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Australia jumps into life sciences fray with R&D tax credit

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You've heard about China and India becoming increasingly significant locales in the Asia-Pacific region for conducting biotechnology research and drug development. Australia, not so much. But the Australian government is now working hard to change that perception with a new tax credit designed for companies choosing to pursue preclinical and human clinical trials there.

Marcus Tierney, the head of PricewaterhouseCoopers' research and development tax practice in Melbourne, spoke to us recently and explained the new changes. Essentially, a U.S. company that sets up an Australian subsidiary to pursue trials in those categories can get back through the Australian tax system between 15 cents and 45 cents of every dollar spent. Legislators passed the new law into effect in September 2011, with the aim to spur homegrown biotechnology research and drug development. Companies could start taking advantage of the tax credit in January, but it launched retroactively for Australian companies based on business conducted as of mid-2011.

About half of Australia's life sciences activity takes place in the state of Victoria, where Melbourne is located. And the incentive helps bring Australia into competitive reach of countries like China and India, which are seen as lower-cost places to conduct preclinical and clinical biotechnology research, Tierney told us. China and India, he said, are "big markets" at the moment, and they are "throwing a lot of money on wanting to attract clinical trials to their countries."

But aside from the new tax incentive, Australia also offers similar intellectual property protection to what exists in the U.S., he explained. And once companies have established a beachhead in Australia, there are more goodies for biotechs to tap into.

"Once you are a company in Australia, you can also get access to a range of different Australian and state grant programs to help support development and commercialization of (your) products in Australia," he said. One of the better programs: Commercialisation Australia, an effort that assists the biotechnology and other industry sectors with dollar-for-dollar matching for early-stage R&D, as well as commercialization in Australia (company puts up $500,000, and the government provides the other half).

Additionally, Australia offers a good cross section of a diverse population in which to conduct clinical trials, Tierney explained.

"We have the multiculturalism of Australian society and the capacity to get drug trials spread across all ethnicities across a relatively small population compared to other parts of the world," he said. -- Mark Hollmer (email | Twitter)