AgVax Developments eyes Australian expansion

By LIAM DANN

AgVax Developments, one of New Zealand's most successful biotech companies, is looking to expand into Australia.

Despite having already added hundreds of millions in value to the economy, the commercial subsidiary of AgResearch is a relative unknown. AgVax holds patents on vaccines which have significantly increased the birth rates of New Zealand's sheep in the past 10 years.

The company calculates that its two cornerstone products have added more than $300 million worth of value to farmers.

"That's just behind the farm gate," says chief executive Andrew MacPherson.

It does not include downstream value such as the extra lambs to freezing works and extra work for transport trucks, he says.

AgVax's annual revenue is more modest at about $10 million - although that isn't bad for a company that has just 28 employees, including seasonal workers.

And, unlike most New Zealand biotechs, AgVax is profitable.

For the past two years the company has featured in the Deloitte list of 50 fastest-growing New Zealand companies.

AgVax was built around a vaccine for the treatment of the sheep disease toxoplasma gondii, MacPherson says.

"It's a disease that causes abortions and reduces fertility in sheep," he says.

"We were the first company in the world to develop a vaccine for it. We license it to a Dutch company and they manufacture it in Europe."

Another cornerstone product - Androvax - significantly increases the rate of twins.

"We can give farmers 20 per cent more lambs with the use of that vaccine."

Until now the company has been very much focused on servicing New Zealand farmers and vets but plans to get into the Australian market are under way.

"We have sheep trials in Australia at the moment for one of our products," MacPherson says. "We are in negotiations with another group in Australia concerning another product."

AgVax primarily has a sheep focus so will target those countries where sheep farming is a big and relatively intensive industry.

"We've been approached by a group of businesses from Brazil but we really don't have a lot that is relevant to them yet.

"Having said that, we are in the process of signing a collaborative agreement between AgVax, Massey vet school, Dairy Insight and Fonterra to develop a cattle vaccine against neospora caninum [a parasite that causes foetal loss in cattle]."

AgVax is a classic example of what the knowledge economy is about, MacPherson says.

"We've taken the considerable intellectual grunt that resides within AgResearch and we've harvested that. We put it into packages that are aimed at helping farmers to be more profitable. So we're not just about selling widgets and I think that is what the knowledge economy is about."

One of the secrets of the company's success has been its commitment to research and development.

Last year the company reinvested 24 per cent of its profits in R&D. That is one of the advantages of being owned by AgResearch rather than dividend-hunting shareholders.

There has been talk in the past year that AgVax could be one of the candidates that AgResearch - through its commercial arm, Celentis - will look to spin off for private sale.

MacPherson says he tries to ignore that kind of speculation.

He can see that AgVax has the right attributes to be desirable but says he has to remain focused on running the business.

He is positive about the arrival of new AgResearch boss Dr Andy West.

"One of the bright lights is that Andy West says he wants to put the farm back into AgResearch. That is really right up our alley."

AgVax Developments

* Animal healthcare product producer.

* Key products: Androvax (increases fertility of breeding ewes); Toxovax (vaccine against toxoplasmosis abortion in sheep and goats).

* Based: Upper Hutt.

* Owned by: Celentis, the commercial arm of Crown-owned research company AgResearch.