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State-owned science company Industrial Research Ltd (IRL) has scuttled its Biopharm business after pouring in millions of dollars which have not yet been repaid.
Hutt Valley-based IRL said yesterday that the Biopharm business, which ran into financial problems in 2004, would cease to operate. It said some of the 28 remaining staff might be offered other jobs elsewhere in IRL.
IRL started Biopharm in 1999, and after several years of successful manufacture of cytotoxins, (cell-killing toxins used in cancer therapies) for international pharmaceutical companies, the start-up had a staff of 61.
The compounds, produced by fermentation of specific soil micro-organisms under highly controlled conditions, sold for thousands of dollars a gram and could be chemically linked to antibodies specific to a particular type of cancer.
The news of Biopharm's fate is expected to renew political calls for an inquiry into the running of IRL.
The potential for failure was highlighted last year by the Crown Company Monitoring Advisory Unit in a briefing to the Government.
But Crown Research Institutes Minister Steve Maharey said this year that new contracts gained by IRL in the United States had eased the financial pressure. Now questions are expected to be asked about inter-company loans in which IRL gave Biopharm $12.37 million last year and $5.5 million in 2004.
IRL posted a $5.37 million deficit for the year to June 30 last year on operating revenue of $60.1 million ($57.38 million in 2004).
Last year's deficit included redundancy payments of nearly $1 million.
Since then, IRL has pulled its core scientific research activities back to a single site at Gracefield in Lower Hutt, and last year laid off 41 staff - 27 of 76 workers in Auckland and 14 of 29 staff in Christchurch.
IRL was a flagship of the Government's fleet of science companies when the DSIR was carved up in 1992: IRL inherited research across a broad spectrum which has led it to develop superconductors, pharmaceuticals, sensors and robotics.
Yesterday IRL chief executive Shaun Coffey said Biopharm had needed to reposition itself in the market, but efforts to attract investment in these initiatives had not succeeded.
"Unfortunately it seems the business was a little ahead of the emerging market for these drug technologies."
Its two main activities were developing a toxin portfolio for new drug development, and developing and making small-molecule active pharmaceutical ingredients.
Mr Coffey said the company was committed to doing all it could to help the employees affected.
- NZPA
