Biotech more promising this time round

By LIAM DANN

Dr Gunnar Weikert has a lot of money to spend and he's hoping he can invest some of it in New Zealand's biotech sector.

As chief executive and chairman of Swiss venture capital company Inventages, Weikert commands funds totalling more than $1 billion.

Inventages is increasingly focusing on the life-science end of the biotechnology sector.

That is where New Zealand comes in. Or, as Weikert says, where it could come in if it can get a few things right in the fledgling industry.

This is Weikert's second expedition to New Zealand and, although he still hasn't made an investment, things are looking more promising this time around.

Last year, the Government invited Weikert to look over the local sector and offer some advice.

In typically frank Germanic style he didn't hold back.

He said there was too much emphasis on setting up biotech clusters based around pharmaceutical development.

New Zealand had good science and research was cheap but it was hindered by the lack of any existing pharmaceutical industry.

The relationship between the Government drug agency Pharmac and the big international drug companies had not helped.

"If you try to convince the CEO of a leading pharmaceutical company to do some research in New Zealand then the first thing that comes to mind is, 'Huh, those guys have hurt me a lot on the pricing side so why should I give them research money'."

Lack of management expertise also limited investment opportunities.

Instead, the country should concentrate on its strength - which is in the agriculture and food industries.

"A year ago, some of the people in Wellington were quite shocked about our assessment," he said. "Their advisers were forcing them to go in the pharmaceutical direction."

Thankfully, in the past year there had been increasing recognition of New Zealand's strength in the life science field, he said.

A local fund - Life Science Ventures - is being established with the goal of raising $100 million.

"Internationally people know New Zealand is an agricultural country and people believe you are good at that," Weikert said. "And there is an industry here. Just mention Fonterra. You have a world-class food company."

But, sadly, from a financial perspective, the situation for research was still not world class.

"It's hard to say how far behind but it is definitely behind in terms of a lack of specialist funds."

In Europe, there was one-venture capital company for every company. In Australasia, it was more like one to 45.

Seed funding was not the problem.

The country had done well when it came to getting projects from university into their first year as a company but, after that, the funds were too small so many firms had listed on the stock exchange too early.

"Here companies are public that we would never take public in Europe."

The region needed more sustainable biotech dollars to help get projects through the second and third development phases.

Going public too early had meant that Inventages had not invested.

"We liked the science, we liked the concept" but bringing them back from being public companies to private was "just too much hassle".

"An investor like us with options all over the world is too lazy. We'll just go somewhere else."

Another problem has been a lack of co-investors.

Weikert is optimistic the Life Science Venture fund could be a potential investment partner. "This visit is about having a second look at investment possibilities," he said.

Hopefully, if the support is there from local investors, including the Government, Inventages will be in a position to make an investment next year.

Weikert said it was vital the Government committed to the sector.

New Zealand needed international money but global investors would always be reluctant to develop the sector for its own sake.

He did not buy into the argument of a tough investment environment.

The problem was that many companies had been set up during the investment bubble of 2000 amid unrealistic investor expectations.