Dialogue: NZ research is missing out

Full returns from publicly funded projects are not being realised, argues COLIN HARVEY*.

The defence of Crown Research Institutes (CRIs) by AgResearch chief executive Keith Steele (Business Herald, March 15) is more of an advertisement for AgResearch than an answer to the concerns raised by a wide spectrum of the public.

Unfortunately, financial results in the form that Dr Steele outlined do show creditable stewardship of resources but this does not address the fundamental issues of the return on investment from publicly funded research.

This return should be measured financially and intrinsically as it contributes to the industrial and social base of our nation.

The new structure for CRIs is supported by the CRIs and by politicians who have formed them. Professor Dick Wilkins' arguments (Business Herald, March 6) are supported by the industries CRIs should support.

Recent surveys of members of joint action group NZ Agritech, who export our leading technologies from agriculture, show few companies receive any benefits from publicly funded projects.

These companies are some our leading innovators and have historically taken technologies such as the electric fence to leading positions internationally. Much of this know-how came from the older concepts of publicly funded research.

The perception of industry is that the current structures are designed to lock know-how within CRIs, not for national benefit but for the benefit of the CRI itself.

The irony is this objective is to allow the CRIs to make profits to undertake further research, again for its own benefit.

For the politicians the benefits are obvious, but it is science and industry that suffer as a result.

Those of us who have worked with commercialising science for many years see the immediate effect of science projects that are either underfunded into commercialisation or, as the going gets tough, are sold or almost given away to international markets.

What politicians have not grasped is the substantial post-research investment that must be made to commercialise research for international markets. Companies such as Genesis and Vironynx can testify to the millions of dollars that must be spent to take pharmaceutical products to United States Food and Drug Administration standards.

Then there is the enormous cost of marketing. It is estimated that in the animal health market, a project that costs $100,000 in research takes $2 million to commercialise just for the New Zealand and Australian markets.

With little or no money for such investment, much of the research from CRIs is often launched with little or no regard to its true potential. In yesteryear, when such discoveries were often justified because they solved a problem for agriculture, such behaviour may have been appropriate. If the politicians and the public are expecting a return for their investment, however, it is a waste.

The typical scenario is that after small local sales the true potential is recognised and the technology is licensed to an international company. New Zealand is then deprived of the full returns from a realistically funded project directed at international as well as local markets.

This is most clearly shown in the behaviour of AgResearch, which has locked up research by its own companies such as Agvax. These have then been forced to seek international partnerships with companies such as Australian biotechnology company CSL rather than develop their own products for overseas markets.

Such projects can be profitable, but does this profitability in any way compare to that of a full international development and the further benefits of building the industrial expertise base of this country?

We need to build our expertise in biologically based solutions to disease and pest control. It is part of a wider agriculture strategy directed at making our agricultural products more environmentally friendly.

There are also large international markets for such technologies. By linking Agvax to CSL, what technologies Agvax has are traded overseas and we do not develop an industrial base in New Zealand. We have the capacity to do this, as proven by the Schering Plough plant which supplies the world from just across the road from Agvax.

Not all CRIs have this behaviour. Most of the research from Industrial Research Ltd (IRL) has been successfully commercialised by partnerships. Some of these are with local companies; others with overseas companies.

IRL has not established its own trading companies and its success for its level of public funding is remarkable.

A simplistic, low-cost commercialisation for CRIs is shown in the IRL model. Quite simply, funding from the Foundation for Research Science and Technology (FoRST) should be given only where there is a clear definition of a delivery partner who is involved from day one. This could be the Department of Conservation for ecological research or a commercial company for projects with a more defined commercial output. Such a scheme would put the scientist back into science and give the hard commercial edge politicians seek.

Experience has shown that this type of structure also produces quicker results. Those in the delivery business want a solution, however imperfect; the scientist wishes to solve the problem to perfection, often leading to over-research.

A project team with a member who wants a solution will take early results and apply them. This is often the most important step. It also means that woolly outcomes are killed off early as the specifications for success are defined early in the project's life.

This does not mean the partner should have to contribute money. However, it should carry the responsibility of being able to implement the total project. For some genetic research this could be a farmer breed society with a wide membership or a specific individual with high expertise in one small area of commerce.

Some of us have had the uncomfortable role of being on referral committees for FoRST on CRI strategy. The single biggest concern is delivery of outcomes.

Our leading scientists still believe that if the idea is good enough the world will beat a path to your door. This is a false concept.

Value comes only from commercialisation. Sometimes a simple piece of research can have significant value once it is put to use - look at Post-it labels. Often complicated research such as gene research can have doubtful and vague outcomes.

There is also the question of the standard of our science. We are as a nation lagging on international requirements. The requirement for good practice is a fact in the world of animal and human science, but few of the facilities in our publicly funded research meet international development requirements.

The quality of much of our research is 10 years behind what is now acceptable internationally.

There is a strong groundswell of highly commercial, quality research in New Zealand. Companies such as Genesis and Vironynx are at the forefront of significant science. They are hiring internationally at salaries that would make scientists in CRIs green with envy. They seek, however, science leadership that understands the role of science in the commercial process, the standards they need to meet, and the importance of tight timetables to keep investor confidence.

Such companies will be providing a new type of career structure in science that has a strong dedication to goals and outputs. Some would argue whether this is science, research or just development. The distinction may be vague, but it is without doubt about adding value through scientific output.

As a nation our public-good research spending is less than that of an international pharmaceutical company such as GlaxoWellcome. The challenge is not to stop the science but to ensure it is directed at adding value to our intrinsic resources, such as our environment, or the wealth of our nation.

This can be achieved effectively only by highly efficient delivery of outcomes.

The partnership model is the only effective way to achieve this.

* Colin Harvey is managing director of animal health technology company Ancare, and chairman of the NZ Agritech export joint action group.