Transgenic start-up stalled by grant freeze

A Melbourne start-up looking at pigs as potential organ donors is among hundreds of Australian businesses to be affected by the suspension of the Federal government's R&D Start program.

Retiring Austin Research Institute director Prof Ian McKenzie said his company, XenoTrans, had been inquiring about the application process through AusIndustry when a letter arrived effectively telling him not to bother.

McKenzie said he had been told the Start grant process was extremely competitive, but was shocked to learn the funds had been suspended indefinitely.

"It has set us back significantly," he said. "With Start funds we would have been able to double our available funding, but now we will miss out on that opportunity."

XenoTrans, formed in June last year as a spin-off of Austin research, is creating transgenic pigs whose kidneys will not be rejected by a donor.

The research group successfully implanted a kidney into a baboon in South Africa last year, with rejection held off for 30 days.

McKenzie said the company was seeking $2 million a year for three years to develop a second round of pigs suitable for transplant into baboons.

Currently the company's sole angel investor, McKenzie had hoped the Start money would help get the business off the ground.

But in a letter to McKenzie seen by Australian Biotechnology News, AusIndustry executive general manager Drew Clarke wrote that the Industry Research & Development Board was "unable to grant further assistance at this time".

"We currently forecast that the R&D Start program will again be able to fund new projects later in the 2002-03 financial year," the letter explained.

"In light of this, we suggest that you do not proceed to finalise your application at this time and invite you to apply for the program when uncommitted funds are again available."

The letter suggested XenoTrans might be eligible to register for the R&D Tax Concession, which from July 1 would enable some companies to claim a cash rebate and 175 per cent premium concession.

McKenzie said that while he was not usually the sort to put his hand out for government money, he thought the Start grants had an important role in assisting new business.

"The name says it all because it is good to give business a start," he said.

Last week AusIndustry announced that because of a $40 million budget blow-out, the Start program would be suspended.

The government body attributed the funding freeze to companies expanding their R&D programs and doubling their cash burn rates compared with previous years.

While the future of Start remained unknown, McKenzie said XenoTrans would seek private funds, and had already held preliminary meetings with about 10 groups including Biocomm International and PricewaterhouseCoopers.

Although several research spin offs from the ARI have been taken on by Prima Biomed, and despite McKenzie being an executive director on the Prima board, he said the ARI's agreement with the company excluded XenoTrans.

McKenzie said XenoTrans had also applied for a round three Biotechnology Innovation Fund grant through AusIndustry.