Direct Capital is loading up on carbs

Richard Garland (left) and Ross George. Picture / Martin Sykes

Private equity firm Direct Capital has bought a controlling stake in biochemical-maker New Zealand Pharmaceuticals (NZP).

While the value of the 51 per cent stake was undisclosed, Direct Capital said the investment implied NZP had an enterprise value of $100 million.

Established more than 30 years ago, NZP is planning a share float within the next three years. The Palmerston North company makes bulk powders and liquids used by global drug giants in a wide range of remedies and dietary supplements.

Late last year, NZP began a joint project into one of the fastest growing niches in biotech: carbohydrate-based drugs called glycotherapeutics. Using recipes developed by the Crown-owned Industrial Research institute, NZP is one of the world's only producers of these special carbohydrate compounds. The building blocks are used in new drugs that prevent cancer, heart disease and other ailments.

NZP managing director Richard Garland said the firm had had "substantial sales" of these ingredients to a leading US biotech company.

He said NZP had a stronghold on the niche and shared the market with only two Italian manufacturers. Combined, the three firms controlled 90 per cent of the global market.

NZP also makes cholic acid, a bovine bile-derived powder used as an ingredient in drugs that treat liver disease, and other biochemicals.

Garland said the investment by Direct Capital and its BioPacificVentures, a $150 million fund launched in March to target agriculture and plant-based biotechnology, was a precursor to the share float. One of BioPacificVentures' investors is Swiss food giant Nestle.

Direct Capital will get two seats on NZP's board and a new independent chairman will be appointed.

Ross George, Direct Capital's managing director, said: "NZP is staged for massive growth."