"If Genetic Signatures can replicate its Australian success in...

"If Genetic Signatures can replicate its Australian success in the US, itwill generate a big pay-off."
Chris Abbotton risky biotechs and his love of trees

Carrie LaFrenzSeniorReporter

Nov 8, 2019 — 12.00am

Maple-Brown Abbott co-founder ChrisAbbott says finding biotech executives is so difficult that he is willing tohelp bridge the gap by offering, for a second time, a $25,000 scholarship tohelp a qualified doctor complete an MBA.

The 87-year-old funds doyen was an angel investor in Genetic Signaturesand has ploughed more than $16 million of his personal fortune into thebusiness, defying his hard-earned reputation for picking stocks conservatively.

Abbott co-founded Australian fund manager Maple-Brown Abbott, which wasknown for its conservative value investment style and manages nearly $15billion today.

However, Abbott has privately been a long-time supporter of the riskierbiotech sector. His other bets include Nanosonics, Acrux and Australian PrimaryHemp.

In an interview with The Australian Financial Review, hecautiously offered up another chance for a student at the Royal AustralasianCollege of Physicians to bag the $25,000 pot if they can complete an MBA.

"I suppose, if I was askedagain, I would say probably say yes," he said, noting that the firstscholarship offer was made eight years ago but ended without any takers.

In a rare interview, Abbott told the Financial Review thereis a great need for individuals who understand business and medicine.

"It is not easy to find," he says. "People in medicinedon’t want to go into business. It’s a different mindset."

Abbott says he was "lucky" to find Genetic Signatures CEO DrJohn Melki, a molecular biologist.

Biotechbeginnings

The biotech world piqued Abbott's interest in 1981 after he met formerCSL chairman John Shine and molecular biologist Jim Peacock, who wasAustralia's chief scientist from 2006 to 2008. This was before Abbottco-founded Maple-Brown Abbott with the late Robert Maple-Brown in 1984.

Abbott, Shine and Peacock started a company together called Agen, whichflourished for a while. Abbott remained on the board until he retired from therole in 1994.

He then became involved with scientist Jim Aylward, who has developeddrugs to fight skin cancer. His company Peplin Biotech was sold to a Danishpharmaceutical company in 2009 for $350 million.

Abbott has invested in at least 25 biotechs over his career.

"The most successful would be Peplin, then Nanosonics, and GeneticSignatures will be one day the most successful," he says. "Acrux wasgood once. But they lost their patent in Indiana."

Genetic Signatures listed on the ASX in 2015 at 40¢ a share and now isseeking to raise up to $37 million through a placement and share purchase planto fund the sale of new disease detection technology in the United States andEurope.

It last traded at about $1 per share, pushing its market cap to $120million. Abbott's private investment firm, Asia Union Investments, owns 26.7per cent of the company he has supported since its inception in 2001. Othermajor investors include HK based healthcare fund Karst Peak Capital, whichcontrols 13.3 per cent.

If GeneteicSignatures has a 50 per cent growth rate per annum in America, then it will goa long way.

— Chris Abbott,angel investor

In the latest capital raise, healthcare-focused funds such as RegalFunds Management and Perennial Value Management have also joined.

Abbott believes that private capital is better equipped for "makingjudgments in the biotech sector" than governments, although he says thegovernment should encourage universities to offer MBAs that specialise inbiotech.

“I don’t know what to say about government support for the sector. I'mnot a big believer in it," he says, noting that the government's exit outof CSL was a good move, as was its decision to privatise Commonwealth Bank ofAustralia.

Melki says getting science funded is critical.

“We were fortunate to have an angel investor like Chris," he says."What drives us is helping people. Ultimately you save lives.

"Biotechnology is designed to help in healing the world. That issomething that drives investment. What drives us is building a valuablebusiness."

Securing a clearance from the US Food and Drug Administration is a keygoal for Genetic Signatures in the year ahead, he adds.

The development and commercialisation of its 3base platform technologyis the cornerstone of its EasyScreen Pathogen Detection Kits, which reduce thegenetic complexity of infection detection in molecular testing. The testsenable hospital and pathology clients to use standard equipment and proceduresto more accurately screen for a wide array of infectious diseases.

These days Abbott plays golf occasionally, admits he struggles atSudoku, drives a blue Tesla and still has a deep love of trees. He had aproperty at Jamberoo south of Sydney for nearly 50 years where he grew pine andredwood sequoia trees.

Time sensitive

He says the biotech sector has a big problem for the average investor:time.

"In IT, you get a bit of software and the market will recognise itand you are doing well. Or if you find a gold mine you capitalise fast,"he says.

"Peplin took 10 years and that is the best you could imagine. Wehave been at this [Genetic Signatures] since 2001 – so 18 years."

If Genetic Signatures can replicate its Australian success in the US, itwill generate a big pay-off.

Bell Potter estimates Genetic Signatures' target markets in the US,Europe and Australia were worth $US6.4 billion ($9.4 billion) in 2018 and aretipped to grow to $US10 billion by 2026.

However, with the government's axing of the Innovation Investment Fund(IIF) scheme in the 2014 budget, there are no programs to support early-stagefunding for Australian start-ups.

There are concerns that the pipeline which takes great ideas to themarketplace – ideas like those underpinning global successes Cochlear, ResMed and CSL –will simply be choked off.

Asked if Genetic Signatures could be the next CSL, Abbott says he won'tknow until it's expanded fully into America and Europe.

"If it has a 50 per cent growth rate per annum in America, then itwill go a long way," he adds.