Celentis shifts into high gear

By SIMON COLLINS science reporter

AgResearch's commercial arm, Celentis, has moved into Auckland and is busy selling its "mature" businesses.

Dr Stewart Washer, the Australian entrepreneur who took over as head of Celentis in January, has sold its analytical laboratories in Hamilton and Dunedin.

He now hopes to raise several million dollars by selling a unit making slow-acting pills called "Time Capsule" for facial eczema.

Other units that look set to be sold include Wallaceville vaccine company AgVax and Dunedin's BioProducts, which makes health food extracts out of deer velvet for the Asian market.

Washer initially turned down a headhunter's approaches to leave Biowest, Australia's major non-medical DNA testing laboratory, which he founded while completing his doctorate in plant genetic engineering in Perth in 1993.

He changed his mind when he realised that AgResearch was "one of the top six life science research companies in the Southern Hemisphere".

He is giving Celentis a suitably global head office in the new block of neoclassical grey offices between Fanshawe St and Viaduct Harbour Ave in downtown Auckland, sharing the buildings with the likes of Compaq and Sun Microsystems.

The office will be a small one of about 10 people; others are still at AgResearch's base at Ruakura, near Hamilton.

"We have global customers and global technology alliances," said Washer. "Auckland is a good window to the world."

In March, he sold AgResearch's two analytical laboratories to Dr Brian Linehan, owner of a competing Hamilton business, AgLab.

Now several local and overseas companies are doing due diligence on the Time Capsule business, which was sold in the early 1990s but bought back so that AgResearch could keep its intellectual property.

"In general, it's our policy to retain intellectual property and to license the use of it on commercial terms," said Roy Savage, a former Zespri treasurer who joined Celentis this year as chief financial officer.

Washer said potential buyers of any business would be assessed on the basis of whether they would retain staff and stay in New Zealand, as well as on the prices they offered.

AgVax, employing around 50 people, is also "definitely" a potential sale - "if it gets to a certain stage where we can say that the best way forward is share sale or even a listing".

BioProducts, a much smaller company, will be expanded within the AgResearch stable before any sale is contemplated.

Washer said his target was to boost the rate of growth in Celentis revenue, now 18 per cent on a base of $37 million a year, to a growth rate of around 25 per cent a year.

Some of this will come from products already being marketed, such as a kind of milk designed to treat childhood diarrhoea and stomach ulcers.

A new variety of this milk is being tested on farms, and is about to go into human trials.

In the longer term, one of the biggest prospects is the controversial proposal to grow human proteins in milk through genetically modified cattle to help people with a variety of illnesses.

Celentis signed a deal in 2000 with the British company PPL Therapeutics giving it access to PPL's patented transgenic technology in return for joint development of any medically important proteins that Celentis produces in milk.

Using cows as a kind of "protein factory" is regarded as a much cheaper way of producing proteins than synthesising them directly.

Although PPL and other big pharmaceutical companies are already using cows to produce some of the most important proteins, Washer believes New Zealand is the ideal place to develop new proteins.

"We are BSE-free and foot-and-mouth-free," he said. "We have a real prospect of becoming the world's production centre for high-value proteins - if we don't get held up by unfounded concerns."

AgResearch told Parliament's finance and expenditure committee in February that its joint venture with PPL stood to grow into a business earning $50 million a year.

Washer is even more optimistic: "$50 million could work out to be a conservative value."

Celentis also has a joint venture with the US company Geron to produce cloned copies of prize cattle, deer and other high-value animals.

"We are still looking at the business model - who wants to pay for cloning," Washer said.



He said the cost of cloning meant it was likely to be worth doing only with a few prize beasts.

"If you paid hundreds of thousands of dollars for a prime animal, what have you got left if it gets run over by a bus?" he said.

"You can take an ear tag [of DNA]. We are not doing that yet. We are proving to the breeding industry that they are healthy, normal animals."

Celentis