has been plenty of evidence of the relationship between rm size and export intensity. However there are exceptions to this rule. Small high technology rms may become exporters at the very beginning of their life cycle, simply because the domestic market does not offer sufcient opportunities for growth (Bonaccorsi, 1992). Of course globalization is not a new phenomenon but a continuation of developments that have proceeded over time (Mrak, 2000). Currently, globalization reects the continuing expansion and mutual integration of market frontiers, and is an irreversible trend for the economic development in the whole world at the turn of the millennium (Shangquan, 2000). To underscore this point, the number of regulatory changes favorable to stimulate FDI (Foreign Direct Investment) has been steadily increasing since 1992. From 79 countries with favorable Foreign Direct Investment (FDI) Regulation in 1992 to 235 in 2002 (United Nations, 2004). However, the recent trend of globalization differs substantially from the past. The world is no longer a collection of relatively autonomous agents, only partially connected and more or less immune to events in theirs neighborhoods. These days, globalization involves numerous features, but there are three that seem to be the main engine driving world economic integration (Mrak, 2000): 1. Internationalization of production accompanied by changes in the productions structure. 2. Expansion of international trade in trade and services. 3. Widening and deepening of international capital ows. The features outlined above, accompanied by the rapid development of science and technologies and the facility to transfer it, is making globalization more than an irreversible trend; it is a new form of economic living. Trends in the global biotechnology sector Currently, the biotechnology industry is going through a process of assimilate massive amounts of information and intellectual property produced so far, how to prot from it and how to gain public acceptance. With the knowledge brought by initiatives such as the Human Genome Project and the advent and diffusion of technologies such as PCR, PAGE, NMR and various forms of high throughput screening, unending streams of new companies are entering the domain of biotechnology companies. Every time a new scientic advance and area of scientic endeavor emerges such as pharmacogenomics, nanomics, metabolomics or proteomics, many new companies come into existence to capitalize on or commercialize the intellectual property (Dibner, 2003). So the advances in the industry stem from a close combination of technology and science. Several reasons make it very likely that the biotech industry is going to maintain its momentum. The entrepreneurial, market-driven R&D model works for healthcare

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innovation which accounts for more than 95% of the biotech industry revenues (Deloitte Touche Tohmatsu, 2003). New diagnostics and therapies are coming to market to address obstinate diseases such as stroke, Alzheimers, various cancers, traumatic brain injury, epilepsy. Demands for such solutions will only diminish when diseases, viral invasions and microbial afictions are eradicated. This is unlikely to occur in our lifetime. The industry has barely scratched the surface of what society needs (Kean, 2004). The biotech industry has not only made promises but has started to deliver on these promises. About 100 biotech-derived drugs have already come to market, and another 350400 therapeutic candidates are in the pipeline (Center for Drug Evaluation and Research, 2004). Moreover, biotech is growing up, and is no longer viewed as a poor relation of large pharmaceutical companies. Big Pharma now seeks out biotech innovation at its source. A clear indicator of this is the fact that many multinational pharma companies are locating their research centers to geographic locations where biotech companies are concentrated, creating and supplementing biotech clusters. Once strangers and uneasy collaborators, biotech and pharma are nally experiencing the long-awaited convergence (Kean, 2004). Molecular Medicine (personalized medicine) is evolving faster than news can follow. New products that will personalize diagnostics and treatment of diseases are in development assisted by advances in pharmacokinetics, pharmacogenomics and metabolomics. These pre-designed diagnostics and therapeutics herald the end of the one-size-tsall pharmaceutical paradigm (Dibner, 2003). This coupled with an enhanced capacity to pay in industrialized and industrializing countries will maintain demand.

Australian biotechnology industry outlook Globally, the biotechnology industry is shifting its value creation emphasis from R&D to manufacture and marketing as more products emerge from the R&D pipeline and the industry as a whole matures (Kapeleris, Hine and Barnard, 2004). Due to such factors as industry concentration, resource access, sophistication of nancial markets and quality of science, the industry has developed at a different pace in different nations. In its evolution Australia trails behind the US and Canada. By contrast, the UK, through the Biotechnology and Biological Sciences Research Council (BBSRC), has built a strong biotechnology prole in a relatively short space of time, but based on a long history of fundamental biological research, epitomized by the discovery of the structure of DNA and pioneering work on determination of the three dimensional structure of proteins in the 1950s. While this is a global industry, there are clear differences in industry structure at the national and regional levels. The role of universities, medical and research institutions are central to the industry in Australia, and other countries such as UK and Germany. This is particularly so given the embryonic and early developmental stages of these industries. There has been a proliferation of IPOs in 2003 and 2004 as the biotechnology industry recovers from the 2000 tech crash. The Australian biotechnology industry is

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growing rapidly and is entering a phase of greater maturity. As in other OECD nations, the industry is largely made up of unlisted rms (Australian Government, 2004). In Australia alone there have been 18 IPOs in 2004 raising over $130M. There are now 105 listed biotechs in Australia (EG Capital, 2004). There is a danger in this recovery however, in the emergence of a boom/bust cycle for the industry. Strategy in industries dominated by small rms is at best emergent, at worst haphazard and random. This dilemma is apparent in many countries with immature biotechnology industries. The Australian biotechnology industry is a case in point. There are no agship companies providing an innovative benchmark for other rms to this lack of direction coupled with the institutional bias of basic research in the industry, means it is institutions which take the lead in establishing the direction of the industry at a national level. The nominated institution generally is government. While there are (as of 2004) 105 listed Australian biotechnology companies, the industry is dominated by three players: CSL, Resmed and Cochlear, which account for 54% of market capitalization (EG Capital Report). Average capitalization of listed Australian Biotechs is $5M, making them o average quite small. This has a major impact on their ability to compete internationally and to proceed to later stage development without further substantial investor, or indeed Government, support. This is seen as one of the major limitations of the Australian industry. This is the limited resources argument. However this traditional approach can be misleading. For some time there has been a clear argument that the relationship between rm resources and export behavior and performance is not direct but mediated by strategy (Bonaccorsi, 1992). So if a strategy exists, the SME is more likely to succeed in its internationalization, than if it pursues opportunities ad hoc. As the industry has matured, companies have begun to shift from an early stage licensing model to generating revenue from their platform technologies, services or intellectual property portfolios, while developing and adding value to their own products in-house (E&Y, 2003). Most companies still operate at an early stage of product development, but increasingly capitalize on the multidisciplinary scientic and clinical excellence available to conduct animal and human trials in a cost competitive environment. Australias 40 Universities are responsible for the majority of Australias leading biotechnology R&D. Universities contribute to approximately 26 per cent of Australian Government expenditure on biotechnology research and development (Hopper, 2001). As a result, Australia is becoming a popular base for translational research, clinical trials, health economics, population-based medicine and regulatory approval (Byrne, 2004). The majority of Australian biotechnology rms have research alliances with research institutions and other rms overseas to support their business development and market entry. A biotechnology industry survey conducted in 2004 found 65 per cent of rms surveyed currently export goods, services or intellectual property, with 85 per cent of respondents planning to expand into overseas markets by 2007 (Australian Government, 2004). These indicate steps towards globalization, however are likely to fall short of a truly global strategy. This study seeks to assess the extent of globalization amongst those

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emerging biotechnology companies that have already commenced internationalization and are supported by nancial resources to achieve their strategies as publicly listed companies. Each of these companies thinks of themselves as global, according o their own company announcements. However it is important to distill myth and rhetoric from reality. If the reality does not match the rhetoric, then the veracity of the strategies espoused by these companies and by implication the entire industry comes into question, to the extent that an SME driven industry which is seen as amongst the most globalised of all industries may not be may not have the strategies to match the vision. Methodology The study is undertaken by using secondary quantitative data on all the publicly listed biotechnology companies in Australia which have undertaken some form of internationalization, that is exporting, establishing subsidiaries in overseas markets or entering commercialization alliances with international companies and institutions. The data set is based on 2003/4 annual reports. The analysis employs criteria emanating from previous small business and globalization research. Results are measured in a scale according to the importance, relevance or periodicity displayed by each company for the data collection protocol (Sapsford, 1996). The design of the research was conducted through a compilation of reports and publications analysis (Bouma, 2000). All the data were extracted from the companies annual reports as a primary data source, to avoid false or misleading data than can be found in other sources. By extracting data from this a homogeneous sample technique results dispersion was minimized (Patton, 2002). From the universe of more than 370 biotech companies and 600 medical devices companies in Australia (Australian Government, 2004), the sample was homogenized to 117 rms listed of ASX pharmaceutical-biotechnology listed rms. This list was then narrowed to core biotechnology rms, which are dened as rms that (Vitale, 2004): Add value on the basis of a patentable biological innovative step Face long development times and signicant technological and market risk Need considerable up-front investment Have the potential to reach large markets

From the total of 117 rms listed on the ASX category of Pharmaceutical-Biotechnology related companies, the number of core biotechnology rms came down to 85 rms, involved in the elds of drug discovery, devices, diagnostics and a few agricultural biotechnology companies. Listed biotechnology companies have been selected as the developmental leaders in their industry. These companies have been successful in gaining investor support sufcient to launch an initial public offering. It is these companies which should be leading the way in the development of the biotechnology industry through their efforts

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in a competitive global environment. Other emerging biotechnology companies should be offered a template for international market entry and competitiveness form these pioneers. This is why the thirty companies analyzed in this study are all listed and have all embarked upon the internationalization/globalization path. These thirty companies represent the population of listed biotechs that have embarked on this journey. Most Australian biotechnology companies are not listed, but in order to obtain accurate information, the listed companies in the ASX (their annual reports) had to be the one selected to obtain the information from. It is not possible to determine the information and accuracy gap between the listed and not listed companies, but it is expected that the listed companies provide a fair good example about the industry structure. The ndings are extremely interesting and there are many fascinating research opportunities for the extension of this exploratory study. It was decided that the best way to nd the information about the companies was through the companies annual reports. The reports contain all the information needed to understand the commercialization issue, international markets approached and future outlooks for each company. Findings and results All companies researched were private equity funded. No government or public institutions were found to own any of the enterprises. From the universe of Australian biotech companies, an average of 11.3 years of establishment of operations can be found. Some companies have just been established (CRYPTOME with 2 years) while others like PEPTECH or BIOTA are reaching the 20 years of foundation. All were headquartered in Australia. In terms of the primary activities of the selected companies, 53% indicated research as their primary activity, 35% indicated commercialization and only 12% were manufacturers. This ts also the prole of the Australian biotechnology industry described above. This does not mean that the companies are exclusively dedicated to research, or to commercialization or manufacturing. In fact, 37% of the companies are dedicated exclusively to research operations, and only 3% to just commercialization or manufacture. An impressive 37% of the companies actually perform research and commercialization, and 20% of the companies are actually performing the research-commercializationmanufacturing cycle. Excluding CSL (with more than 8000 employees) Australian biotech companies have an average ration of employing 33.2 employees. Some companies go up to 190 employees (AGENIX while others just in the start up phase just have 4 employees (IMUGENE). Therapeutics and Diagnostics account for more than 75% of the biotech sub sector on which the companies operate. Therapeutics accounts for an impressive 51% and Diagnostics account for a 26%. The other biotech sectors are well represented among the universe researched, but none of them account for more that 5%, as in the case of Food Biotechnology, Nanotechnology, Tissue Engineering and Bioinformatics. Bioprocessing is found to have a presence of 3%.

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Figure 1.

Companies protability.

Sales data clearly indicates that the Australian biotechnology companies are still SMEs. Sales volumes per company show that 50% of the companies have revenues under 3 AUD million, and some of those revenues are coming from grants, not even from sales. Sales under 1 million account for 30% of the total companies, and sales from 1 to 3 million account for another 20%. Between them, they account for the 50% mentioned above. Also, only 20% of the companies have revenues above AUD 10 million. The percentage is relatively small compared to USA standards, clearly indicating that the average size of Australian biotechnology companies is still relatively small. Further 13% of the companies researched are protable, while the majority (87% of the companies) are still losing money for their investors. It is clear when observing Figure 1 below that losses are common in the industry, and that it is common to loose between 5 and 10 AUD million (45%), with 5.06 AUD million being the average prot for the Australian biotech industry. Even more signicant is that four companies (14%) are loosing more than 10 AUD million. These Australian biotechnology companies have a clear tendency to hire or to have local people for the chairman position. 79% of the companies have an Australian as a chairman. The other 21% is indicated in equal percentages of 7% between chairmen from USA, EU and ASIA. This may well have an impact on the geographical focus of the companys aspirations, though this would be mitigated by length of service and level of inuence in the company. The internationalisation process is dependent upon building an enabling infrastructure. This is not evident in Australias listed biotechnology companies. The majority (60%) of the companies do not have an export department. Neither do they have dedicated staff attending to the role of international business. Despite this deciency, 100% (30) of companies admit their products have a global market. It clearly indicates the

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necessity of having more international focus, but due to lack of resources or lack of products ready to be released into the market, companies either cannot have or do not wish to have designated personnel in the international business area yet. Also, a big majority of the companies (80%) have the international market quantied. Companies know where they are heading and the potential of reaching each one of the markets. A minority of the companies (just 20%) doesnt have, or doesnt report having their product market quantied. All companies attest to having demand for their products where the real incidence of the disease exists. The companies also have these markets identied and quantied. Companies, also because they are aiming at the therapeutics market, are trying to stay within markets with the capacity to pay for their products. There are some companies like Panbio which, with their Dengue Diagnostics kit, are aiming at South American markets, but it is proving to be a difcult task to sell in those markets. USA and EU account for almost 75% of the main markets for the companys products. Little attention is given to Asia (12%), mainly because of its geographical proximity and enormous populations, which compensates somehow for their lower capacity to buy. Little or no attention is given to South America and Central America, Africa, Eastern Europe and Middle East. Just 50% of the companies export. Many of the companies dont have products ready for market or do not have the infrastructure necessary to reach foreign markets, despite the markets being identied and the products currently being oriented to those markets. For the current exporters, their export sales account for a considerable 48% of total sales revenues. The USA dominates the overseas market focus for these biotechs with 57% of product directed toward the US market. Not surprisingly then, the second most important destination is Europe at 13% of product. So these two wealthy destinations account for 70% of the export focus of the publicly listed Australian biotechnology companies. While all of Asia, geographical proximal to Australia, and including China and India account for only 17%, South America 4% and others Africa, Canada and the Pacic only 9%. Therefore, while the major diseases and afictions are occurring in South America, Asia and Africa, it seems the capacity to pay principle has won out over the public good concerns. These are companies with a prot motive, whose prot is yet to manifest itself. So the good intentions which often generated the discovery research upon which the current products are based for these companies, have been overtaken by commercial concerns. In concordance with the market orientation explained before, it can also be observed in this graphic that the main market for those companies who do export is USA, with 57% of all export destinations. It is followed by Asia with 17%, which is mainly due the fast growth in the biotechnology sector (PricewaterhouseCoopers, 2003) and the markets geographic proximity. Europe, even though it is shown in the main markets as the second most important, is actually just in 3rd place in terms of exports importance, with a modest 13%. Reasons for this is the great importance that the USA market has, which overshadows the rest, and the fact that even Europe, although more important in economic terms, does not have Asias proximity which facilitates exports there.

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Figure 2.

How many countries do the companies export to?

South America and the other markets together do not account for more than 13%. Factors such as distance, language and economic conditions do not facilitate or encourage going to those markets. The Figure 2 does not show a clear tendency in the number of countries Australian biotech companies are exporting to. But it is important to highlight that 36% of the companies are exporting to just one country, and just 14% are exporting to more that 10 countries. This fact denitely indicates the stage of globalization the industry is at the moment. A major part of the internationalization process is the establishment of international subsidiaries. 63% of the companies researched have international subsidiaries. This is an indication of the importance that external links have in the biotech industry, since despite only 50% of the companies export, 63% of them have international subsidiaries. There is an average of 2.3 subsidiaries for each company. In discovering the primary purpose of the subsidiaries, it is observed that 56% of the subsidiaries are established with an R&D purpose. International linkages are the best way to encourage and to get access to new technology and developments, and this is the reason that most subsidiaries are established in foreign countries, to gain access to this new knowledge. Commercialization with 41% of participation comes up as the second reason for setting up subsidiaries and with just 3% of subsidiaries created for the manufacturing process. One reason why there are no more manufacturing subsidiaries is that the stage of biotech development for Australian biotech companies does not yet need to create manufacturing alliances, but instead research and commercialization. This also shows that international subsidiaries are not established only with the purpose of commercialization, but can also be established with other purposes such as R&D.

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Figure 3.

Location of international subsidiaries.

For those majority of companies in the sample with international subsidiaries, it is important to note that Europe, with 44% of the Australian companies having established an international subsidiary there, rates above the USA (37%), despite the US being the preferred market (see Figure 3). The main reason for this is that most subsidiaries are established for R&D purposes, due to Europe being cheaper, and at a similar knowledge and commefrcialisation level to that of the Australian industry. Asian, South American and African subsidiaries are established only with the purpose of commercialization. Globalization-stage In line with the denitions provided by Srinivas (1995), it can be concluded, that more than half (51%) of the Australian biotechnology companies are in a domestic stage of the globalization process (see Figure 4). Though large as a proportion, it is encouraging to observe as well that there is a considerable 43% of companies that are already in the export stage. Just one company (3%) can be described as being in the multinational stage and the same for the global description. In the case of CSL, it was found to be the only company with the structure, resources and reach to be considered to be a global company. Discussion and conclusion The evidence from the listed Australian biotechnology companies, dominated by SMEs, with some momentum towards commercial internationalization is that the Australian biotechnology industry is still in its global infancy. The companies size in employee numbers, sales revenue and most important, the average accumulated loss, are early indicators of that.

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Figure 4.

Globalization stage.

From the key personnel it can be concluded that even though the industry is still in an early stage characterized by heavy investment in the R&D phase, where a significant amount of scientic knowledge is needed, directors have a strong management background, which augers well for the companies. This will be likely to lead to appropriate organizational forms for the company, so that when the products reach the international market, the company can be prepared for their successful release. Also, these companies can gain administrative efciency for the scarce resources that the companies account for. From the global market it can be appreciated that a large majority of the companies are working in the elds of Therapeutics and Diagnostics, which are currently the two segments which account for almost 95% of the revenues in the biotechnology industry (Cortright, 2002; Standard and Poors, 2000; Yin, 1994). Thus, their products are designed to t into the global markets. USA is shown as the most important market and more desirable one to export to, followed by Europe. In contrast to this, emergent markets such as South America, Africa, Western Europe and some Asian countries are just not on the radar for these internationalization leaders for the Australian economy. This contrasts with other industries, as China, Japan, New Zealand, Singapore, Indonesia and Malaysia account for the vast majority (72%) of Australias international trade (Australian Bureau of Statistics, 2004). Australian biotechnology companies are increasingly becoming more aware of the importance of exporting. Even though many companies are still in the R&D stage with little or no physical products to export, they are attempting to reach international markets by selling intellectual property. The USA identied as the market receiving most of the exports, according to data. Asia is shown as the second most important market when the exports gures are accounted. Surprisingly it is more important than Europe in terms of revenue. By 2003, according to the data gathered, 50% of companies

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were exporters, by 2004 65% of the companies export (Australian Government, 2004) and by 2007 the gure is expected to be in the order of 85% of the companies exporting (Australian Government, 2004). So the trend is positive for the industry, though still narrow in its collective focus, as developing countries have little or no incidence when revenues from exporting gures are accounted. Just South America with 4% shows some relevance. Information about subsidiaries establishment is quite relevant to determine the preferences when a company wants to set one up in a different country. Data shows clearly that when the subsidiary is established for R&D purposes, the preferred location is Europe. But if the main purpose for establishing a subsidiary is commercialization, the preferred location is the USA. Data about the European biotechnology industry shows clear signs of recovery (Lefteroff, 2003) after having had a recession in the last two to three years (Brown, 2004). It seems that Australian biotechnology companies are well aware of this situation and are taking advantage of the competitiveness and lower prices shown by their European biotech counterparts. At this stage of development in the Australian biotechnology, where companies are investing heavily in R&D, the data about why subsidiaries are being established shows the same tendency. The main reason to establish a subsidiary is to develop R&D programs according to the data gathered. Currently, listed internationalizing Australian biotechnology companies are in the rst stage of the globalization process, are still domestic focused companies, in the R&D phase of the product development with few products on the market. This data also matches what is exposed by the Australian Government in its 2004 biotechnology industry report (Australian Government, 2004) indicating that most companies in Australia still operate at an early stage of product development. But even though most companies are still in the rst stage of the globalization process, the transition for the second stage is on its way. As the industry is maturing, companies have already begun to shift from their primarily R&D activities to a model of generating revenue from their platform technologies, services or intellectual property portfolios (Australian Government, 2004). For the next period it is expected that the Australian biotechnology industry will continue its transition from being a domestic industry to becoming more an export industry. Globalization is now a forceful process that is unlikely to be reversed (Mrak, 2000). Australian biotech companies are inexorably moving toward globalization. The industry has to start delivering products to all markets in order to gain access to capital and knowledge resources. Once this happens, the industry can proceed along its globalization path. However there is a concentration clearly on high wealth nations and their markets and a neglect of other markets in which a major demand exists in terms of diagnostics, therapeutics and disease eradication. If the situation of the Australian emerging biotechs is being replicated elsewhere, there will be considerable unmet demand where the need is greatest. Future research needs to comprehensively analyze the extent to which SME dominated industries are can be considered to be truly global and whether the strategic

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paths being undertaken are optimal. While the markets of North America and Europe are obviously lucrative, SMEs have always operated in niches. It may be an ill-advised long-term strategy for many high technology SMEs to target the obvious markets at the expense of markets where demand is strong, particularly as developing countries enhance their capacity to pay. The economic, global and technological conditions are set at this moment to create success for the Australian biotechnology industry, delivering good science and good prots. The question remains, as it does for the biotechnology industry globally, just when these economic benets of this tremendous investment will arrive, and through which markets?

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