R&D Start grant woes backdated

By Daniella Goldberg
Monday, 20 May, 2002

The writing was on the wall for the suspension of the Commonwealth government's R&D Start program as early as January, Australian Biotechnology News has learned.

The program was suspended in late April, when it became public knowledge that unprecedented cash burn by grantees had caused a $40 million budget blow-out.

But according to a spokeswoman for Industry Minister Ian Macfarlane, the minister became aware of the blow-out in January, just one month after he took office.

She said AusIndustry, the government agency that managed the R&D Start program, warned the minister of the blow-out and recommended that funding be put on hold.

"The minister rejected AusIndustry's suggestion straight up," the spokeswoman said. "He had to fight for a different solution."

She said it took until April to come up with another solution that was acceptable to Treasury.

The decision to suspend all 115 grant applications currently in the R&D Start pipeline was officially announced on April 26.

A briefing was held last Friday, May 10, between AusIndustry executive general manager Drew Clarke and all the R&D Start grant consultants from around Australia.

The teleconference link-up, with over 100 industry consultants, went for more than 75 minutes, according to an AusIndustry spokesperson.

During the briefing, Clarke announced that an injection of $40 million would go into the program to cover the shortfall from this financial year.

Macfarlane's spokeswoman said $20 million of that would come from the loans component of the R&D Start program, but also from unspent Biotechnology Innovation Fund (BIF) and Commercialising Early Technologies (COMET) money.

She said the remaining $20 million would come from future years of the loans component of R&D Start, which she said was under-spent by about $10 million every year.

Sydney-based biotech consultant Dr Kelvin Hopper, who attended last Friday's AusIndustry briefing, said the government should not have allowed R&D Start to collapse.

"It gives a poor reflection of the R&D process in Australia to international organisations," Hopper said.

He said that AusIndustry had admitted that because of the way R&D Start was structured, the blow-out was unexpected. The agency is now reviewing the way it does its financial modelling.

Hopper said the R&D Grant crisis was "very unfortunate", not least because the 115 disadvantaged companies would have already spent a large amount of time in preparing their applications, as well as paid a consultant to assist them in filing a grant application and finding a private source to match the grant funding.

The program should not be offered if there was uncertainty about its future, he said.

Meanwhile, Macfarlane has promised that the program will be up and running again in 2003, with $163 million in available funds.

In the dark

Being on R&D Start's bioscience selection board is no guarantee of inside knowledge of the program's future, according to Institute for Molecular Bioscience co-director Prof Peter Andrews.

"We're more in the dark than anyone," he told an Australian Venture Capital Association breakfast in Sydney shortly after the program's suspension.

Andrews said there was genuine commitment from the minister to get the program back on the rails, but also a lack of understanding by Treasury about what was needed to solve the problem.

He suggested that one way out of the hole might be for angels and private investors to put in the cash, with the government matching it dollar for dollar.

"The same day that the R&D Start grants came to a halt, [Prime Minister John Howard] announced that the government is propping up Mitsubishi with $18 million," Andrews told the breakfast delegates.

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