GAPS IN NEW ZEALAND'S BIOTECHNOLOGY INDUSTRY
BY TAMSIN BATEMAN
This essay takes the position that New Zealand’s biotechnology industry has failed to provide the returns expected and explores challenges to growth in the sector. The work won Tamsin Bateman, Associate at Scarlatti, a place at GapSummit 2014, which brought current and future leaders together at Cambridge University, UK, to discuss and debate gaps in the global biotechnology ecosystem.
OBSTACLES FOR GROWTH OF BIOTECHNOLOGY IN NEW ZEALAND
New Zealand’s small size and isolation from the markets of North America and Europe are the biggest obstacles for growth of the national biotechnology industry. We are not exposed to the culture of large capital markets, sophisticated institutional investors and accompanying big deals, or the economic growth that comes from value-added industries such as biotechnology. Moreover, we are a long way from our customers which can lead to poorly directed research.
Despite the globalisation brought through the internet, this exposure is needed to foster a thriving biotechnology ecosystem. This gap has led to a small and unsophisticated market that is yet to develop and mature. This geographic gap has resulted in a number of symptomatic barriers, including a focus on commodity industries, an unsophisticated investment community and a lack of capital, particularly at the growth stage.
This challenge should be approached by forming strong, collaborative relationships with other biotechnology markets in a few key areas of strength. New Zealand has no shortage of innovative scientists, entrepreneurs and early stage investors, but stronger relationships with stakeholders in other markets are imperative to develop this into a prosperous biotechnology sector. Exposure through these relationships to more successful biotechnology markets would work two-fold – it would draw more sophisticated international players to New Zealand and help channel high quality market intelligence to participants in the New Zealand industry. It is hoped that this would flow through to government to encourage a shift towards diversifying into biotechnology.
THE FUNDING GAP IN NEW ZEALAND'S BIOTECHNOLOGY INDUSTRY
One reason that New Zealand’s biotechnology sector faces a funding gap is the lack of returns delivered by the industry to date. Over the last decade, biotechnology has been a focus for both the public and private sectors, and was the industry that many hoped would provide New Zealand with a much needed boost to our knowledge-based economy. The current model for biotechnology, however, has not provided the anticipated returns, and consequently many bioscience focussed funds have wrapped up and government support has reduced.
Large (by New Zealand standards) domestic institutional investors could contribute substantially to the industry but currently do not. For example, the national superannuation and ACC funds, the former of which has reached $NZ25bn, could make significant differences to the sector if only a small proportion of their funds were invested. Historic returns, however, have not been good enough to attract their interest.
To turn things around and produce impressive returns in the sector will require changes in approach. We must avoid spreading funding too thinly and instead focus on developing areas of strength. We need to become more rigorous at identifying the areas that are working well and foster support for them through the public and private sectors. An example of a group with a proven track record is the Cancer Research Institute, which has succeeded in commercialising several cancer therapeutics.
If we can channel funding to areas of strength and build on them to produce further successes, then the returns would attract funding from a range of sources, such as the domestic institutional investors already mentioned. This would gain the much needed critical mass to foster a truly prosperous biotechnology industry in New Zealand. Furthermore, success stories would draw good people and ideas, thereby enabling growth into less established areas.
To support this approach, we must ensure that New Zealand is visible in the international biotechnology community and continually strive to build strong, collaborative relationships with other successful biotechnology markets. This would go some way towards developing the presence of sophisticated international investors in New Zealand and stimulate a culture of investment and growth. In addition, we must foster local investors to follow this lead. One way to do this is to find gaps that have not yet been developed, such as the potential of Māori (indigenous people of New Zealand) investment in the life sciences. This was the topic of my Master’s thesis which concluded that there is interest in investing in the life sciences, but a disconnect between the Māori and science communities.
To conclude, the funding gap for biotechnology in New Zealand has widened because the returns achieved have fallen short of expectations. To overcome the resulting lack of public and private sector support, we must focus on developing key areas of strength in order to gain critical mass and build on the success stories to generate a revitalised perception of the industry among local and international investors.