MOASE, Mr Patrick, Co-Founder and Chief Operating Officer, Marine Biomedical Pty Ltd CHAIR: Welcome. I understand that information on parliamentary privilege and the protection of witnesses giving evidence to committees has been provided to you. I now invite you to make a short opening statement, and, at the conclusion of any remarks, I'll invite members of the committee to ask questions. Mr Moase : Marine Biomedical welcomes the committee's focus on enabling emerging industries in northern Australia. As the first medtech company operating in northern Australia, we demonstrate that high-value, globally relevant, sovereign manufacturing can exist in the regions, but only when policy settings reflect the realities of operating here. We sit at the intersection of marine science, medtech, regional health and biosecurity. Marine Biomedical converts marine biomaterials sourced in northern Australia and translates them into regulated biomedical products with global application. This represents a new industry for the Kimberley, one that contributes to sovereign capability, regional economic diversification and a pathway for advanced manufacturing in the north. However, pioneering a regulated, export focused industry in a remote region presents structural challenges that individual companies cannot address alone. Our first product, our premier product, PearlBone, is currently under review with the United States FDA, with an outcome expected in early May. A successful review would see a Kimberley-made biomaterial enter the world's largest medical markets within the next 12 to 18 months. At that point, the central question is no longer about the strength of our science but about whether the operating environment allows us to remain and scale in the Kimberley, or whether these constraints push advanced manufacturing activities south. For Marine Biomedical, long-term success depends on coordinating operating environments that enable advanced, export focused manufacturing to scale and stay in northern Australia. The export connectivity is critical. Biomedical products are highly regulated and time sensitive, and direct international air and port access materially reduces freight costs, regulatory complexity and product risk. Routeing products through southern hubs introduced avoidable friction that undermines competitiveness and export productivity. Our fit-for-purpose infrastructure finance is equally important. Scaling our operations requires specialised clean room facilities, quality systems and regulatory-grade processing equipment that differ from traditional resource or transport infrastructure. These investments are capital intensive and often fall below conventional infrastructure finance thresholds. Flexible mechanisms, including appropriately structured NAIF support, can anchor value-adding manufacturing in the Kimberley and derisk private investment. Research translation, workforce attraction, liveability and biosecurity systems complete this equation. Biomedical manufacturing delivers its greatest return when it remains close to R&D. At the same time, attracting and retaining specialised staff in the Kimberley depends on livability factors such as housing and services, while predictable, well-resourced biosecurity systems support rather than restrict our medical exports. From our experience, northern Australia does not lack opportunity. It requires alignment between connectivity, capital, workforce livability and regulatory systems so that emerging industries can scale up and stay. Senator DEAN SMITH: Thank you very much for the opportunity to tour your facility yesterday. I was going to say 'laboratory'. Could you call it a laboratory? Mr Moase : It was a laboratory. It's now a manufacturing facility, so I guess it's a supporting laboratory necessary for a GMP facility. Senator DEAN SMITH: Best wishes for the FDA approval in early May. When Marine Biomedical gets to the point of scale and considering increasing scale, what are the impediments that currently exist to do that in Broome and in the Kimberley more generally? Mr Moase : Scaling is the number of factors that are going to have to happen simultaneously. We have to establish our output capacity. At the same time as establishing our output capacity, we're trying to establish a portfolio of products, which means prototyping at the same time as manufacturing. So you have a core product then you potentially have a prototype that's undergoing refinement and development. It's important that we aren't a one-trick company, if you like, or a one-product company. Advancing multiple products in a portfolio makes us attractive for acquisition. We're confined by space and we're confined by expertise, so my key concern is about how the business might challenge the timeframe and be able to look into the future and be able to scale up in terms of the size of our infrastructure at the right time without potential financial stress if there are any delays in that approval process. It's going to be a real balancing act, and I think expertise in the region is going to underpin how fast we can move on that as well. Senator DEAN SMITH: So when you say 'expertise in the region', do you mean the availability of skilled workers? Mr Moase : Yes. We've looked at recruitment through universities and high schools, mainly biology students graduating year 11 and year 12, and we've pitched to a couple of the local colleges here. We've done that to show that there's a pathway. A lot of the upskilling and training is hands on, and the mindset is probably the most important factor. You have to establish that if you understand the importance of quality, repeatability and excellence, then you're a fantastic candidate and the rest can be taught. But there are challenges to kids understanding that they may need to venture into the larger space around the opportunities in the cities. Mining oil and gas is a very attractive first role for some of these candidates that have that right mindset, and the salaries reflect that, so it is very difficult to compete against it. But we need to look closely at the moment because housing is a challenge. So if they're still here and they're still happy to live with their parents for some time, they're kind of the right candidates for us to start focusing on. But it's a steep learning curve. A lot of our training has to be online through webinars that are provided by medtech training companies. Senator DEAN SMITH: You talked about appropriately structured NAIF financing. Can you just elaborate on that for us a bit more. Mr Moase : Currently, our understanding in NAIF is a $100 million minimum loan. Obviously, there's a lot of due diligence around the importance of when you pay that loan back and around having a very clear pathway. Those kinds of loans are relevant to significant businesses, often ASX listed businesses, I'm sure, or businesses that are well past that start-up phase. They're in manufacturing and they're scaling up to bulk quantity rather than the quantities they're at now. We had a look at the NT model of the smaller loan process that potentially helps businesses maybe a little larger than us. I've previously hosted the board of NAIF, and they had the same visit that I presented to you guys—hopefully on the same level I presented to you guys—to give them an understanding that $100 million is not possible for us to facilitate, but would they consider a small loan that allows us to scale up significantly—around the $5 to $10 million mark? We understand the due diligence is probably the same: What is your pathway? What is your return on your investment? When do you expect to pay that loan back? Do you have the right board in place? Do you have a clear model? What is your regulatory pathway? What is the likelihood of either a buyout, a merge or a licensing of your technology? They expect you to stay in the region, so there is no point getting a loan and then saying, 'We're too big for Broome; we can't find staff.' We can't build a big enough facility that is, as we showed yesterday, quite technical in its operation and then move somewhere else because you're effectively defaulting the whole underpinning of that loan. So, for us, it's not a black-and-white solution, but we're kind of engaging in conversations to see how they can potentially look at our situation on a case-by-case basis rather than a defined policy—a black-and-white line. Senator DEAN SMITH: So is that moving from inflexibility to flexibility when they see the nature of the enterprise? Mr Moase : Yes. Sharing the vision and sharing their expectation is important. We share the vision; they share their expectation. But if they don't deviate from that expectation, then you can say maybe it's not right for your business. Then you have to go back to raising capital again, diluting your equity and those sorts of things. A lot of your investment doesn't come from here either. Your private placement comes from your angel investors that are heavily focused on cities. Senator DEAN SMITH: When you speak, you sound like a fintech, when, in actual fact, you're a medtech, aren't you? Mr Moase : I am. I like fishing, though. Does that makes me fintech? Senator DEAN SMITH: Did you get a sense that the NAIF understood the dilemma? Mr Moase : My feedback from NAIF was particularly of the board, and one of the board members was from here. He was absolutely fascinated by the fact that we are taking a by-product. He's also Indigenous as well, so he can see the importance of that custodian use of the product. One of our strategies is looking at the treatment of osteomyelitis, which is bone infection, in the Indigenous population of Australia. In fact, it's common in indigenous populations globally. It resonated with him, but he also was surprised that someone had put this kind of business here. He was proud to be a Yawuru man, and he was also proud to actually say, 'Wow, this is happening in my town.' And he went away understanding that we would be the type of business they would likely want to help. What was disappointing is that I was short-listed on a regular three-month interaction with NAIF to check in and update us on how they were going to progress, whether this smaller loan was going to come to fruition and whether we would continue to be a potential candidate, and I had no response over 12 months. So I've reignited that flame through Regional Development Australia Kimberley. I said that it may not be for us, but the offer to continually engage helps us design our strategy going forward about our capital raise. Senator DEAN SMITH: I would add to that to say that the NAIF is in a constant state of evolution. There is a NAIF amendment bill coming before the Senate shortly. The success of programs like NAIF and others is that they do evolve over time when they become more aware of new enterprises like your own, like the cotton gin in Kununurra, for example, when they go through that real experience of having given the money and accounting for the money as the business starts to grow and change. We would hope that the NAIF is flexible enough to grow with the changing opportunities as well, recognising that it has its own mandate and criteria and those sorts of things. So you were involved in a regular three-month checking in, and then that stopped? Mr Moase : It never started. When I left, it was my understanding that we would constantly have a conversation, engagement or a Teams call to update me and to say, 'Hey, is your appetite for this program continuing to remain the same?' I looked forward to that because it was a way of building value in the business but not constantly looking over your shoulder for your next tranche of payments, so you can advance your product development quite quickly. And I know full well that we need to have a clinical business strategy process to market, a marketing strategy and key opinion leaders that have, if not national, global recognition that brings a lot of credence to what you're pitching to NAIF. So, from that engagement alone, it's a way to improve your business structure by saying that, if we're eligible for this opportunity, we better get our backyard in order. I'm continually trying to emphasise to the board that for us to be eligible we need to move and be dynamic. We have to have diversity in our board, and we have to have the right people in the right locations to advance the product early. So it's a great exercise to go through, even if you don't become eligible, because you improve your business structure. So it was disappointing that we didn't get included, but we are a small fish. There are plenty of small fish in northern Australia; they're the ones that are asking for help. Senator DEAN SMITH: Thank you. CHAIR: Senator Whiteaker. Senator WHITEAKER: Thank you for having us at your facility yesterday. I know we talked through this in a lot of detail while we were there, but I think it would be useful for the Hansard record, perhaps, for you to just talk through what it is that you are working on. What particularly struck me was the connection to Broome and the Kimberley and the story about how it came about. Mr Moase : Thank you, Senator. I'm happy to do that. Marine Biomedical is focusing on developing platform technology by harnessing biomaterials from the marine environment, typically sourced from sustainably certified fisheries, and by-products of those fisheries that typically would be low-value commodities—even to the point that some of them are discarded to landfill—and converting those into groundbreaking medical devices for global distribution. Our premier product, PearlBone putty, which has proven to be extremely successful in our preclinical studies, is a bone substitute designed for trauma medicine. It uses the Pinctada maxima pearl oyster, which is synonymous with Broome and northern Western Australia. It is sourced from Eighty Mile Beach, and it's converted into a bioscaffold for trauma medicine. It's typically used to treat osseous defects, either surgically created or through a trauma situation. It acts as a scaffold and is resorbed by the body and replaced with new bone. It's a fascinating product. It's patented in five countries. We're currently looking at multiple indications, going forward, in dental and spinal pathways. That gives us quite a broad indication for use of a product in its form, and, with a few variations to the product, it exposes us to markets which have a global value of US$5.6 billion. We don't want a big chunk of that, because we're not greedy, and we are a small player up here, but it gives you an understanding of the importance of being able to upscale to meet perceived demand. It's a natural product, and there are no religious links to porcine or bovine—which are common in a lot of bone substitutes—so it's quite attractive when you think of the markets that are available. To have a small piece of that market, perhaps in India and in the Middle East, Muslim and Hindu countries, not to mention those who have a preference for the use of natural rather than synthetic—it's obviously going to be extremely attractive. We haven't marketed the product, so we want to make a lot of noise when we get regulatory approval because we think the uptake is going to be great. But we have to be on the front foot to be able to manage that uptake. It's really important for us to have this business here because the pearling industry is a luxury good industry. It has ebbs and flows. It suffered from SARS and it suffered from the global financial crisis and those sorts of things. At any time where a luxury good is no longer a priority in a person's day-to-day financial importance, industries like that have a tendency to suffer. Pearls are traded in yen, typically, so you have to look at the Japanese market in terms of the fluctuation. With the yen at 112 to the dollar at the moment, no matter how good your pearls are, you are still hamstrung somewhat by trading in a foreign currency. For us, it is about shining a light on the pearling industry and providing opportunities for science related expertise—they can be, as I mentioned before, year 11 and 12 biology students or chemistry or physics students—to say, 'There is an opportunity here for you'. It's an ambitious business, but it's backed by me as a co-founder and by Professor Minghao Zheng, the other co-founder, from UWA. It's backed by some solid science and it's backed by some solid support. We have recently signed a right of first refusal distribution agreement for a product that's not even approved, so there's faith in the market that this is attractive. What we need to do is get it out there. That's really what Marine Biomedical's goal is: to really advance medtech manufacturing here in Broome. Senator WHITEAKER: You talked a bit about the additional barriers that exist for businesses like yours that are trying to get off the ground in northern Australia. I understand that some of them are around TGA approvals et cetera, but I think you also mentioned size and space. Were they the two that you mentioned in response to Senator Smith's questions, about the challenges around the workforce and attracting the skills that you need? You talked about some of the common skills that might exist in the mining industry, for example. I assume it is difficult for a company like yours to match the salary of someone who is perhaps working in oil and gas or mining. What are the things that might attract a local workforce or attract people with those skills to come and work here in Broome? Mr Moase : We need the housing available for them to be able to come. There are some local government regulations around caretaker residence on a property. We are working on a commercial property, and we would be expanding into a commercial property. If we had the opportunity to work in with local government and potentially change the local government regulations around caretaker accommodation on site, you might be able to offset people's salaries by providing reasonable accommodation within the boundaries of your larger facility. But that's not as simple as what we'd hoped. There are some obvious grandfather clauses that exist in a lot of these local governments, but new clauses don't really permit you to be able to do that. You've got to be really innovative. I think I mentioned yesterday our employee share option plan as a strategy for committed employees to take ownership of the performance and the success of the company, and that often offsets the competitive component of the salary. But the cost of living is significantly greater, so you've got to be realistic that equity as options that sit in the background and aren't able to be accessed are intangible until you have a liquidity event. And the age of the people that you attract, that sort of equity understanding doesn't really resonate with, 'What's my long-term achievement here?'—it's 'cash is king' at the moment—so that's quite a challenge. In terms of space, there is lot of commercial property that is underutilised here. But for us to build an extremely large cleanroom at different ISO standards, if our product changes to require different ISO standards, there is no expertise here to build that. What we are doing is importing or relocating, if you like, everything from the regional centres anyway. Cost may be beneficial by acquiring it in Perth, but then you have 2,500 kilometres to relocate all that infrastructure, and then the technology or the expertise to assemble it. That's a big challenge in itself, meaning they can't go home at night. They are here for two, three, four, five weeks to build it. Your costs are significant that way. One of the things that's really attractive to a business like ours is the R&D tax incentive, but one size does fit all in Australia with the R&D tax offset of 43½c. My pitch to this committee would be: is there a way the government would look at those businesses that meet key sets of criteria around made in Australia, manufacturing in regional Australia, setting up in northern Australia, access to a much more attractive R&D offset not applicable to everyone else, no matter where they live. So 43½c in Perth shouldn't be 43½c in Broome, or in regionals. Senator DEAN SMITH: Sorry, Senator Whitaker. Meaning that the gateway would be that you would still have to meet the R&D tax offset requirements. So if you had one, and then are in a regional location, that's how— Mr Moase : Yes. Senator DEAN SMITH: Okay. So it's an additional benefit that may be available to you after you've been approved for the offset if you meet these other three— Mr Moase : Absolutely. It's incentive to go north in your R&D tax offset. As startups, it's really what improves your cash flow, because it's a refund in direct cash. We have a very stringent and a very good R&D tax offset. I've spent the last 20 years in R&D tax in relation to a lot of projects that I've worked on in the pearling industry, and there is absolutely no problem with us justifying it. In fact, those that are serious should be willing to be audited if there's an uplift, in terms of saying, 'What if, instead of being 43.5c in the dollar, it was 55c?' That may trigger an audit to make sure you continue to remain legitimate, but you're legitimate at 43.5c. Otherwise you're not getting that. Senator DEAN SMITH: That's the key, I think. That's right. Mr Moase : Is the government willing to maybe look at that to say, 'We want a manufacturer in Australia'? PearlBone was just approved for a logo and Made in Australia certification. We're proud of that. But we're also made—and one of my pitches in a presentation, where the company won a WA regional innovator of the year award in 2025, was 'made in Australia, made in WA and made in Broome'. So, if we're not ticking those boxes in terms of what the federal government wants, we probably can't do much better. R&D tax offset loading would be an amazing benefit. CHAIR: It's a good question to put to the committee to put to the government! Mr Moase : I thought about that last night— CHAIR: Did you? Mr Moase : after realising how much R&D we do, but we're still treated like—even though our address might say— CHAIR: What is that comparison at the moment? In terms of the tax offsets, if you're sitting in a regional area—not quite northern Australia but you've got other regional areas—what's that percentage at the moment? Mr Moase : It's 43½c. CHAIR: So, when you were thinking about it last night—43½c in the dollar—what were you thinking of? When you think about it, what would you see as an incentive for northern Australia and for innovation and development to happen in places like that? Mr Moase : It dawned on me yesterday that medtech companies in Australia—I'm familiar, or becoming more familiar, with WA's medtech industry. Minister Dawson, who lives in Broome, is the minister for quite a complex portfolio. He's the Minister for Regional Development but also minister in medical innovation. I sit on a medical innovation advisory committee in terms of being the one person that's not based in central Perth or in that southern part of the state. We're the one lone wolf, if you like, up here. A lot of those guys are all recipients—and legitimately recipients—of an R&D tax offset. They all get exactly the same 43½c, and most of them, if they're not profitable, will continue to benefit from the 43½c. Then I thought about it and said, 'Why are we suffering from the same return when we have a significantly different living— CHAIR: Environment. Mr Moase : Yes—environment, living standards and challenges about being in this space? You have a look at the CPI up here versus CPI down there and you kind of say to yourself, 'You're grouped identically when you know you're not.' Is there an opportunity for it to be looked at from a—you've taken the risk. I think one of the definitions I had previously, which I removed from here, was the definition of pioneering, which is doing something that's never been done before. For us, the definition of pioneering is taking the risk that others didn't. What's the reward for that? You can have fantastic recognition of the gamble that you've taken, but you're still an R&D company, if you like. You're still a medtech company and you're still within the confines of the great state of WA, but you're not the same. So, looking at that pound for pound, maybe there can be some visionary understanding that the guys who are working hard to be here and have a legitimate R&D tax offset should probably be looked at a little differently, in terms of meeting some of the guidelines that are specific to being here. CHAIR: Would you be open to—I was taking a question on notice—exploring that a bit more and putting in a supplementary submission to the committee specifically on that area. If Housing and all of these things are added challenges, is the R&D component enough? Mr Moase : Yes. If your claim has a loading because of where you are, then we ask the question about how we attract expertise. I'm not suggesting that the government says, 'If we're going to give you this loading, you've got to funnel it there.' But, as a business co-founder—and this is closely linked to our budgets—I can say that we have the leverage to be able to say, 'We can offset your rent using that extra loading that we might get that makes it attractive for you to stay here.' We could advance some of our projects. You're encouraged for R&D innovation when you know it's an incentive for a refund. So you're going to push R&D, which is what we want to talk about. For our business, it's innovation in the region, and innovation is research. You've got universities here where you can utilise bench space and you can bring in that expertise. The regional medical doctor training here—I've already engaged a lot with those guys. They're fascinated with our business. I've had some of them come and visit. They're being incentivised to work regionally to offset—from my understanding, and I may be wrong—some of the costs of their university fees, because they're prepared, once they become doctors, to do time in the bush. So we're looking at how we get clever about incentivising clever research that's generated here. I know James quite well from a previous conversation. James has the Kimberly Marine Research Station, and he's pushed for research to be done in the region as well. He has an R&D program that I'm aware of. CHAIR: Would that be R&D tax offset or would that be more zonal rebates or tax rebates for the different zones? Mr Moase : Let's look at everything. Look at your company tax rate. Potentially look at your R&D tax offset loading. We get a regional loading, in terms of our tax return, for operating above the 26th parallel. Depending on the region and the grade that you get, it offsets your tax. It hasn't moved, and CPI has increased and the cost of living has increased. We want it to be a live and well-monitored offset. I'd be a fan of a larger offset—a much larger offset. You can budget well on that because you know what your R&D expenditure is. Probably around 40 per cent of our expenditure is pure R&D. Then, indirect R&D to support that is probably another 20 per cent. Let's say you're just using round figures. To have a $1 million operating expense and a 50 per cent refund of 500 kay coming in the next, you're stretching your life out quite a lot, knowing that that sits in the background. It's another way to raise investment, because of that offset. It's very attractive to have an R&D offset when you're pitching to investors. CHAIR: Yes. I have one more, in terms of the training. Thank you for making the time and for showing us your facility yesterday. I don't think it was what I expected, but it was fantastic to see that. There was that young lady who was there. There's you. I think you said you had three people. Mr Moase : Yes. CHAIR: When we look at the medical and the sciences, if you were to get the—is it FDA?—tick-off and you then went to the next step and expanded the program, what would be the capacity to meet the requirements if everyone said, 'Yes, we want your product'? Mr Moase : What's our current capacity? CHAIR: Yes. Mr Moase : I think I mentioned yesterday about 20,000 doses. That's not doing too much in terms of scaling up, but we worked out that's 40 weeks of manufacturing. We're in the process of optimising manufacturing and looking at our post-prototype proof of concept to small scale-up. We're thinking 20,000 doses, with a little bit of optimisation of our equipment to run in parallel rather than having a single piece of equipment, if you like. The capacity of our clean room is related to the number of individuals that are allowed to be there, and then we exceed that. So we've got to stay within that standard. I think I mentioned yesterday that it'd be a great problem to have more demand than our capacity, but we've got to see that early, and to see that early is going to be a very strategic decision that the company needs to make: do you expand for uptake now or do you say no to orders because you can't meet that capacity? It's probably not a good thing to say. It's fantastic when you build demand for your product. Having a waitlist, if you like, might be attractive for certain things, but it may not be attractive for medical devices. So you've got to build relationships with distributors and surgeons. If they share your story and the results of your product then you may get people coming and knocking on the door and saying, 'I want this much.' We don't want to be saying no to 5,000 doses in three weeks. But realistically, to get your product qualified, you've got to be manufacturing well before you have an audit, and you've got to have them sitting on the shelf. We're developing a three-year shelf life, and we want product. You typically wouldn't distribute anything that has less than six months shelf life unless they've run out and they're desperately going to take it, because they're paying for a product that would be redundant by the time they get to it. So it's a fantastic balancing act. You've probably heard about the challenges about losing international flights. One of our strategies was being able to go to BIA really quickly and drop off shipments of product that could go into South-East Asia and then across to the US in three days. I can ship a product, using FedEx, to the US and have it in New York in three days. For almost the same cost, it takes me a week and a half, sometimes, to get it to Perth and then across to Victoria to be terminally sterilised. Yet I can have it over there, and it will be in the middle of being analysed within five days, after it arrives in three. So we kind of go: how important is Broome International Airport for us if we want to get this product into a hospital fairly quickly? We know we can do it. So we've got to build up those relationships around transits, but at the moment we would book a shipment and we would have an airfreight guy turn up at the same time we have a road freight person turn up. So there's even a disconnect in that space. These are companies that should be operating in a much more streamlined way, but they're only as good as the agents they use here. We could have a product that we say needs to be in Victoria in two days to be irradiated on a weekend, and a road freight company will turn up and say, 'It's not going to even be in Perth in three days.' Then it might sit down there, and then it'll go in a truck across. It is frustrating, but that's the card we're dealt, so we've got to work extra hard for that efficiency. We've got to map that out before it happens. CHAIR: If Senator Smith and Senator Whiteaker have no further questions, Mr Moase, I thank you for your evidence today, and I thank you for yesterday. The committee has agreed that responses to any questions on notice—we'll tease out that bit that I asked you to expand on in terms of the tax offset—should be provided within two weeks of you receiving a copy of the Hansard transcript. Thank you for coming today. Proceedings suspended from 12:14 to 13:17 .