Budget reveals a hidden bonus for biotech

A $150 million incentive scheme for companies developing new drugs might prove to be the sleeper in the May budget for young drug discovery companies.

The Pharmaceutical Partnerships Program (P3) is due to take effect on July 1 with funding spread over the next five years.

The money will be accessible on a competitive basis to any company with a track record of undertaking drug R&D activity in Australia, including biotechnology, originator and generic medicines companies.

Announced in principle on budget night as a replacement for the Pharmaceutical Investment Incentive Program (PIIP), the new drug R&D incentive scheme has yet to be fleshed out in detail.

But the program promises to outperform PIIP in terms of encouraging multinational firms to forge partnerships with local drug discovery companies, according to industry observers.

"This is a win for Australian biotech because it shifts the emphasis to Australian companies where the old scheme was focused on the big [international] pharmas," said Dr Peter Riddles, president of industry association Ausbiotech.

"Most young biotech companies need partnerships with big international players and this [P3] will foster that."

Riddles' enthusiasm for P3 is understandable because Ausbiotech, in conjunction with Medicines Australia, was heavily involved in fashioning the program.

The funds it will provide represent a substantial improvement on the sums made available through the R&D incentive component of PIIP, he said.

P3's final shape awaits the results of an ongoing consultative process involving industry and other stakeholders which is scheduled to continue through June following the circulation of a discussion paper available from the Department of Industry, Tourism and Resources this month.

However, some of the scheme's main points include:

• Successful applicants will receive 30 cents for each additional dollar they spend on locally-based drug R&D.
• The program will offer three entry rounds plus multiple exit points to give companies flexibility in timing their length of participation in the grant scheme.
• Applications for the first round of the program will be due in December 2003 after program guidelines are released in the second half of 2003.
• Applicants will be assessed by an independent body and each entrant will be judged on the entire portfolio of their company's activities.

According to government figures, the R&D spend of Australia's pharmaceuticals industry is running above $AUD450 million. The industry also employees 30,000 people and its export activities are worth more than $2 billion.