BiotechDispatch spoke with Bill Ferris AC after his briefings on the $500 million Biomedical Translation Fund.
Mr Ferris was appointed the chair of Innovation Australia last year, now Innovation and Science Australia. He founded Australia’s first venture capital company in 1970 and is currently co-chairman of CHAMP Equity, the Sydney-based firm he started in 2000. He is a former chair of Austrade and spent 12 years as chair of the Garvan Institute of Medical Research.
According to Mr Ferris, people incorrectly use the term R&D as if it is one word referring to one thing.
“The research and development people say it as one word, but there’s heaps or ‘R’ and bugger all ‘D’. So whether you call that an ecosystem or not, we do so damn well at ‘R’, the research end, and relatively poorly by an international standard at the ‘D’ – that’s why we’re trying to just fix that somewhat,” he said.
“When the McKeon Review looked at these issues, it concluded that the NHMRC was doing a pretty darn good job with the peer reviewed grant process which has, over many years, produced fantastic health and medical research outcomes. That doesn’t need a lot of fixing.
“What needs fixing is developing more of that stuff, and at the very, very early stage, yes, there is an NHMRC development fund programme which is still modest, but a recognition that they can and should do more in that field. That there is some help through ARC linkage, that there is some help through the Research and Development Incentive Scheme. So I’ve been concentrating, as have others, on saying okay, there’s always more you can do in that so-called valley of death number one at the smaller scale end,” he said.
Mr Ferris said the failure to fund companies through the ‘valley of death’ means some of them “go broke, give up, it’s too hard, can’t afford to carry on.”
“Others sell themselves as quickly as possible to the highest bidder somewhere offshore. And others prematurely go for a public offering if the stock market’s hot, they take advantage and raise a bit of capital and go public. I’m not criticising them if they’ve got no other way to go, but what you need for this stage of development is long-term, patient money. You don’t need mums and dads in a very small, risky IPO.
“So it’s a combination of all of the above which we’re trying to say hey, wait a minute, let’s get a sustainable, patient, long-term, properly scaled set of funding here where you can get teams of private sector managers who know what they’re doing to do a great due diligence job and add value, not just the money, to build these companies for the next whatever number of years it takes before they do list here or offshore or whatever else.”
The BTF will be a for-profit enterprise. A committee, which is yet to be finalised, will appoint a small number of private funds managers who will receive investment allocations of $50-$125 million, depending on their experience and expertise. The allocations will only become firm commitments after each manager has raised matching funds.
Mr Ferris said he expects the selected funds managers will be Australian-based but maintain active alliances and relationships with successful bioscience managers from offshore.
“So is it impossible that you could have a offshore manager be one of the managers? Not impossible. And I think the local managers that do get appointed, we’re not talking about hundreds of them, we’re talking about very few, that I would expect they’ll all have and be able to realistically describe their international alliances with other managers offshore,” he said.
He hopes Australian superannuation funds will get behind the BTF.
“Because they should be in it. That’s a value judgment. I think they have already begun to demonstrate an appetite for well-run venture capital prospects…also increasingly looking at medical research, commercialisation thereof, and that properly structured they will support this.”
He continued, “A lot of it’s been rational behaviour for the big investors not to bother with investments that take so long to come to fruition and where the record has been patchy, some good, some bad, and where the sector has not always been as sophisticated as it now is, in the sense of parallel infrastructure of professionally run trials programmes, clinical trials programmes.
“You have to take a bit of a leap of faith and put something up of scale that does work, does have a chance to work. I mean, I’ve no doubt in this Biomedical Translational Fund, 500 million that we want to put to work here, half government, half private sector, there will be some complete write-offs within the portfolios of the funds, and there will be some fantastic outcomes.
“You don’t need many in that portfolio to really pay off for the whole fund to succeed, but importantly in addition to that just looking at those deals, and let’s go back to the buzzword, the ecosystem, just that it will drive more clinical trials activities and the CROs, the people servicing the trials and making the trial drugs you need for the trials and all that stuff will be expanded as well with it. People will come back to Australia because it’s all happening again, or happening. So that it carries with it all those spinoffs that I could never quantify but I know will happen.