- Australia’s Research and Development (R&D) tax incentive allows companies to receive a tax rebate of up to 43.5% on clinical trial related R&D costs.
- The program offers companies the opportunity to significantly reduce costs, lower risk and accelerate time to market.
- Australia provides a globally competitive research landscape with data that is accepted by the FDA, allowing for seamless commercialization in the US for Life Science companies.
While working with startup companies across all Life Sciences and Healthcare (LSHC) sectors, a critical issue we constantly come across is founders struggling to manage investor expectations while at the same time trying to minimize costs as they shepherd the company through the long R&D process all the way to a successful commercialization. To get funded, founders need to demonstrate a roadmap of getting to clinical trials faster and at a lower cost. Having human efficacy earlier in the process essentially lowers the risk profile of your company to VCs resulting in a better valuation.
One way to achieve this may be through the R&D tax incentive program in Australia, an opportunity not widely known about among founders. Australia’s Research and Development (R&D) tax incentive offers companies that make less than $20 million per year a tax rebate of 43.5% on eligible clinical expenditures. For companies that make over $20 million, a lower, albeit still significant 38.5% tax credit is available with any remaining credit carried over to the next year.
These tax programs have been available in Australia since the 1980s with the aim of bringing in innovative companies and further positioning Australia as a research hotspot. This program is available for R&D in any sector – in technology and life science – ranging from biopharma, therapeutics and medical devices to agriculture, alternative fuels and robotics as long as it meets the Australian Government’s parameters for true R&D.
Hear more about how companies have already leveraged these tax programs. SVB hosted a webinar, “Cutting R&D Costs with Australian Tax Rebates,” featuring business leaders who have firsthand experience with the rebate process. The discussion was led by:
- Mike Watson, Manager of Business Development at Avance Clinical
- Ryan Fox, Chief Business Operations Officer at Orange Grove Bio
- John F. Maroney, CEO of Alessa Therapeutics
- Kathryn Garvey, FX Advisor at SVB
- Anton Xavier, Director of Healthcare Startup Banking at SVB
Learn about the benefits and logistics of moving R&D to Australia. Watch the full webinar now.
Why take your research and trials to Australia? It can be a game changer for companies and their investors
Rapid drug development: Because the Therapeutic Goods Administration (TGA) – Australia’s equivalent of the FDA – does not require an Investigational New Drug (IND) application to initiate clinical trials, the approval process can take as little as five weeks.
Faster time to market: For drug companies in particular, not having to go the IND route with the FDA can mean saving months right at the beginning of the clinical trial phase. All-in-all that can total a time to market advantage of over one year depending on the type of clinical research.
World-class clinical ecosystem: With globally recognized hospitals, sites, Principal Investigators (PIs), and academic centers like Monash University, Australia is considered a top tier research hub.
Clinical research data is accepted by the FDA and EMA: Once phase 1 and 2 trials have been completed in Australia, you can continue through to phase 2 and 3 in Australia, or even return to the US or Europe for phase 2 or 3 without having to repeat trials.
Cash rebate: One of the most compelling reasons to take your research to Australia is the 43.5% rebate on every dollar spent on research and other eligible clinical expenses.
Rebate applies across multiple stages and multiple projects: Depending on how you proceed, the 43.5% isn’t a one-off, it covers all stages of R&D done in Australia, so it can be 43.5% of pre-clinical, clinical, drug manufacturing etc. Also, if you have multiple projects or R&D tracks running, each of these can qualify independently for the rebate.
Rebate can cover work done outside Australia: Certain elements of the clinical program conducted outside of Australia may also qualify for the 43.5% rebate.
Favorable FX Strategies: Often, the FX rate can be favorable for US investors. For clients of Silicon Valley Bank in the United States, FX risk management is simple with proven solutions to help preserve cash and participate in favorable FX rate movements.
Demonstrates financial prudence to investors: Pairing an FX risk management strategy with Australia’s rebate program can help demonstrate sound financial judgement.
Financing against rebate: Financing options (of up to 80%) are available to borrow capital through a non-equity loan to better recoup investment costs.
John Maroney, CEO, Alessa Therapeutics, Inc.
How to get a rebate?
Follow our 7-step roadmap below to jump-start your R&D journey in Australia.
Kick-off the process by selecting the right Contract Research Organization (CRO). Interview multiple CROs to find an expert that you are comfortable with and who gives your research the attention it deserves. A good CRO will assist with writing the protocol and investigative brochures as well as understand the nuances of the Australian ethics review board process. Just as in the US, there are different CROs with their respective specialties. The rebate will only apply to new R&D, so it is critical that you partner with the right CRO for accurate advice.
Create an investigator brochure, valid protocol or synopsis. While an active IND is not required to initiate trials in Australia, having strong documentation will enable you to engage effectively with CROs. Many companies including Avance Clinical provide this as a service.
Set up an entity in Australia. The process is simple, and a company doesn’t need to be headquartered In Australia.
Plan to get in the game early. Getting in the pre-clinical phase as opposed to a later stage may mean significant savings.
Get funded. Make the Australian R&D cost saving a part of the strategy as you pitch to investors and VCs. Make sure you have the most accurate numbers not just in terms of dollars but also time to market, providing comparatives of running the study in the US vs. Australia.
Recruit patients and run your clinical trials. Though this involves a lot of factors depending on the phase, in Australia the current timeframe from engaging with a CRO to starting clinical trial is approximately 3 months.
File your taxes through the entity. Within three months of filing your taxes, you'll get the rebate of 43.5% minus your tax amount.
Ryan Fox, Chief Business Operations Officer, Orange Grove Bio
It doesn’t have to be all or nothing
Australia has largely the same diseases instances as the US but in less quantities so a hybrid model can also be an option with smaller phase 1 and 2 studies done in Australia and phase 3 studies requiring larger patient populations conducted by opening an IND in America or Europe. There is also flexibility for the company to further lower the cost of the US-based study during phase 2 and 3 by continuing to do the data processing, project management and statistical analysis in Australia thereby continuing to benefit from the cost advantage and potentially the tax rebate.
Life Science companies in this scenario need to consider how are they capitalized. Are they in a comfortable position where they can commit to a full US-based study and the cost savings aren’t worth the effort? If not, then a hybrid model/full study in Australia that potentially saves a couple of million dollars over the long term might be a viable solution.
With over two decades of experience delivering early phase trials, Australia has positioned its specialist ecosystem as the preferred destination for international biotech companies for their early and late phase clinical trials.
Go to Oz with even less
Australia doesn’t have as large a VC ecosystem as the US. As a result, for most LSHC companies, therefore America remains the primary market for investor engagement and commercialization/exits.
Life science companies looking to save time and money or to avoid costly delays should consider Australia for trials. With over two decades of experience delivering early phase trials, Australia has positioned its specialist ecosystem as the preferred destination for international biotech companies for their early and late phase clinical trials.
R&D and clinical work in Australia just makes good busines sense. Just as targeting the US market for commercialization. Innovative LSHC companies operating around the world may find that banking in the US is easier with experienced support, such as with SVB Global Gateway and the Healthcare and Life Science team at Silicon Valley Bank. SVB’s FX platform has helped may clients with simple currency purchases and hedging when necessary.
Anton Xavier leads SVB’s efforts in NY and the Northeast supporting the creation and growth of early stage life science ventures.
Mike Watson is the U.S. Director of Business Development for Avance Clinical and has been in the CRO space for 15 years.
Ryan Fox is the Chief Business Operations Officer at Orange Grove Bio and has over 15 years of R&D experience.
John F. Maroney is the CEO at Alessa Therapeutics, and he serves as a trusted advisor and mentor to CEOs.