Earlier this week, Bill Ferris, Chair of Innovation and Science Australia, provided details regarding the structure, governance, funding process and operations of the Biomedical Translational Fund (BTF).
The creation of the BTF was announced by the Prime Minister in his National Innovation and Science Agenda (NISA) on 7 December 2015. The BTF will assist eligible biotech and medtech projects with their early commercialisation by allocating funds made available by the Federal Government and by private investors ($500 million in total).
Here is a snapshot of what the BTF will look like:
- the BTF is a “for profit” investment program with an equity structure;
- the BTF will report to the Department of Health and the Department of Industry, Innovation and Science;
- a governance committee will select a panel of fund managers through a merit based selection process;
- each fund manager selected by the BTF committee will be allocated between $50 and $125 million of government BTF capital, to be matched dollar for dollar by private sector investment;
- a fund manager will only commit to an investment if the government BTF capital has been matched by private investors;
- each fund manager will be responsible for investing the allocated funds into investee companies through VCLP or MIT vehicles (each a Biomedical Translational Investment Fund or “BTIF”);
- eligible projects will receive funds to be applied to bridge the 2 “valleys of death” for commercialisation (preclinical phase and advanced preclinical phase I and phase II in human trials);
- it is expected that each project may be eligible to receive between $5 and $20 million;
- each fund manager will call for funding as required;
- the fund manager’s management fees will be between 1% and 2.5% per annum;
- each BTIF will have an advisory board responsible for governance and conflict issues;
- the life of the BTF, each BTIF and the investments is expected to be between 7 and 15 years;
- the exit for each investment will be decided by the fund manager;
- the distributions of net profits after return of capital will be shared between the BTIF and the private investors with a ratio more favourable to private investors (ratio yet to be agreed);
- it is expected that the BTF will be up and running in July 2016.
Other incentives such as the R&D tax rebate and the tax offsets introduced with the NISA will support the early commercialisation of medtech and biotech projects and will encourage private investors to invest through the BTF.
In addition to the direct benefits for biotech and medtech companies, the BTF is likely to have a significant impact on the Australian economy with expected billions of dollars in revenue and the potential to advance the research, create jobs, generate export revenue and improve health in Australia and worldwide.
Some key elements regarding the operation of the BTF are yet to be clarified:
- what will be the BTIF/private investor distribution ratio?
- who will be the fund managers and private investors likely to get involved?
- how will members to the advisory committees of the BTIFs be appointed?
- what will be the eligibility criteria for investees (private / public companies, international investors and impact of the project in Australia)?
- will there be any additional returns for the owners of the IP?
- how is the Federal Government’s BTF going to interact with state-based initiatives such as the NSW Medical Device Fund?