Investors dared to take punt

By SIMON COLLINS

Biotech entrepreneur Garth Cooper has challenged local financial institutions to take a gamble on New Zealand's emerging biotechnology sector - or see it move to Australia.

Dr Cooper, a New Zealander who founded the $US700 million ($1.7 billion) Amylin Pharmaceuticals in the United States, is chief scientific officer of an Auckland start-up company, Protemix, which is conducting trials on a drug for Type 2 diabetes.

He has just returned from a visit to the United States, where he was told by a top venture capitalist that he had made "the perfect pitch" for investment.

But he told a biotech networking dinner organised by Competitive Auckland on Monday that raising money for biotech ventures in New Zealand was "extremely difficult".

"Scientifically and technologically, New Zealanders can do the job," he said.

Yet overseas investors did not believe New Zealand had the ability to run large, technologically sophisticated businesses.

"No matter how good your science and technology, basically the admission that you come from New Zealand is virtually the kiss of death," he said.

"They think that if you think you can do it here from a business perspective, then you are deluded, and if you don't admit to that at the beginning of the discussion then they think you are incompetent.

"What that means for your business development is that the perceived value of your company is immediately divided by two, four or five."

The only way to change this was for New Zealand to "get some runs on the board" using its own capital. But that required local institutions to change their approach.

"There are a number of major financial institutions in Auckland that have the wherewithal to invest in this type of activity," he said.

"But if you talk to them, they will say they have neither the mandate nor the analytical skills to undertake this type of activity in New Zealand, but they do have branches that can do that. But they are in Australia.

"So what you have to do is go across to Australia and talk to people there who do have the skills and expertise and understand that it's a very important area, and Australia is ploughing billions into it.

"But oh, by the way, if you do come from New Zealand you are going to have to take Australian money, and oh, by the way, your company is now an Australian company.

"So the financial structure here has basically created a tilt that will tend to tip most things out of New Zealand to Australia."

Dr Cooper said he was using his contacts in the US to get around this, and Protemix would "give it our best shot" to build a business here.

"Where it winds up, I'm not clear at this point in time," he said.

"But if there is an attempt to develop a real biopharmaceutical industry in New Zealand with a number of success stories, then I think a number of these structural issues that are business and economic, rather than scientific and technical, are going to have to be addressed by a combination of Government and financial institutions."

In response to questions, he said local taxes were not a big issue for foreign investors, and the regulatory environment "hasn't proven to be a major hurdle". The main issue was financial.

The chief executive of Genesis Research and Development, Dr Jim Watson, said he raised his first $3.5 million from 70 "mum and dad" investors through Auckland venture capital firm Caltech. He then raised money in the US by signing up Seattle-based pharmaceutical company Immunex as a partner.

"We traded on that name right around the world," he said. "The deals we did in the early days were based on the fact that they gave us credibility."

The chief executive of A2 Corporation, Corran McLachlan, said local, mainly South Island investors, offered to invest $26 million when A2 raised its first $14 million.

Claire McGowan of investment bankers Northington Partners, who has just returned from a US visit, said there was "a lot of interest" there in New Zealand.

"They are looking at investing in a later-stage company, and they are looking at investing in a Protemix," she said. "Where we are lacking is not having the big pharmaceutical players actively in New Zealand.

"We have to look at how we address that. We first get communication, we cooperate together and then further down the path look at addressing the pharmaceutical players in the NZ market."