Three New Zealand research organisations have signed up to become members of the Medical Research Commercialisation Fund, Australia’s largest life science venture fund.
Otago University, the Malaghan Institute, and Callaghan Innovation are joining the fund’s collaborative structure which includes more than 50 Australian medical research institutes and research hospitals, the Australian federal government and five state governments. The A$200 million fund managed by Australian venture capital firm Brandon Capital includes backing from four of Australia’s largest industry superannuation funds – AustralianSuper, HESTA, Statewide Super, and Hostplus.
Since 2007, the firm has already fully invested two other smaller funds and supported the development of 27 start-ups developing biotech or medical device technologies originating from members. A couple of investment successes include Spinifex Pharmaceuticals which was sold last year to Novartis for US$725 million and Fibrotech Therapeutics which netted US$557 million when sold to Shire in 2014.
In February the New Zealand government paid A$500,000 to become a member, the same amount as Australian states. That paved the way for other New Zealand members to join and their research to be considered for investment by the third fund.
Brandon Capital’s new New Zealand investment manager Duncan Mackintosh was most recently chief executive of Waikatolink, the University of Waikato’s commercial arm. He said Brandon’s previous life science funds didn’t allow for investment outside Australia whereas this one has added New Zealand in like “another state”.
“The MRCF funding helps promising technologies bridge the current market failure, the so-called ‘Valley of Death’, enabling them to progress beyond grant funding to a point where they have achieved clinical or prototype proof of concept and/or market validation.”
Brandon managing director Chris Nave said New Zealand ranks highly in terms of its medical innovations internationally and the latest fund had the capacity to support the best research opportunities from across Australasia. Around A$50 million of the fund will go to seed investment and the remainder is reserved to support the most promising of these and existing portfolio companies through to mid-stage clinical trials.
Early stage opportunities can receive up to A$3 million to support preclinical development, with those progressing to the next stage able to receive a further A$17 million, and that can stretch to A$30 million. The superannuation investors can also individually invest as the start-ups mature.
The fund has first right to invest in discoveries from its hospital and university research partners. In exchange, the partners get a small share of any profits from successful commercialisations which incentivises them to help competitors succeed.
Pete Hodgson, chief executive of Otago University’s commercialisation arm Otago Innovation, said it was an obvious choice to sign up even though the university understood deal flow is always dependent on the quality of the science and that it’s a numbers game.
“Over the course of the next year or so Otago University IP is sufficiently deep that we anticipate one or more investment opportunities,” he said. “These guys are strong and have a longer track record than anyone in New Zealand.”
The fund runs an investment committee, similar to Auckland University’s Return on Science, which members can attend and the best research ideas submitted for funding are considered. Mackintosh said it can take up to six months from a project being put forward to a final funding decision, given the number of competing projects and the return thresholds required.
Key investment considerations include whether it is world-class science, a significant breakthrough in its field, the potential market size and need, competition, and the strength of the intellectual property.
It has proven difficult in New Zealand to access the capital required to commercialise this type of “high-risk, high-reward projects that require a well-funded investor”, said Mike Zablocki, chief operating officer for the Malaghan Institute. The medical research institute is focused on finding cures for cancer, asthma and allergy, multiple sclerosis, and infectious diseases and Zablocki said it has some IP worth trying to develop.
A key advantage to membership was the opportunity to network and assess the capability of the Australian members regularly as he said it’s “not that easy getting that many of them in the same room at once”.
Callaghan Innovation national technology network manager for biotech, Kim Jordan, said membership acts as a bridge to the fund for client companies and to become part of a larger Australasian network focused on creating wealth and high-value jobs from life science technology.
“It will also give Callaghan Innovation visibility over focused, specialised, and deeply experienced biomedical venture assessment, development and management skills that are not readily available in New Zealand,” she said.