November 15, 2008 (Vol. 28, No. 20)

Janet Mason

Developing Sector Boosted by Biodiversity and a Host of Government Initiatives

What’s the first thing that comes to mind when you hear the name New Zealand? To some, it evokes thoughts of Lord of the Rings or the last frontier. To others, the name conjures up sheep, and there are a lot of them—over 60 million. One thing that does not immediately spring to mind, however, is biotechnology.

Over the past five years the biotechnology industry has started to gather momentum, and yet, New Zealand is one of the world’s many biotech hotbeds that remain largely untapped. The country has a long history of leading-edge agricultural and horticultural work. Together, with nutraceuticals and forestry, this research base continues to play an important role.

Of particular significance is the work performed by the nine Crown Research Institutes, established as government-owned businesses in 1992. Each institute focuses on a specific sector or natural resource. These include AgResearch, Scion (forestry, biofuels, and biomaterials), HortResearch (fruit genomics), and Industrial Research (carbohydrate and glycotherapeutic drug targets and manufacture).

Scientific expertise continues to cross over from these primary industries to human life sciences. For example, Keratec isolates keratins from wool for use in wound-healing products, and Fonterra produces excipients for the pharmaceutical industry in a joint venture with Campina.

An embryo coated with Kode Biotech constructs and imaged by confocal microscopy.

University Research

New Zealand has a number of leading research institutions including the University of Auckland. The world-class university houses scientists renowned for work in cancer, neuroscience, and reproductive biology. One example is Bill Denny, professor and director of the Auckland Cancer Society Research Centre (ACSRC). Over the last 15–20 years, the center has developed eight compounds that made it into clinical trials, with one approved so far. The institution has shifted its cancer drug development work from cytotoxic small molecules to targeted, personalized therapies.

Off-Shore Connections

Proacta treats cancer with its hypoxia-activated prodrug lead compounds currently in Phase I and II trials.“We have maintained a great relationship with the University,” says John Gutheil, CEO at Proacta. “All our lab work is done by them under contract and to be associated with Denny’s lab commands respect in the international scientific community. The main reason for moving overseas was funding. With estimates of between $400 million and $800 million to develop a drug, we knew that we would eventually have to move to the U.S. to secure adequate funding for later stages of development.”

Pathway Therapeutics, a newly formed University of Auckland spin-out based on PI3 kinase inhibitors, recently received NZ$12.5 million ($8.29 million) from an Australian venture capital fund.

Last year, in a deal worth up to $890 million, Novartis gained rights to the vascular disrupting agent DMXAA that originated at the ACSRC and is starting Phase III trials.

Other University of Auckland spin-out successes are CoDa Therapeutics with woundcare and tissue-repair therapeutics, and Neuren Pharmaceuticals, with four lead candidates that target a range of acute and chronic neurological conditions. Like CoDa and Proacta, Neuren maintains a strong research presence in New Zealand.

The University of Auckland helps to nurture these companies and a new research building that includes a bioincubator is planned for completion in 2010.

Kode Biotech a cell surface modification technology company, is a spin-in company now based on campus.

Technology Transfer

“Whereas universities didn’t have commercial arms 20 years ago, they all have them now and are quite successful,” says Pete Hodgson, New Zealand’s Minister for Economic Development, Tertiary Education, and Research, Science, and Technology.

The University of Auckland technology transfer and out-licensing is facilitated by Auckland UniServices, which generates contract R&D funding for the university. These offerings are common to the other main Universities: Otago, Wellington, and Waikato. In addition, UniServices has found creative ways to finance research at the preseed stage. Through access to the Trans-Tasman Commercialization fund it hopes to double the number of spin-out companies it creates each year.

WaikatoLink ranked in the top 3% of 157 university commercialization offices in the 2004 Association of University Technology Managers study. It ranked fourth for license income received per research dollar expended, out-performing Harvard University and MIT, it reports.

“Waikato University may be relatively small in size but we make startlingly efficient use of our research dollar,” Mark Stuart, CEO at Waikato, explains. “This is not a one-off. We have performed consistently at that level for a number of years.”

ZyGEM, a molecular diagnostic company with DNA extraction and detection technologies, is one of WaikatoLink’s successes. The latest fledgling spin-out is the next-generation antibody company Obodies.

Companies that originated at Otago include Pacific Edge Biotechnology, which is developing tools for cancer detection using multiple biomarkers, and Antipodean Pharmaceuticals with mitochondria-targeted antioxidants for treatment of hepatic inflammatory disorders currently in Phase II trials.

New Zealand’s small size and location in the South Pacific has forced the country to be resourceful and innovative—always looking for an alternative way of doing things. Even with its trademark can-do attitude, the need to be globally focused in order to fully exploit the commercialization potential of products is ever present. This is highlighted by collaborations with leading research institutes, companies, and a number of trade agreements.

The most recent FTA, signed with China in April, is the fifth for New Zealand. Its first, with Australia in 1983, was described by the WTO as “the world’s most comprehensive, effective, and mutually compatible free trade agreement.” Hodgson adds, “New Zealand and Australia compete fiercely in many ways, and the most obvious one is sport, but the truth is that the two economies are more interlinked than any other two economies in the world.” Regulatory harmonization and the establishment of the Trans-Tasman fund illustrate this.


The ability to take natural resources or endemic organisms and then apply scientific expertise to them is an important factor in the country’s biotechnology success. For example, Migco’s lead compound, MGX-008, based on pine bark extract, is under development to reduce the incidence and severity of migraine headaches.

Another example of using natural resources finds ZyGEM sourcing novel enzymes from extreme climactic conditions in Antarctica.

New Zealand’s category 1 animal health status, with none of the Al diseases endemic in the rest of the world, is of particular significance to companies such as Living Cell Technologies, a University of Auckland spin-out now located in Australia that produces xenotransplants for diabetes, hemophilia, and Huntingdon’s disease.

Another example is Virionyx, an immune-focused company with a caprine polyclonal antibody therapeutic for HIV. The firm’s potent microparticle immune stimulator, incorporating both NOD2 and TLR 9 ligands, is also creating a lot of buzz .

Adds Larry Glass, Neuren’s CEO, “for a country with only 4 million people to be generating that level of research is really quite extraordinary. On a per capita basis, New Zealand clearly is one of the lead generators of novel promising science.”

Clinical Trials

“Companies tend to look for high-quality clinical trial sites in the U.S. and then maybe in Canada or Europe. They don’t even consider New Zealand,” says Gutheil, who is currently conducting trials in New Zealand. “Whenever we have performed clinical trials here and linked them with other trials for the same drug in other parts of the world,” Denny says, “New Zealand has invariably come in first with the lowest cost for the most patients.”

So what does New Zealand get in return? “Infusion of knowledge, finances, and global connectiveness,” says Hodgson. “We are, figuratively, the last bus stop on the planet and always have to think outside our own territorial limits.”

Virionyx’ CEO SimonWilkinson understands that they may have to move offshore eventually, but feels that “running clinical trials in New Zealand has given us the opportunity to take a compound to a much more advanced stage and add value before partnering or licensing,”

Cross section of tumor showing areas that do not receive sufficient oxygen (bright green).

Critical Crossroads

Realizing the significant economic impact that biotechnology could make, successive governments have invested heavily in the sector, and introduced tax reforms, foreign investment incentives, and policies to encourage migration.

A recently released study titled “Making Biotechnology Work for New Zealand” positions the country at a crucial stage of development in biotechnology. The report highlighted two areas—access to funding and talent. In these tough economic times, the former is a complaint the world over, but with the number of core biotech companies to increase fivefold by 2013, the government has a crucial role to play in raising funds and stimulating foreign investment.

Years ago, Yigal Erlich, Ph.D., the founding father of Israeli venture capital, helped set up an investment fund with NZ$100 million ($66.3 million) of government money and coinvestments from the private sector. Though it was moderately successful the VC industry is not yet big enough, which leads to ideas becoming funded and commercialized overseas. Companies like Proacta, Neuren, and CoDa are successful because they moved offshore at an early stage in their development.

“We have experienced failures the same as in many other countries in the world, but the fact that New Zealand is a small country means they are felt particularly hard,” says Neville Jordan, chairman of Endeavour Capital.

The second area identified by the report is that of attracting skilled researchers and encouraging migration. One recent initiative enables overseas students to study for a Ph.D. at the domestic rate. As a result, the number of people doing doctorates in New Zealand from offshore has risen from about 200 to nearly 1,500.

“Our Immigration Service is charged with being not just a gatekeeper but a recruitment agency,” says Hodgson. He referenced BIO2008 activities, where staff attended specifically to recruit scientists, those with commercialization skills and entrepreneurs with private equity to invest.

Election Year

Like the U.S., New Zealanders will be heading to the polls this year, with a closely contested election forecast to take place in November. Paul Hutchison, M.D., is the opposition National Party’s spokesman for Research, Science, and Technology. Should his party succeed to power, he has definite plans for biotechnology.

“I see science, R&D, and technology as something New Zealand must embrace if we are going to improve our position in the OECD rankings. I see it as critical and am keen to embrace this area going forward.”

One of the first changes would be to appoint a dedicated senior science adviser attached to the Prime Minister’s office, a proposition supported by the Royal Society of New Zealand’s National Science Panel. The panel outlined a vision for the future in the form of a ten-point plan in their 2008 Science Manifesto.

Moving forward, likely hot areas include biofuels and with the government recently committing $10 million, New Zealand’s well-developed forestry industry is an ideal source for cellulosic bioethanol. Lanzatech is a company to watch.

Oncology, biodiversity, and niche markets such as the synergy of nutraceutical and biomedical sciences or small-molecule carbohydrate chemistry are also the future.

In addition, Jordan says New Zealand has “a number of talented groups producing drug delivery, bioapplications, nanoscience, diagnostic materials, and tools.”

Although New Zealand can claim to be the birthplace of Glaxo and has generated a steady stream of biotechnology companies since then, “what has happened in the past five years has been staggering” adds Glass. “New Zealand may not currently be a hotbed of biotechnology, but it is certainly warming up,” concluded Denny.

Janet Mason ([email protected]) is a business intelligence consultant in the global biotechnology and pharmaceutical industry.

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