AusBiotech Ltd. Release: Tax Reform Story Not Over for Biotech Industry
Appropriate support from the Federal Government was the topline issue for respondents, who urge the Government to support access to capital via policy instruments and programs.
The R&D Tax Incentive remains a top priority for the industry, with 66% of respondents having already seen the benefits of the policy or identify that it will have a positive impact in the future. Amongst the most pressing public policy issues, respondents repeatedly expressed concern that the R&D Tax incentive would be reduced or withdrawn and the industry urges further tax reform to provide incentives for manufacturing and to encourage longterm investment in homegrown technologies.
Of the 24 companies that raised capital in 2012, an overwhelming 87.5% did so by issuing (diluting) equity. The capital raised was for the dominant purpose of research and development, working capital or commercialisation – all critical to the survival of a biotechnology company. The industry is keen to see the Government support nondiluting forms of capital, especially the intact preservation of the R&D Tax Incentive, and to continue beyond that with tax reform.
However, biotechnology and medical technology manufacturers are not especially assisted by the R&D Tax Incentive, as it phases out as a product or IP reaches commercialisation. This is the point at which Australian IP is most vulnerable to being sold overseas and the resulting community benefits going with it.
The Industry’s hightech manufacturers are pursuing a tax incentive to support exportoriented local production. Such a program would, unlike a direct grant, require companies to actually generate economic benefits for Australia (income) before they would be eligible for the incentive.
The majority of responding companies (60.7%) are manufacturing, with 37.5% manufacturing in Australia and 35.7% are manufacturing overseas, with a crossover of 12.5% that manufacture both locally and overseas.
Dr Anna Lavelle CEO of AusBiotech said: “Innovation, wealth creation and job creation should be bipartisan issues regardless of who wins the Federal election.”
“The R&D Tax Incentive is a great foundation for innovation to nationbuild for Australia, but the tax reform story is not over for innovation. Australian policymakers and businesses needed to do more to make manufacturing and investing in industries of the future more competitive globally and attractive.
”The survey undertaken by AusBiotech and Grant Thornton Australia provides an industry snapshot, direct from the industry’s CEOs and senior managers on three topics: sentiment, funding and public policy.
Grant Thornton National Life Sciences Leader, Michael Cunningham said: “2013 promises to be an extremely competitive year for fund raising with tight capital markets and dwindling cash reserves pose a threat to smaller market participants.”
“The R&D Tax Incentive reform has been extremely well received, and we would strongly encourage the government to not water it down,” he continued.
The sentiment section of the annual Biotechnology Industry Position Survey showed the positive sentiment for the industry’s future continues, while the operating environment (economic and public policy) remains a concern. The key findings were:
· Consistent with our previous years’ findings, the Australian operating environment (economic and public policy) remains a key concern with only 16% (24%:2012) of respondents identifying the environment as conducive to growing a biotechnology company, and 38% indicating that the operating environment is working against the growth of companies.
· The level of support from the Federal Government for the biotechnology industry, on a scale of 1 to 10 with 10 being most supportive, saw 68% of respondents indicate the level of support at 5 or lower. · The competition for capital is high with 71% of companies planning to raise capital in the coming 12 months. For a significant portion of companies the requirement to raise capital in the short term is apparent with 37% of companies holding less than 12 months’ cash.
· With capital at a premium, it is no surprise noncash remuneration remain significant component of most company’s remuneration strategy, with only 20% of companies using cash only remuneration strategies.
· The expansionary sentiment towards employment persists, with only 7% of companies planning to decrease staff numbers during 2013, whilst 55% have flagged and intention to be a net hirer of staff.
For a full copy of the report or interviews with Dr Anna Lavelle or Michael Cunningham, please contact: Lorraine Chiroiu, National Communications Manager, AusBiotech, Ph. 03 9828 1414 / 0429 801 118, lchiroiu@ausbiotech.org or Emma Cooney, National Public Relations Manager, Grant Thornton, Ph. 02 8297 2426 / 0415 842 801, emma.cooney@au.gt.com
AusBiotech is Australia’s voice on biotechnology, and represents more than 3,000 members, encompassing medicines, medical diagnostics and devices, agriculture, food technology, alternative fuels and climate change.
Grant Thornton Australia is a member firm of Grant Thornton International – one of the world’s leading networks of independently owned accounting and consulting firms, working with dynamic businesses, irrespective of their size, to help them achieve their goals with our range of audit, tax and business consulting services.