Venture capitalists and institutional investors are keen to back a new $250 million federal government venture fund that aims to invest in promising biomedical discoveries and keep funding them until they become global giants.The Biomedical Translation Fund (BTF), which was officially launched on Wednesday by innovation and science minister Greg Hunt, should reach $500million in assets because each dollar of government funding will be matched by private investors.It is fitting that Bill Ferris, who is chairman of Innovation and Science Australia and co-chairman of CHAMP Private Equity, spoke at the launch at the Walter + Eliza Hall Medical Institute in Melbourne. He has been the driving force behind ensuring that Australia no longer squanders its world class position in health and medical research. He was a member of the Simon McKeon-led inquiry into health and medical research in 2013. It recommended the government create a translational fund.The new fund is a partnership between the Federal government and the private sector.
Ferris is on the record as saying that the BTF will lead to an expansion of Australia’s “outstanding clinical trials capability and a deepening of the eco systems of biopharmaceuticals, medical devices, processes, technologies and procedures; and services, including digital health”.You don’t have to look far to find evidence of the clear market failure in relation to the provision of later stage venture capital funding for biomedical discoveries. Chris Nave, Melbourne managing director at Brandon Capital Partners, was personally involved in the sale to offshore interests of a couple of successful biomedical companies.Brandon Capital, which is backed by four industry superannuation funds, was an investor in Spinifex Pharmaceuticals, which was sold for $725 million. It was also an investor in Fibrotech, which was sold for $560 million.Both these companies had reached a critical stage in their development which required a last dose of capital investment before making the big leap on to the global stage.Spinifex and Fibrotech are examples of Australia’s over-dependence on offshore venture capital funding and bio-pharma funding. This leaves Australia’s brilliant medical research detached from the high value wealth creation following Phase 2 and Phase 3 trials.Super funds that have backed Brandon Capital are expected to show a keen interest in the BTF. These include AustralianSuper, First State Super, Hostplus and MTAA Super.
The BTF aims to foster a new culture whereby medical research is commercialised right through to the point where it becomes an export industry. We need a bunch of new global companies in the same league as CSL, Cochlear and Resmed in order to show that science and innovation create jobs. Nave says the beauty of biomedical companies is that once they have secured global patents and jumped over strict regulatory hurdles they can begin manufacturing in Australia. These manufacturing facilities, such as those in Sydney for Cochlear and in Melbourne for CSL, are high wage facilities. The critical point is that these are industries that are not vulnerable to being exported to low wage countries.
Anna Lavelle, chief executive of AusBiotech, says the BTF has the potential to be game-changer that will help change the conversation in Australia about science and innovation. Andrew Cuthbertson, chief scientific officer and R&D director at blood plasma company CSL, says too many Australian biomedical companies have listed on the sharemarket too early in their life, placing enormous pressures on the management of these companies. But the capital provided has not been sufficiently patient to take the companies through to successful product delivery.
The BTF has been structured to make it attractive to investors and venture capital fund managers. The fund will share returns between the government and investors once it achieves a return equal to the government bond rate. After that point the balance of the relevant distribution will be split between the federal government and the private investors on a 40:60 basis.Venture capital funds have been given until September 14 to apply to manage licensed funds with terms of 15 years each. Hunt said: “The selection of private sector fund managers, backed by astute professional investors, will be competitive to ensure that they have the skills and expertise to make investment decisions that will pave the way for long-term health and business wins. “Ferris says the BTF will help retain and promote technology development and clinical trials in Australia, create high value jobs, retention of technical expertise, advanced manufacturing and taxable income, and increase company valuations to international levels and deliver higher returns for investors. He says the worldwide demand for better health seems irreversibly strong and Australian biotech companies have begun to show what is possible. Good examples include Hatchtech for head lice and Vaxxas with a nanopatch alternative to needle injections. There are many more projects in oncology and pain management. The BTF will be administered by a committee of the ISA board. The chairman of the committee is Peter Wills. Other members include people with experience in biotech and VC, including Chris Roberts from Cochlear, Melissa Little, Deborah Rathjen, Jeremy Samuel, Fiona Pak-Poy and Leanna Read, who is the chief scientist in South Australia The CEO of the Australian Private Equity and Venture Capital Association, Yasser El-Ansary said: “We know we have world class health and medical research capability, but we have to do better at translating and commercialising those discoveries.”
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