Start grants stopped in Fed funding freeze

Biotechs banking on an AusIndustry Start grant will have to look elsewhere for research cash after the government body revealed it would indefinitely freeze new funding.

The decision is the result of a $40 million blow-out in spending this financial year, which has been attributed to companies ramping up their first-year R&D cash burn.

Industry Minister Ian Macfarlane said the funding freeze was needed because of the program's popularity.

"There has been an unprecedented and most welcome call on funds by companies in Australia who are taking the opportunity to expand their R&D programs," Macfarlane told ABC Radio.

"That has caused them as companies to spend more money sooner and in doing so meant we've had to restrict the numbers of new applications we can consider in the near future."

While a statement from AusIndustry described the halt as indefinite, the Minister said he was committed to seeing the Start grants resume next financial year.

The $250 million R&D Start Program is a merit-based scheme to assist businesses to undertake research and development through to commercialisation.

Under the changes announced today, companies that have lodged applications or were considering lodging applications for funds would not be considered in the immediate future.

Businesses not affected by the halt include:

• Biotechnology Innovation Fund recipients
• The 600 companies that have already signed three-year agreements for Start funding
• About 33 companies who have received a letter of offer, but not yet signed a formal agreement.

However, some Start recipients contacted by Australian Biotechnology News said they were concerned money outstanding from the last quarter of 2001 would not be honoured.

"We were not officially notified about the halt, but we were aware through the grapevine," said one chief executive who did not wish to be named.

"We're still waiting on funds from last year."

Labor's industry spokesman Chris Emerson has also reported that some businesses had been told to wait a year before applying for the funds.

An AusIndustry representative urged concerned businesses to contact the body to clarify their position, but reiterated that all existing recipients would receive funding as it fell due.

Although the grant money is decided at the outset of the agreement, it is understood that the amount given to each company each quarter is not rigid.

If a company does not achieve certain R&D milestones the money can be held over, whereas if it reaches milestones early more money can be given at that time.

This means that while the total three-year expenditure on each recipient is known, the government is unable to precisely budget for each year's expenditure.

AusIndustry said that the current blow-out was a result of the fact that companies' R&D spend rate in the first year of their contract has doubled compared with that in the previous four years of the program.