The pandemic is steering the venture capital lens away from shorter-term sugar hits found in the technology sector in a “new dawn” for the local life science and biotech fields, one of Australia’s pioneering investors says.
Bill Ferris – who founded CPE Capital in 1970 and now chairs the Brandon Capital-managed Medical Research Commercialisation Fund (MCRF) – said COVID-19 had boosted the focus on personal health and disease prevention.
But, despite the nation’s strong medical research capabilities, investment has lagged that of other sectors because of the longer lead time a product is commercialised owing to strict efficacy trials and regulatory safety hurdles.
“It could take many years to say well ‘our investment is ready for a scale up and the marketplace’,” Mr Ferris told The Australian Financial Review.
This is why the MCRF will set up a dedicated incubator for the sector using $40 million of government-funding from the Medical Research Future Fund (MRFF) scheme.
The incubator will dole out the funding in two streams over the three years.
An initial $20 million tranche will provide funding to pre-clinical biomedical technologies to guide the assets through to seed investment, while a second $20 million will support clinical development of disease therapies.
Mr Ferris hopes it will kickstart a decade of “health and medical research start-ups” with “IPOs and unicorns that will actually outsize anything in the other industries”.
“We are seeing wonderful breakthroughs across the disease spectrum coming out of Australia. These are global challenges, not just about the Australian situation, there is a global health challenge and marketplace.”
Superior to patent box
He said the government support for the incubator will likely have a more significant impact on medical innovation than the patent box tax breaks introduced in the last federal budget.
The patent box will allow biotech companies to pay just half the corporate tax rate on any profits derived from patents registered in Australia when it comes into effect next July.
“I’m not against the patent box, but I’m not a champion of its ability to help early stage breakthrough stuff. The companies we plan on working with have years of non-profit development ahead of them,” Mr Ferris said.
Nevertheless, he praised the federal government’s MRFF scheme.
“It is probably one of the largest funds at a government level worldwide and does give us the opportunity to take some high-risk moves that would have never been taken before,” Mr Ferris said.
The MRFF has $20 billion of funds overall and is designed to help develop ideas and make projects viable and improve medical care.
Mr Ferris said the MRFF was a crucial piece of “national infrastructure” as it provided “a credible pool of high-risk money available to researchers in their labs to really have a crack at it”.
He hoped the addition of the MRCF incubator would encourage further investment from large superannuation funds as well.
“Many of them are very keen to have significant investment in the life sciences sector,” Mr Ferris said. “Having sufficient funds and a big enough portfolio of biotech and medical development companies can enable the super fund industry to write cheques at a level sensible for them to bother with.
Australian Financial Review
22 August, 2021