At first glance, what Bob Kay is considering doesn’t sound unusual. The guy is looking for a new home for his chickens and two of the places he’s thinking about taking them are the Waikato and Manawatu.

But the founder of San Francisco-based biotechnology company Origen Therapeutics isn’t rearing everyday barnyard chooks. For the last seven years, Kay and his team have been developing technology to genetically engineer chickens so that the eggs they lay contain immuno-therapeutics usable in human medicine (see ‘Raising chickens’).

If Origen succeeds, Kay will be sitting on a technology that could result in a paradigm shift in how we treat cancer, autoimmune diseases and organ transplant rejection.

Paradigm shifts translate into a healthier world. They also mean big money. And Origen is exactly the kind of company that could do well in — and for — New Zealand.

Kay is considering bringing Origen to New Zealand for a few reasons, and not just because he and his Central Otago-born wife hope to retire here. While New Zealand’s disease-free status isn’t so important (poultry don’t get BSE or rabies, for example), its experience in animal husbandry, strong scientific base and highly trained scientists and workforce are.

“We hire a lot of PhD and Master’s level scientists,” says Kay. “They need an environment where they can be stimulated with new thinking and fresh ideas and being close to the universities is really helpful.” When Kay (who visits family here annually) returned in June on a business reconnaissance, he was impressed by what he describes as “very strong government incentives”, support from New Zealand Trade and Enterprise and the Foundation for Research, Science and Technology, and the facilities and level of cooperation between companies at places such as the Waikato Innovation Park. Furthermore, because Origen is leveraging off the ability to create antibodies economically, he’s also attracted to our lower cost of both animal production and R&D.

The probable outcome is a Pacific Ocean triple play: R&D would likely stay in San Francisco, New Zealand is a logical site for antibody production, and China is looking favourable for preclinical work (essential preclinical testing on non-human primates can be conducted there at approximately one-tenth the cost of in the US).

Kay expects to make a decision and, if it’s in favour of New Zealand, to set up shop by the end of the year.

Origen and homegrown companies such as Proacta, Protemix, Neuren, Antipodean and PEBL are ones to watch. Even so, New Zealand is unlikely to become the world hub of human pharma; we just don’t have the money, the population mass or the global distribution networks.

So what are the strengths of New Zealand’s biotech industry? One of the great hopes for the New Zealand economy, biotechnology has certainly taken its sweet time to get off the blocks. We have some 53 biotech companies (six public and 47 private) along with research institutes and universities. Almost half of our biotech companies were formed within the last three years and are still firmly in startup mode. That’s the nature of the beast: biotechnology is never going to provide a fast turnaround and there are going to be plenty of failures along the way. It’s a big gamble with big payoffs and if we look offshore for guidance in our biotechnology, we’ll be forever stuck hanging our hopes on the dream of human pharma. But we are not the rest of the world and the models that work elsewhere are not best suited for here.

The good news is that international biotech markets are now moving in a direction that is increasingly compatible with New Zealand’s strengths.

There was more emphasis at this year’s annual international biotech conference held in Chicago on industrial biotech and much more interest and debate around the benefits of agricultural biotechnology, says Chris Boalch, NZTE’s biotechnology director. “The latter is clearly a reflection of the Chicago location, but both themes are where New Zealand stands to gain maximum advantage.”

How, then, is New Zealand poised to take advantage of that trend?

Consider this description: The underlying strengths include a highly educated and productive labour force, a high quality of life, strong educational institutions and generations of expertise in key areas such as plant, marine and environmental sciences. [It] can leverage existing competencies, such as in human health, agriculture and information technology. Weaknesses include a lack of venture capital funding, inadequate levels of federal funding and the lack of a coordinated pipeline to provide businesses with the workforce and knowledge workers of the future. Threats include human capital flight (‘brain drain’), increased global competition and risks of being … simply overlooked, in the absence of a coordinated branding and positioning effort.

Sound like some place you know? The description is not of New Zealand, but of Hawaii and was written in the winter 2005 issue of Industrial Biotechnology. No matter how many times we congratulate ourselves for having ‘world-class’ science (and let’s remember, the rest of the world has it, too), New Zealand biotechnology is not alone in its strengths, weaknesses or threats.


The alternatives
Our opportunities are, unsurprisingly, in some of the same places identified in Hawaii’s roadmap: consumer health and food safety, marine-based consumable water and food products, biomass and biofuels, plant genomics, biodefence (detection, response sensor), deep-water technology and bioconversion energy systems.

One of the investment companies talking to Origen is BioPacificVentures. While the company has also invested in New Zealand Pharmaceuticals, human pharma is not its only area of interest. Executive director Andrew Kelly says his $100 million firm wants to invest in a sector that hasn’t yet been completely defined. “I think there is an opportunity going missing,” says Kelly. As the world’s middle class gets wealthier, people’s attitudes about health are changing and they’re more interested in preventative healthcare. People don’t want to take drugs for life, he says, and instead are looking for alternatives when at risk from heart disease or faced with low-grade diabetes.

The alternatives — probiotics, nutraceuticals and functional foods, for example — are areas in which Kelly thinks our part of the world could play a major role.

“We don’t see a lot of that synergy yet being realised,” he says. “Part of the reason we came into existence is because we thought there was going to be something there and we want to help it happen. I think there is an interesting opportunity there. Our flow is showing more and more deals in that space; give us another two years and not only will we have a portfolio that we’re proud of, but we’ll have a sector that doesn’t exist today.”

Other investors are taking note, too. Nestlé has allotted $500 million for a venture capital fund aimed at research and startup companies developing new foods and processing techniques that target the health and nutrition market. Life sciences investment banker Steven Burrill keeps an eye on biotech stocks and in 2005, his Burrill nutraceuticals index rose 31.6% (the Nasdaq ended the year only 1.37% up). In the past four years that same index rose over 300%, unsurprising given the US alone spent over US$68 billion on nutraceuticals in 2004.

New Zealand does have some new moves in that space. Last year, Crop & Food launched Gracelinc to commercialise barley beta-glucan, an extract shown to decrease cholesterol and blood sugar. The barley — bred for high levels of the beta-glucan — is specific for our growing conditions. Globally, the market for lowering cholesterol, says Gracelinc chief executive John Morgan, is in the billions of dollars. But he knows it’s going to be a hard slog to make a dent in that market. Currently, Gracelinc’s raw ingredient is being evaluated by food producers with major market interest coming from Europe.

Our biotech industry is far more diverse than just human pharmaceuticals, asserts Morgan. “For New Zealand, it has to have a far broader definition; it’s got to be a broader use of the technology. We’ve got to find little pieces that are profitable and viable to make the whole thing fly over here.”

Take the marine industry. Our broad marine diversity provides novel opportunities to produce profitable science. Nelson-based Cawthron Institute is developing neuroprotective drugs from toxins produced by phytoplankton. Cawthron, says programme leader Doug Mountfort, is working with research partners at the universities of Otago and Auckland to develop compounds that will target disorders such as stroke, Alzheimer’s and Parkinson’s disease. Cawthron Institute was also the first in the world to develop a method to freeze shellfish eggs and sperm (Unlimited March 2006).

While foods and drugs are great, there are other niche agricultural biotechnology markets in which we can succeed. In 2005, New Zealand exported over $120 million worth of cut flowers, bulbs and plants, with Japan the biggest single recipient ($30 million). Okay, no one is saying this is the equivalent to a human pharma blockbuster, but floriculture exports have risen 30% over the last decade and the field is being focused on by Crown Research Institute Crop & Food. New cut flowers have been developed for the ornamental and cut flower market and one, Showtime Diva, is a red gentian. Last year, Crop & Food, Southland Flowers and Ashiro-Cho (Japan’s largest supplier of gentians) partnered to form Rhindo International. The Japanese market consumes 120 million gentian stems annually, at an average cost of $1 per stem. Most of that is supplied by domestic growers, but Japan grows only blue, pink and white. Graeme Smellie, director of Rhindo, says new colours and shapes developed in New Zealand will command a premium price (about double) and our Southern Hemisphere location will make them available at opposite times of the year. Our cultivars are being tested in Japan, which would be a double play: sell fresh cut flowers in their winter and supply plants for their growing season (while maintaining licence and IP).

Smellie also expects the embryonic European and North American market (currently buying five million stems annually) to open up as gentians become available in brighter colours.