AgResearch moves into human health

By SIMON COLLINS science reporter

Ten years after it was set up as the Pastoral Agriculture Research Institute, AgResearch is shifting its focus from cows and sheep to the ultimate beneficiaries of food and medicines: human beings.

The institute adopted a goal in 1999 of becoming "a global $200 million life sciences business by the year 2004".

Three years on, it is 36 per cent of the way to that target, with revenue up from $94.4 million in 1998-99 to $132.2 million in the 12 months to June this year.

The $200 million target has been shifted out two years, to 2006. But chief executive Dr Keith Steele says the institute is more determined than ever to be more than just a food company.

"We went through quite a long debate - are we in food?" he said. "We decided that we are in ingredients, not in food per se.

"We are particularly interested in ingredients that impact positively on the health of humans. We have large discovery programmes in animals and plants which will follow through to things that impact on the health of humans."

The institute has formed a company with Otago University and the Malaghan Institute to develop a new asthma drug.

It also plans to use its Covita joint venture with the Meat and Wool Boards to commercialise myostatin, a gene which regulates muscle growth in humans as well as sheep. Although a sister company, Ovita, is based in Dunedin, Dr Stewart Washer of AgResearch's commercial arm Celentis said Covita would be in Auckland.

"To get close to multinational drug companies, Auckland is the place to do it," he said. Jobs for a general manager and chief scientific officer in the new venture are about to be advertised.

New chairman Rick Christie said in his first annual report, tabled in Parliament last month, that AgResearch had been through an "extremely challenging" year.

After two years of exceeding its targets, revenue growth dropped this year from 12 per cent to 7 per cent, compared with targeted growth of 11 per cent.

Funding from the Foundation for Research, Science and Technology rose 5.7 per cent to $58.1 million, reversing a slight downward trend over the previous five years.

But Steele worries this income is vulnerable. More than half of it ($31 million) is up for review in the foundation's present funding year.

To compensate, he is targeting 25 per cent growth in revenue from all other sources this year - also a tough ask, given non-foundation growth in the past year of only 7.8 per cent, to $72.5 million.

Some of this growth will come from products such as animal vaccines, cattle embryos, nutritional milk, deer extracts and devices such as a system to trace meat back to its farm of origin.

Other revenue will come from contract research - so far mainly for the local meat, wool and dairy industries, including consortiums researching the genetics of sheep and white clover, developing meat-based foods with specific purposes and looking for ways to stop sheep and cattle belching so much methane.

About half of the $38 million revenue growth in the past three years came from the 1999 takeover of the Meat Industry Research Institute, which had commercial revenue of $6.3 million a year, and the purchase in 2000 of a 49 per cent stake in a Brisbane food processing software company, Sastek, which contributed $11.3 million in the last year.

In the year to June, the institute budgeted $10.3 million for further acquisitions and expansions.

Washer says Celentis is on the lookout for prospects to complement AgResearch's biotech expertise.

"Fifty per cent of the US biotech market slipped away in the last financial year. What this is creating for us is amazing opportunities.

"There will be companies in distress with very good technology and some very good people. We'll be looking at merger/acquisition type activities to combine with some of our technology," he said.

Celentis itself also hopes to earn revenue by commercialising products for other crown research institutes, co-operative research centres, universities and venture capital firms in New Zealand and Australia.

"We have spoken to all the venture investment funds and most of the other venture capitalists here in New Zealand and in Australia," Washer said.

Many farmers have questioned this new commercial thrust. Former AgResearch soil and fertiliser research manager Dr Doug Edmeades has formed a private consultancy, AgKnowledge, because he felt AgResearch's technical information was not reaching farmers.

Steele responded: "To Doug Edmeades, I'd say: show us that information and we'll get it out."

AgResearch