Research start-ups get extra boost from joint fund

Up to 15 start-up companies born out of the University of Auckland's commercialisation arm could receive financial backing from the Government under a new partnership.

The Government funded New Zealand Venture Investment Fund (NZVIF) yesterday committed $4 million to be invested alongside investment from a west Australian pension fund called the Trans Tasman Commercialisation Fund.

The two funds will team up to look at commercial opportunities coming out of UniServices - the commercialisation arm of the university - and have already invested in one cancer research business and are close to backing a second.

The first, Saratan Pharmaceuticals, is working on drug research to help cure a type of breast cancer. The second company, Pathway Pharmaceuticals, is based on work on inhibitors of PI3 kinase, an enzyme involved in controlling cell growth and migration and is also expected to help treat cancer.

Up to $500,000 can be invested in each company under NZVIF's guidelines although initial investment is limited to $250,000.

The Trans Tasman fund has up to A$30 million ($37.4 million) to invest across Auckland and four Australian universities and so far has committed A$1 million to Auckland.

NZVIF chief executive Franceska Banga said its involvement would ensure there was a New Zealand focus on the research being undertaken by Kiwi companies. Trans Tasman investment manager Craig Reilly said the fund saw plenty of opportunities emerging out the university but it took time to do the due diligence needed before investment could happen. It first began looking at Saratan more than a year ago.

Research companies like the two cancer businesses would potentially take eight to 12 years before the drugs could be used by the public and it was hoped the company's products could be licensed to a larger firm or sold to a trade buyer before then.

Reilly said it was very expensive for drug research companies to grow as the first set of basic trials could cost up to $15 million with a second wider trial even more expensive.

The fund had also been approached to invest into research companies spun-out of other universities but was focused on growing its size in the medium term.

Reilly said there were concerns that there were not enough investors to continue putting money into companies once they got beyond a start-up.