When I was a kid, my Dad and I drove across the Nullarbor Plain, from Adelaide to Perth. I will never forget the experience and it rests in my mind as one of the most visually spectacular stretches of road I have ever driven along. It also very much reinforced my perception of how remote and far-flung from the rest of the world a place like Perth really is. But when it comes to science, technology and innovation does physical remoteness have any bearing on the quality of science and technology commercialisation? In this day and age, it shouldn’t, but does it?
A lot of the companies I talk about in this forum with some degree of skepticism – not all, but many – come from far-flung corners of the Australian continent. Most of the companies I dislike the most are based in Queensland or Western Australia. I was thinking a bit about this, this morning, as I was sitting out he front of one of my favourite Melbourne coffee shops, enjoying a few moments of crisp but sunny winter air and I thought – just for fun – I would analyse a dozen or so of my “least favourite” biopharma companies and just see whether distance makes a difference. When I used to work in business development, some of my pals would joke about the 2,000 mile rule, where wives or girlfriends ‘didn’t need to know’ if something took place 2,000 miles away from home. Sometimes when I see biomedical technology companies spring up out of a mining shell in Perth, I wonder if the same applies to biotech and quality of corporate governance.
This is the very sophisticated and complex analysis that I undertook … I took 13 “therapeutic” biopharma companies that I like the least (so, sadly, I couldn’t include diagnostic companies or mixed-bag players like Admedus). For each company, I noted the market cap of the company and the distance from my seat (the coffee shop) to their corporate HQ. I then ordered the companies from closest to furthest away according to Google Maps. I have to admit, when I plotted out the results, I had to have a good chuckle because it pretty much captured my actual opinion about the relative quality of the companies, noting that I dislike all of these companies. I probably dislike Neuren the least, and Alchemia and Phylogica have probably earned the right to sit at the bottom of the dung heap.
I will also note that I did not include companies like Phosphagenics or Patrys – they’re just not even viable and clearly would have messed up my elegant hypothesis.
Removing the clutter of the data and just mapping the trend-lines of distance from my coffee shop vs market cap, is highly revealing and may serve to provide good guidance to both investors and company CEOs alike. For example, one interpretation could be that if you have a really crap company with absolutely no substance whatsoever but you want to be successful, maybe you should base it in Melbourne, or possibly Sydney. Another possible interpretation is that biomedical companies that emerge in Queensland or Western Australia are just too far away to be of any quality. There may be some truth to that, given that the best biomedical research is here in Victoria (yes yes, I am baiting). Of course, this last statement is unkind – and fails to acknowledge that UQ/QUT is generally an impressive research powerhouse with a commercialisation track-record that probably leads the country.This post is, of course, tongue-in-cheek, but it does make you wonder.
I actually generally do think that a company in QLD or WA is likely to be poorer quality, not because of technology (or technology potential) but because there is a separation of distance between the company and shareholders. If one considers the retail ownership of ASX-listed companies, NSW and Victoria represent a populace majority of almost 14m people – but how many small parcel shareholders are going to get on a plane and attend an AGM, and give hell to an under-performing board? Most of the industry’s larger money sources are in Melbourne and Sydney as well, and while major shareholders are certainly going to get on a plane/phone and engage with CEOs, there is still an element of the ‘2,000 mile rule’ when it comes to corporate governance and shareholder accountability. This is why I think we need more shareholder activism in this country and a stronger culture of board accountability.