The industry will contribute about $2' />
Part four of the Project Auckland series looks at 'Prosperity and Profile'
No sector has greater potential to make a significant contribution to Auckland's growth than biotechnology.
The industry will contribute about $200 million to the economic output of the Super City and the region accounts for more than half the country's biotech sector in terms of companies and jobs.
Before the global financial crisis it was the hottest sector in the western world, attracting the lion's share of angel investment and venture capital.
Today, starved of capital but with the enthusiasm and talent base of old, it is on the cusp of a breakthrough that could put the Super City on the map as a world-class biotech hub.
"What we need is a 'poster child'," says Bioeconomy Leadership Group chairman Peter Bradley. "We need to have a big win."
Bradley says the ingredients for a big win are simple:
"Fabulous" science and world-class Crown research institutes;Infrastructure to make it happenFunding from angel investment to venture capital to private equity Experienced executives to run the companies
The quality of Auckland-based scientific research and development is not in question and some top New Zealanders have returned from overseas with the skills to make their mark in biotech.
However, funding is a problem. Angel investors abound but funding for growth between $2m and $20m is patchy and private equity funds, a prime source for biotech expansion in the US, tend to concentrate on mature unlisted companies in need of help rather than biotech companies or startups. Bradley concedes that biotech is a diverse and complicated long-run industry.
"There is a serious need for big investment dollars but the returns are exceptionally large if you get it right.
"If you look at Statistics New Zealand figures, Auckland contributes 53 per cent of the [biotech] companies in New Zealand, employs 54 per cent of the total people and contributes 54 per cent of the gross output. Auckland is leading the way significantly. It s probably going to get better but there are other areas where [biotech] business is ramping up such as Manawatu and Canterbury. In terms of gross output, it was around $199 million for Auckland in 2009."
Bradley says biotech is a potentially enormous sector and is pleased that the private-sector focused Bioeconomy Leadership Group he heads, set up by the soon-to-be-abolished AucklandPlus development agency, will survive the transition to the Super City.
The challenges Auckland faces developing the biotech industry apply to the country as a whole.
An Ernst & Young report highlights limited access to capital, geographic isolation, a small domestic market, the recent abolition of government research and development funding, and the global recession as problems affecting the industry.
"But those who weathered the storm are stronger and better able to adapt to change," the report says.
"At the forefront of change in the industry is the convergence of sectors, and earlier corporate partnering both of which are in response to increased demand for return on investment through earlier product commercialisation."
Ernst & Young says speeding up the transition from R&D to commercialisation should yield "significant benefits for a country with world-class research and untapped intellectual property".
"It could also spark new interest from international investors already attracted by legislation making it easier and more attractive to invest in New Zealand under a limited-partnership regime established in 2008. This, together with the absence of a capital gains tax regime in New Zealand could be seen as an attractive proposition."
The report says information-sharing and partnerships involving international companies and institutions are important to the industry's development.
"Aquaflow Bionomic Corporation [is] working with Honeywell to develop technology that enables the harvesting and refining of wild algae to create biofuels. The innovative technology identified is also now being broadened for exploration into areas such as carbon sequestration. The University of Auckland Institute for Innovation in Biotechnology - built in 2009 and the first such incubator in New Zealand - brings together academics and industry partners from biotechnology and pharmaceutical industries in one location. Partners draw on the expertise of internationally recognised academics through collaborations or contract research."
Ernst & Young says that although governmental interest in the industry is a positive step, growth will be driven by better offshore product marketing in sectors such as biofuels and food and the ability to serve the needs of other emerging markets.
"There is an increasing interest from China due to New Zealand's high standards of education, product safety and food safety systems, and high standards of product development. With more disposable cash and an historical interest in what is being done in the area of biotechnology in New Zealand we may see China beginning to invest in the sector over the next two years."
The report says New Zealand biotech companies are taking a fresh look at business models, deal structures, financing, partnering, and joint ventures.
"They are looking for investors to develop their products further and provide market entry into Europe and the US. They are also working to get products to market sooner."
Local companies to look out for:
LIVING CELL TECHNOLOGIES
First company globally to enter clinical trials using therapeutic porcine cell implants; its lead product, Diabecell, is designed to help normalise the lives of people with unstable type 1 diabetes.
Diagnostic medical company specialising in infectious disease.
A biopharmaceutical company focused on developing and commercialising a new generation of wound care therapeutics known as "gap junction modulators". The company's head office is in the United States in San Diego but virtually all the research and development is carried out in Auckland.
Contract development and manufacturing organisation dedicated to improving animal health.
Developed a platform for lowest-cost liquid biofuel in any industrialised market at a much larger scale than currently being envisioned elsewhere.