Brandon Capital to manage $230m for Biomedical Translation Fund
December 13, 2016
Medical venture capital fund Brandon Capital has been selected to manage the lion’s share of the government’s $500 million Biomedical Translation Fund, which is aiming to bridge the funding gap between early stage pharmaceutical and medtech startups and commercialisation.
Australia has a history of being strong in research, but weak in commercialisation, and this has seen companies such as Spinifex, which was acquired by Novatis for more than $US200 million, and Fibrotech leave the country thanks to the larger funding pools available overseas.
Innovation and Science Australia chairman Bill Ferris told The Australian Financial Review that Australia had witnessed a lot of “inventiveness drift offshore or prematurely die”, but he was confident the new funding would help correct this, and hoped it would lead to more superannuation funds taking bets on medical innovations.
“Ultimately investment will accelerate if the success ratio in the biotech and medtech space continues upwards,” he said.
“Nothing is guaranteed, but I think the BTF will be a lead demonstrator of what is possible and I’m expecting to see an increase in opportunities for super funds and other big private investors in this country.”
The other venture capital firms which have been allocated funds to invest are OneVentures and BioScience Managers. The $500 million is composed of $250 million from the federal government and an equal contribution from the industry.
Brandon Capital will be responsible for $230 million of the money, making it the largest life sciences fund in Australia, with private investors including CSL, and superannuation funds AustralianSuper, Hesta, Statewide and HostPlus.
OneVentures was granted $85 million in government money, and matched this amount with funds raised from its investment partners, creating the OneVentures Healthcare Fund III, while BioScience Managers will be responsible for $100 million, again with half the capital contributed by the government.
Brandon Capital managing director Chris Nave said Australia had undergone a few key changes this year, including the introduction of the BTF and legislative changes that will accelerate the approvals process for new medicines by increasingly accepting the assessments of comparable foreign regulators. These changes, he said, would elevate the nation’s position as a world leader in health sciences.
“What we’re trying to create with the BTF is access to the full funding continuum and that situation hasn’t existed in Australia before for this industry,” he said.
In 2015 Brandon Capital raised $200 million from major super funds for its Medical Research and Commercialisation Fund, which has since backed firms such as Global Kinnetics Corporation, Cardiora and Osprey Medical.
Recommended R&D rebate changes
Dr Nave said while Australia was in some ways making headway in its fight to become better at commercialising ideas, the recent recommendation the government is considering – to cap the R&D tax rebates at $2 million for small business – would be detrimental to pharmaceutical and medtech startups.
“For biotech, where even a base clinical study costs $8 million to $20 million, a cap of $2 million will have a huge impact and it will stop all the inbound work we’re getting from US and NZ,” he said.
But Mr Ferris, who co-authored the review which made the recommended changes to the R&D rebates, was not concerned that medical startups would be negatively impacted by the recommended changes.
“The $2 million cap can often be a misleading number … such that a company to get the $2 million refund would need to spend about $5 million a year on R&D,” he said.
“On the numbers we’ve seen that is a relatively small percentage, certainly less than 1 per cent. There also needs to be some regard for companies to have their shareholders have some skin in the game, particularly now we have the angel investor tax deduction.”
OneVentures managing partner Paul Kelly said the OneVentures fund would be open for business in January 2017, and would be making investments of $10 million to $20 million in each company.
“The launch of this new fund effectively doubles our capacity to invest in great Australian biomedical innovation and convert those discoveries into commercial products for the global health market,” he said.
Managing director of BioScience Managers, Jeremy Curnock Cook, said the funding would help ensure another generation of companies like Cochlear, Resmed and CSL are created.
“It is really important to remember that this money is not a handout – the federal government is rightly expecting to achieve a good financial return on its investment on behalf of taxpayers and the three fund managers appointed will certainly be seeking just that for the money they are investing on behalf of their investors.”
The Australian Financial Review
13 December 2016