Biotech Sector R&D Tax Incentive Case Study
Like any manufacturer, Biopolis encounters cost point, regulatory and competitive pressures. These pressures, in concert with the company’s prevailing corporate culture, are the drivers behind its commitment to the principles of continuous improvement and innovation.
The company conducted a range of activities in order to research, develop, test and finalise a reformulation of an agar to better isolate a particular species of bacteria. After extensive research Biopolis could not find any existing information about raw materials that would inform the redevelopment of the agar to the specifications and at the cost points it required. Biopolis thus had to embark upon a process of experimentation.
Biopolis began a series of activities to investigate and acquire new information about the raw materials used in the existing agar formulation and then applied this knowledge in the development of the new and improved agar formulation.
NOAH worked with Biopolis to clarify the technical scope of the project and advised on how best to break up the activities into “core” and “supporting” limbs for registration with AusIndustry. This included advice on how discrete activities might be grouped under a broader suite of experimental activity without raising the ire of Government for registering what has become known as an “umbrella” project.
Core R&D Activities
Companies need to decide whether an activity that is closely connected to an experiment forms part of the core suite of R&D activity or whether it would be more correctly classed as a supporting R&D activity.
In this case, with Noah Connect’s help, Biopolis self-assessed that there were two core R&D activities. The first one ‘Product Reformulation and Laboratory Testing’ encompassed a range of experimental activity from hypothesizing a new agar formulation, synthesizing it in the laboratory, testing it against a range of performance criteria, analysing the results and then drawing logical conclusions. This was an iterative process as test results subsequently informed re-formulation until stability, quality and performance criterion were met. The hypothesis raised and tested was that if the agar is appropriately reformulated (in terms of the selection of base ingredients and their ratio of addition in the mixture), then the resulting agar would enable better isolation of the bacteria.
It was determined that the first core activity was completed once the lab work provided a result that was ready to test in a manufacturing environment. The new knowledge gained from this activity was articulated in terms of new information about the chemical characteristics of different base raw ingredients in the agar formulation how these achieved better isolation of the bacteria.
The second core activity ‘Batch Testing’ included multiple feasibility batches that were manufactured under production conditions. The hypothesis was that if the manufacturing parameters were correctly specified, then the manufacture of the new agar formulation would meet the required cost points without any compromise of product quality. Tests were carried out to assess the performance and stability characteristics of the formulation in manufacture. At the end of the testing program, Biopolis failed to identify a formulation with improved performance that was cost-effective in a commercial-scale environment.
Although the outcome of the second core activity was not successful, new learnings were made about the process of manufacture. These new learnings will inform future research.
Biopolis also conducted a range of other activities in support of the project. These included preliminary research to set key performance parameters for the new formulations in consultation with the end user. Background research was then undertaken to determine the extent to which there was any information in the public domain or available on normal commercial terms that would provide a blueprint for the reformulation work.
What Documentation Did Biopolis Need to Keep?
Biopolis adhered to a project reporting system that required milestone reports to be generated in respect of:
• Project specification outlining reasons for undertaking the project and project parameters;
• Laboratory Reports that included the full rationale for an alteration of each component; and
• Manufacturing Trial Reports documenting observations; and
• Final Report drawing on all the data to reach a conclusion about the success/failure of the project and potential areas for further research.
Through discussions with Noah Connect, Biopolis came to appreciate how other documents which were seemingly more business-as-usual (emails, management reports etc) could be modified or enriched to provide additional evidence of the experimental activity.