Investors warn Australian startups working on the forefront of medical research could be pushed to the brink as the coronavirus outbreak puts a squeeze on capital.
"Companies that move quickly now are likely to survive, but there will be lots of layoffs," said Chris Nave, managing director of biomedical investment firm Brandon Capital Partners.
Chris Nave, managing director of Brandon Capital, fears economic conditions will mean many Australian companies engaged in research will struggle to find runway to continue operations. Credit:Louie Douvis
Dr Nave warned the nation must have a plan for how it will support sectors including medtech and biotechnology in years to come as the industry faces tough conditions presented by the coronavirus pandemic.
This includes the fact that many clinical trials have paused in Australia, meaning businesses need to turn back to their investors to secure more capital to keep afloat, he said.
"I think that you'll see that particularly from high net worth investors, there will be a retreat from this speculative kind of investment," Dr Nave said.
"We will need to think about ways of protecting these companies, hopefully the CSLs and Cochlears of the future."
Earlier this week Australian peak body AusBiotech warned business support on offer from the government including the JobKeeper payment was not targeted at the biotech sector, where many companies were not generating revenue or had high cash burn rates.
"These pre-revenue companies house priceless talent and intellectual property that could be permanently lost to Australia if they are not able to weather the COVID-19 storm," chief executive Lorraine Chiroiu said on Tuesday.
Dr Nave agreed support measures so far did not directly address the challenges that research-intensive firms faced if forced to put their projects on hold.
He said his firm's portfolio companies had already made the decision to stand down staff to preserve their financial positions. While investment deals would still be made in 2020, the broader sector outlook was challenging.
"The government will need to think about programs that provide capital into the sector."
Chief executive of digital health company commercialisation body ANDHealth, Bronwyn Le Grice, said the crisis had brought into focus the importance of digital health tech, which was a "sleeping giant of the economy".
Chief executive of ANDHealth Bronwyn Le Grice believes investment conditions will be tough despite a renewed focus on health tech.
"But you can’t deny these economic shocks will reduce the amount of available capital," she said.
"The research and development community has to be significantly supported to ensure we don’t lose highly trained professionals [longer term]."
The future of the research and development tax incentive scheme remains unclear, with government plans for new caps on the program still on the table despite pushback from the startup community.
A Senate committee is still reviewing those changes, though is not set to report until August and in-person hearings have been postponed due to COVID-19.
Federal funding for biosciences research has been focused on fighting the coronavirus. Minister for Industry, Science and Technology Karen Andrews announced with Health Minister Greg Hunt last week that the CSIRO would receive a $220 million funding injection to upgrade its facility in Geelong to help fast-track infectious diseases research and work on a vaccine.
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