The potential of bioscience in this country to build exports deserves a broad debate, writes Paul Tan.

Kiwi bioscience companies secured millions in international investment and grabbed the global spotlight this year.

But in this country questions are being asked about granting taxpayer dollars to science and technology companies that end up doing most of their business overseas, or being acquired by an overseas company.

A new multi-million dollar advanced technical institute, formally named Callaghan Innovation in November, has had its start delayed by several months while the relationship between academia, Crown research institutes and those who commercialise research is massaged a little more thoroughly.

Meanwhile, the Prime Minister's chief science adviser, Sir Peter Gluckman, is asking which science should be publicly funded and whether the vetting system for science makes it too long and arduous when it comes to delivering return on investment.


All of that and another big debate still remains: whether science should continue to engage in genetic modification (the government funds pure research) and then commercialise the results.

If it doesn't, will it lose the research results overseas and simply get left behind as other parts of the world continue doing controlled GM projects, finding technologies to feed more people and build economies?

Science here, especially bioscience, is at a crucial point in its evolution.

For success on the international stage this year, the most globally awarded is LanzaTech.

The clean energy and renewable chemicals technology company is considered in the top echelon.

LanzaTech takes CO and CO2, found in the likes of waste gases pouring out of steel mill chimneys, and ferments them into fuel ethanol and green chemicals, or with partners further processes them into jet fuel.

This month it revealed its demo plant with one of the world's biggest steel producers, Baosteel, has proven its technology is scalable and they will now move to build the first commercial plant capable of producing many million of litres of fuel ethanol a year.

The company has other partners in China and with huge corporate giants in Taiwan, India, Korea, Malaysia and the United States. The impact of LanzaTech's technologies on the world is predicted to be enormous.

Some have squealed about the taxpayer money invested in companies such as LanzaTech, which has received $14 million, and there's been a public suggestion that money should be more like a loan that gets paid back when a company is successful.

But there's been no discussion about whether such a financial instrument would be enough to leg trip start-up companies at the outset.

Unencumbered support helps make these companies attractive to non-government investment.

There does not appear to have been any rigorous modelling of just how much return on investment is delivered by success stories such as LanzaTech, which raised more than $100 million in funding.

Added to any financial calculation must be that LanzaTech has kept its research and development base in Auckland - employing around 85 people, including several PhDs, from around the world - and contributed to the local economy both financially and intellectually.

There are plenty more examples of companies to model. Here are a few:

•Living Cell Technologies (Auckland) has signed a deal with Japan's Otsuka Pharmaceutical Factory to co-develop its NTCELL product for the treatment of Parkinson's disease and other neurological disorders. The deal is worth up to $34 million if milestones to getting the product ready for market are met.

•CodaTherapeutics (Auckland) raised $24.5 million from Russian investment firm RusnanoMedInvest bringing total fund raising to $90 million. Its drug, Nexagon, is in phase two trials for the treatment of diabetic foot ulcers and venous leg ulcers.

•Pacific Edge (Dunedin), the NZX-listed cancer diagnostic company has built a $3.7 million lab in the United States. Its CXbladder diagnostic test is expected to help generate gross revenues of more than $100 million in the US market alone in the next five years.

•BioVittoria (Hamilton) has linked with a Johnson & Johnson subsidiary to put its natural, no-calorie sweetener made from monk fruit grown in China on to US tables as Nectresse.

•Photonz (Auckland), which produces Omega-3 fatty acid, eicosapentaenoic acid (EPA) from marine microalgae rather than fish, has scaled up its technology in the UK and France and is poised to go into commercial production. EPA is used in regulated pharmaceutical products and medicinal foods that target cardiovascular disease.

The New Zealand Bioscience Survey conducted last year by Statistics New Zealand found 474 companies involved in bioscience.

It was core business for 147 of them and they employed 1900 people, with 260 of them having a doctorate.

However, a serious constraint the report identified was access to capital.

A few brave companies, including our biggest drug manufacturer and exporter, Douglas Pharmaceuticals, remained determined to stay New Zealand-owned.

Douglas recently announced it had rejected international suitors, believing it has the resources to continue R&D and exporting to the world.

For start-up companies there is a growing network of incubators, such as The Icehouse, angel investors and investment funds.

The incubators help companies attract funding from venture capitalists of the likes of Stephen Tindall's K1W1, which then seek to multiply money to be invested using government-backed initiatives such as the Venture Investment Fund. NZVIF has $200 million of funds under management.

And the indications are that Maori are interested in investing in bioscience.

But once initial seed capital from friends and family and money - usually less than $1 million - from angels and venture capital groups is exhausted, many bioscience companies are likely to have to look overseas.

There is, of course, a bonus in foreign investment. With it comes international networks and connections to markets.

For some companies that means the R&D and manufacturing base for niche items can remain here, but distribution channels are assured.

The Government is pouring millions into innovation and science.

Take Callaghan Innovation, named for the late Sir Paul Callaghan.

As long as it can get the recipe right, and prove its business case to the Cabinet next month, it can call on $166 million of government funding over the next four years.

Its mission is to help high-tech firms become more competitive by better connecting them with its expertise and facilities and that of Crown research institutes, universities, polytechnics and other research organisations.

Despite the need for debate on how science can contribute and who should pay, progress is being made.

New Zealand was ranked 13th in the world this year in the Global Innovation Index, beating Norway, Israel and Australia, and third in Asia and Oceania, after Singapore and Hong Kong.

But looking at our successful companies, it is obvious they have been driven by entrepreneurs - individuals prepared to take a risk and tirelessly work to find capital.

Analysts would probably never have picked LanzaTech, or LCT, for example, as the winners they are.

Until it is accepted that the tax pool is not big enough, and that venture capitalists do not have deep enough pockets, commercially innovative companies will need foreign investors.

The big question is what funding models will be created - and publicly accepted - to make sure money is available and the country reaps the rewards.

Paul Tan is chairman of NZBIO, the member-based organisation for the bioscience sector. He is a consultant in biotechnology and was recently appointed to the position of chief science and medical officer for Living Cell Technologies, starting next year.