Good morning Armchair Army,

Welcome to today's edition of The Armchair Analyst, a 5-minute daily update on the ASX life-sciences sector.

Yesterday, BIO 2026 kicked off, with MULTIPLE transactions.

Topping the list is AbbVie’s US$10.9 billion acquisition of Apogee Therapeutics for a range of autoimmune disease and anti-inflammation assets:

This was amongst a number of other smaller deals announced on day one:

(Pretty crazy in the US when the smaller deals still have a “B” behind them)

BIO is the world’s largest and most comprehensive biotech and life sciences partnering event.

20,000 people from 70 countries, to talk biotech.

Australia sent a contingent of high-profile names to answer one important question: 

Why Australia?

Research? Clinical Trials? Talent? Science? Investment?

Or a mixture of all of it.

The reality is that the biotech industry doesn’t operate on a domestic scale. 

It’s a global industry.

(And those with the biggest cheques tend to actually come from overseas)

This means that every dollar of investment that Australian biotech companies are fighting for is in a global competition, not just a local one.

There is some amazing science being developed around the world.

Just this morning, China announced that it had approved the first-ever CAR-T cell therapy for solid tumours:

A genuine breakthrough for the cancer CAR-T industry.

I recently wrote about how Chinese biotech is soaking up a LOT of M&A activity, which makes it difficult for Australian biotechs…

Read more here: The Competitive Landscape of the Healthcare World Cup 

So, championing our industry abroad at events like BIO and securing deals for Australian biotechs are essential parts of competing on the global stage.

But while Australian biotech is being showcased overseas, an existential threat is emerging domestically for the industry.

The budget.

Particularly on how changes will affect risk capital.

Because the reality is… 

All capital is risk capital for biotech drug developers.

High-growth industries are lobbying hard right now.

Startups. Tech. Biotech…

Even the WA government has lobbied for more tax carve-outs for early-stage mining and exploration.

… everyone is fighting over a shrinking pie.

The government has proposed carve-outs for small businesses and startups (including biotechs)... 

But the question is whether these carve-outs go far enough to help the biotech industry:

I’ll make my position on this super clear.

I think that ALL productive assets: stocks, shares, businesses should have the lowest possible tax to encourage investments.

Grow the pie, rather than shrink it and fight over the crumbs.

I understand the need for tax revenue for healthcare, government, roads, the army, etc…, but I think there are better ways to tax (and spend less money).

The US is having its own version of this discussion with SpaceX's IPO, creating the world’s first ‘trillionaire’ in Elon Musk.

If you want a bit more into the political debate (capital vs labour), there is an interesting segment in this week’s All In podcast talking about this, worth a listen:

(Start from 19:35 in)

So, it looks like the government is going ahead with carveouts and the budget as planned.

I had a chat with someone yesterday who cancelled his family holiday, paused his business, and has spent the last several weeks lobbying senators to defend the biotech industry's position.

AusBiotech has been great too.

It is currently running a survey to finalise a submission to the government (which you’ll need to fill out by the 28th of June).

Today, I’ll share with you something a little different. 

This is my submission to the government on this issue, with a lens specifically on the biotech industry and its importance to Australia.

But first…

Tetratherix (ASX: TTX) secures ethics approval for an international pivotal trial to evaluate its platform technology for spacing. Recruitment has also concluded in the pilot trial, with good early results. (TTX)

🪑The spacer platform is just one of six different applications for TTX’s technology - an injectable polymer that is liquid at room temperature and hardens in the body.

There are two leaders in the space, SpaceOAR and Barrigel.

Both of these products were acquired by large pharma companies for ~US$600M (SpaceOAR in 2018 and Barrigel in 2023).

Speaking to a friend of the newsletter, Surgeon Dan, who has used both of these products extensively, 

They are both still good products, but each of them is flawed.

TTX is positioning its spacer technology at the intersection of the two: safe AND easy to handle.

Tetratherix was my first Armchair Analyst High Conviction Pick, and I own 18,500 shares in TTX.

Tetratherix initiation note: The Tetratherix Story (TTX)

CleanSpace Holdings (ASX: CSX) announces ISO certification for its respiratory protection device. (CSX)

Avecho Biotechnology (ASX: AVE) will hold a webinar to discuss interim analysis results for its Phase III trial. (AVE)

🪑  Webinar set before the results announced… is this a good sign?

US-Based company Definium Therapeutics published positive top-line data for its Phase 3 LSD (psychedelics) trial for Major Depressive Disorder. (Fierce Biotech)

🪑 Another big tick for the clinical evidence supporting psychedelic treatments for depression.

One quote from the CEO that stood out: “It’s really a magnitude, of a rapidity, and of a durability that we’ve never seen before in a Phase 3 study.”

This should encourage more research into the sector, where ASX-listed Emyria is well placed to now operate clinical trials (with the largest network globally of trained therapists for psychedelic medication in the world).

The macro is just heating up, and Emyria is years ahead of the game.

Emyria is my second Armchair Analyst High Conviction Pick, and I own 2 million shares in EMD.

Emyria initiation note: The Emyria Story (EMD)

Imagion Biosystems (ASX: IBX) enters a trading halt pending an imminent announcement regarding a capital raise. (IBX)

InovIQ (ASX: IIQ) has been on a massive run over the last few days. No news, but my old outfit, Next Investors, published a great article on the stock last week. (Next Investors)

Impact on the Australian Biotech & Medtech Sector

To The Australian Treasury,

I am a healthcare analyst who has covered ASX-listed life sciences stocks for almost seven years. 

I have strong networks across the public markets and investment community, and I speak regularly with ASX-listed CEOs, retail investors, and institutional investors.

As it stands, this budget will harm the innovation and longevity of Australia's biotech and medtech industries.

I want to walk through the policies I think will have the biggest impact.

Biotech and medtech R&D companies are, by definition, high-risk assets.

The CGT discount is a critical incentive for investors to back those assets, so they can be developed into, hopefully, life-saving medicines and devices for Australians (and the rest of the world).

Funding from charities and government bodies alone is not enough to take an asset through the clinic and into the market.

There needs to be risk capital.

A good example is the wonderful work of FightMND (the Big Freeze). Since 2014 it has raised around A$157 million and invested more than A$115 million into MND research and care, of which roughly A$100 million has gone specifically into cure research.

That is a decade of extraordinary national fundraising, and it would barely cover the cost of a single Phase 3 clinical trial.

Developing these assets is incredibly expensive, and it requires investors to take on risk in exchange for a return.

Not every trial succeeds. That is the nature of financing a drug toward approval.

For the investors who shoulder that risk, the ones funding the lion’s share of the trials and the R&D, the reward has to match it.

If I invest $1,000,000 across ten companies, I am relying on one of them to deliver an outsized 10x return to offset the 9 potential failures.

Such is the high-risk, high-reward nature of investing in biotech/medtechs.

If that windfall is capped and the capital gain tax is taxed at 47% (compared to the current effective rate of 23.5%), then the risks no longer match the reward.

When that happens, investors stop taking those bets, research funding stops, and Australia loses its competitive edge in the biotech sector.

Drug development happens on a world stage. Australian companies are competing with the rest of the world for capital, investment, and attention.

For a late-stage developer, the primary exit strategy is a licensing deal or a takeover by a big pharma company.

2026 is on track to be one of the biggest years on record for biotech M&A, roughly US$106 billion in deals by early June, across more than 200 transactions, putting it on pace for the strongest year since 2019.

Almost none of that involves Australian public companies.

Part of the reason is the rise of competitors like China, which has made biotech a national priority and is pulling in serious investment.

If Australia wants to stay competitive, government policy should encourage investment rather than make it harder.

With that backdrop, here are the specific proposals that, left unchanged, will damage the industry.

Government Proposal: at the 10-year mark, the R&D tax offset switches from a refund to a rebate.

Why it does not work: the 10-year mark is precisely when most biotech companies are entering their larger, more expensive clinical trials. Years 1–10 are largely benchtop and early-stage work. Years 10–20 are when these companies need the refund the most.

Biotechs do not generate steady income. They generate little, then potentially a lot, all at once on a drug approval. The R&D tax refund bridges the gap between trial costs and the capital for biotechs to raise from the market. It is the backbone of nearly every listed biotech’s funding strategy.

Likely outcome: Australian life sciences companies will spend years 1–10 here developing interesting science, then move their operations offshore when it is time to run larger trials.

The growth from years 10–20 is where most of the value is realised; it is where the billion-dollar companies and industry staples are built (Telix, Clarity, Mesoblast, Neuren). Pushing companies offshore at that inflection point means Australia loses out on the winners and wastes upfront R&D spend.

So the Americans get to enjoy our talent and our science at exactly the moment it pays off.

Suggestion: Do not change the R&D tax refund.

Proposal: There is a $10M lifetime cap on the CGT discount.

Why it does not work: for retail mum-and-dad investors, this is not an issue ($10 million would be a huge windfall for any individual investor). But for the larger institutional investors, the ones writing the $10M cheques that finance late-stage trials in Australia, a $10M cap is effectively the same as having no discount at all.

Take Brandon Capital, Australia’s largest life sciences fund, whose latest fund closed at A$439 million. A $10M capital gain would be less than 3% of the funds under management.

Even the smaller funds active in the space, Synthesis Bioventures, Fidelity, and Australian Ethical, would see the cap apply to only a token portion of their capital. 

It would not change their behaviour, because from their perspective, they are looking to make outsized returns on the entire FUND, so a $10M cap is too small.

These large institutional funds are the primary source of funding for most biotech companies.

Suggestion: Leave gains on biotech and medtech investments uncapped.

If the carve-outs apply only to private companies, the result is simple: companies will just stay private.

That is bad for three reasons.

FIRST, it means less retail investment in healthcare companies. 

Retail investors play an important role in getting healthcare companies “out of the mud” when trials are delayed, and more capital is needed. 

4DMedical is a great example. Their $14 million capital raise last year was primarily backed by retail investors (in the Share Purchase Plan). Without it, the company doesn’t survive. 

Six months later, 4D Medical is raising $150 million off the back of the successful approval of its lung imaging device, and it is now a top-20 ASX healthcare company. 

Retail plays an important role when institutional money fails. Similar stories to those of Neuren and Mesoblast.

SECOND, biotechs will avoid listing on the public market, removing a crucial liquidity lever for private institutional investors. 

Without that exit lever, investors will be far less willing to take biotech positions - even in private companies.

THIRD, public-market disclosure is a good thing in biotech, particularly in an industry that can be vulnerable to abuse and overstatement. 

We should be encouraging the governance and transparency that an ASX listing demands, not discouraging it.

Suggestion: Ensure the carve-outs explicitly include public companies.

Government Proposal: To be eligible for the carve-out, the shares must be held for 5 years.

Why it does not work: it takes 15+ years for an ASX-listed healthcare company to move from benchtop to commercialisation. Along that journey there are multiple value inflection points where investors can bank wins. Namely, catalysts driven by data readouts or regulatory milestones (Phase 1, Phase 2, Phase 3, IND filings, and so on).

Investors who bank those gains then roll them into other early-stage biotechs, financing more research across the board. It is the classic waterfall: back a stock, the stock re-rates on a good result, sell, and redeploy into the next early-stage company.

This creates a healthy liquidity system in the industry (and the public markets).

A five-year hold is too long. It locks up the capital pool, investors hold purely to qualify for the discount, and drains liquidity from the market.

Suggestion: A three-year hold period would better reflect the time between investment and a meaningful catalyst (such as a Phase 2 readout) while still addressing liquidity concerns.

Government Proposal: In order to be eligible for the carveout, a company must be younger than 15 years for biotechs and medtechhs.

Why it does not work: In biotech land, 15 years is still a spring chicken.

I had a dig into how long Australia’s most successful biotechs actually took to get from incorporation to their first commercial product. Here are some examples:

The pattern is clear: the genuine value creators routinely take 20 years or more, and a 15-year window risks penalising companies right as they reach the finish line.

Suggestion: move the company-life threshold to 20 years.

In my opinion, the best reform is no reform.

Leave the CGT alone for shares and non-property investments.

Carveouts create complexity, and the only people who win in complexity are the lawyers and accountants at tax time.

BUT, if you want to make carve-outs for the biotech and medtech sectors to maintain investment in Australia and enable it to compete on the world stage, then it must be done the right way.

A few targeted adjustments would protect the very “winners” this country should want to keep onshore.

Kind regards,

Jason

The Armchair Analyst

See you all tomorrow!