Merge to attract investors, research companies told

By SIMON COLLINS science reporter

New Zealand's biggest listed biotech company, Genesis Research & Development, wants to merge with other Australasian companies.

Genesis chief executive Jim Watson told Vision Conferences' biotechnology forum in Auckland yesterday that investors no longer supported pure "discovery" firms that might wait 10 to 15 years to start making money.

Instead, Australasia needed a smaller number of integrated pharmaceutical companies that could cover the whole spectrum, from discovering active molecules through to manufacturing and marketing products based on them.

He said the only such company in the region at present was CSL, formerly Commonwealth Serum Laboratories, which was privatised by the Australian Government in 1994.

But its sales last year of A$1.3 billion ($1.48 billion) made it too big for Genesis, whose revenue fell just short of $10 million.

"We have to merge with companies of like size and interest," Watson said.

He said Genesis had raised $68 million from shareholders and $112 million from partnering and licensing deals since it was founded in 1994. It had $23 million in the bank at the end of last year - enough to survive only two more years unless it can raise more capital.

But investors who had been willing to wait for successful products in the 1990s had changed their minds after the collapse of biotech stocks in the US in 2001.

"Investment now is very, very much focused on the product end of the spectrum," he said.

"I don't think, in the near future, the market is going to go back to financing discovery companies, because there are a lot of products in development."

Yet almost all of the 21 biotech companies that he counted in New Zealand were still focused on discovery, with total revenues of only around $60 million. All were too small to attract funding easily from the world's huge pharmaceutical firms.

"I think there has got to be quite a lot of consolidation across Australasia to get a stronger pharmaceutical presence," Watson said.

"I think maybe the pathway is for a biotech company or a series of small biotech companies not just to merge, but then to look at the possibility of doing a deal with a big pharma to get them to put one of their big R & D [research and development] centres down here.

"I don't think we are going to compete with the Northern Hemisphere unless in Australasia we have one or two of these beasts that we are working to."