The end of the BIF boom?

The sixth and final round of grants under the Biotechnology Innovation Fund (BIF) program was announced on November 4. Depending on one's point of view, the results of this round indicate either the maturing of Australian biotechnology or the final throes of the government's vain attempt to prop up the sector.

The final round was by far the largest in BIF's three-year history, dispensing nearly $12 million in 51 grants. In line with the trend since the beginning of the program, the companies receiving grants were older than the recipients in earlier rounds, reaching a median age of 3.2 years, compared to a median of 1.2 years in the first round of BIF funding in 2001.

Across the six rounds of BIF funding, companies in NSW received the most grants, followed by Victoria and Queensland, and then SA and WA in almost equal numbers, with WA pulling slightly ahead by virtue of receiving more than 15 per cent of the grants in the final round.

Several aspects of the final round were of interest, in addition to the obvious attempt to give away all of the money available. Nine of the 51 grants were in the area of agricultural biotechnology, a much higher proportion than in the two previous rounds. Whether this is due to the growth of the agbio sector or a selection bias in the final round is not easy to determine. Equally ambiguous is the observation that 13 -- more than 25 per cent -- of the grant winners in round six had won a BIF grant in a previous round. Across all of the first five rounds, a total of only 11 winners, about 7 per cent, were repeats. One interpretation of the dramatic increase is that earlier winners were able to show positive results from their first grant, giving them an advantage in the final round. Another possibility is that earlier winners understand how to use the BIF system, and have leveraged that understanding to win another grant. A third, and less optimistic, view would be that the pool of companies able to put forward a fundable project and matching funds is running dry.

With the absorption of BIF into the Commercial Ready program, part of Backing Australia's Future (the successor to Backing Australia's Ability), it is natural to ask about the impact of BIF during its lifetime and after. A report done in July 2003 by the Allen Consulting Group for the Commonwealth Department of Industry, Tourism, and Resources, the sponsor of BIF, found support both for government assistance to the biotechnology sector in general and for the BIF program in particular. The report also found that "if the BIF program is not continued beyond 2006 the likely impact on the Australian biotechnology sector will be significant -- with a serious loss of momentum in the creation of new biotechnology start-ups. Australia will miss valuable opportunities to build a robust biotechnology sector." The Commercial Ready program contains no specific provision for the funding of biotechnology; if the Allen Consulting Group report is correct, then the sector may be in for some difficult times.

One speaker at the recent AusBiotech 2004 conference referred to the past three years as the "BIF boom", a period characterised by too many BIF-funded start-ups that will never become viable companies. He predicted that the end of BIF would mean the end of the artificially induced boom, and recognition of the futility of trying to create a viable biotechnology sector in Australia. The mid-2003 Allen report on BIF was delivered less than two years after the first grants were distributed, a very early stage in the BIF program. That report was able to gather perceptual views about the impact of BIF, but little quantitative data. One year further on, all of the companies that received grants in the first BIF round are still alive and reporting regularly to ASIC, but their progress on commercialisation remains to be measured. Without knowing how much difference BIF made for the grantee companies, it is difficult to predict the impact of the end of the program. By cancelling BIF before understanding it, the Commonwealth government appears to be developing its funding policy for the biotechnology sector on a trial-and-error basis.

No one denies the existence of a 'funding gap' between university and government support for conceptual research and private support for practical development. BIF was an attempt, undoubtedly imperfect and possibly ill conceived, to fill that gap. Its effectiveness is not yet understood. With the demise of BIF, the question of what else might fill the funding gap cannot be left to chance or to the whims of government policy.

It is imperative that ways be found to bring additional capital to bear at an early stage in the development process, ideally ways that do not require the formation of a company with the attendant overhead. If Australia has indeed been in the midst of a BIF boom, then the focus now should be on making the best of what was created during the boom, avoiding boom-like excesses in the future, and continuing to search for the path forward to the best biotechnology sector that the country can possibly have.