Archive March 2011

Professor opts out of probiotic commercialisation route to concentrate on research Peter Kerr Mar 30

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In a world in which scientists are often encouraged to commercialise their research findings, there’s something quite noble about Gregor Reid.

He’s a professor these days of microbiology and immunology at the University of Western Ontario, Canada, and director of the Canadian Research and Development Centre for Probiotics. (More info here)

When he first started researching the probiotic (good bacteria) over 25 years ago, it was considered a bit left field and unnecessary, since antibiotics were all that was considered necessary.

As time has gone on however with no new antibiotics and a growing bacterial resistance, the role of probiotics and their ability to crowd out harmful bacteria has become increasingly important.

As a Scotsman, who carried out his undergraduate studies at Massey University and gained a Canadian post-doctoral scholarship, Reid ended up working on women’s urinary tract infections.

His research found that lactobacilli prevent infections by colonizing and outcompeting other more harmful varieties. Some of this research was patented, mostly around what the organism does and how it operates.
Monash University, where Reid did an MBA wanted to jointly commercialise the science, including potentially taking the resulting company to the NASDAQ.

“But I could see a potential conflict of interest, and had decided I didn’t want to be in business,” Reid says.
Two years ago the patent rights were sold, and is now sold as Flora Restore, a product to help vaginas repopulate with beneficial bacteria.

Reid is now able to concentrate more fully on the science of probiotics and how they work.

As antibiotic resistance grows, it also allows him to be at the forefront of probiotic’s means of preventing infection.

Reid says future approaches to ridding patients of infections will not be as dependent on the ‘carpet bombing’ technique of antibiotics, but be much more strategic.

Genetic bioinformatics and gene sequencing will see much more personalised medicine happening in the future. The role of probiotics and prebiotics (something that stimulates the growth of beneficial organisms), will have a much more important role to play in tomorrow’s medicine he says.

“There’s no reason such products couldn’t come from New Zealand,” he says.

(Prof Reid recently visited New Zealand to receive a Distinguished Alumni Achievement Award from Massey University. See the Manawatu Standard’s write up here).

Are there some new products in the pipeline as business manufacturing increases its R&D spend? Peter Kerr Mar 29

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Considering that the time period for the R&D survey mostly coincides with the global financial crisis, you’d have to be pretty pleased with the nation’s 13% increase between 2008 and 2010.

During the 2010 reference year, Stats NZ reckons the total R&D spend was $2,444 million. The split between sectors was business at $1,013m, government $629m and universities (though why this doesn’t come under government is slightly strange) $802m.

The original statistics are here.

Services, particularly computer and other, lifted R&D by 18% to $481 in the 2010, reflecting some of the strong below the headlines work that happens in this area. It would be interesting to know the strength from Wellington’s ICT sector in this increase.

Minister of Science and Innovation, Wayne Mapp, was pretty pleased to announce at last week’s NZBio conference dinner (where LanzaTech cleaned up the major prizes of the year) that total R&D spend now represents 1.3% of the country’s GDP.

Its well below the often documented and desired 2.5%, but up from 1.19% in 2008. Mapp was especially pleased to see the private sector increasing its R&D contribution more than the government.

Sometimes it is difficult to compare private sector R&D spend between countries, and apparently often NZ businesses don’t include items under such a spending column, but by comparison, the OECD national average R&D spend in 2008 was 2.33%.

The largest proportion of NZ’s science research spend was in manufacturing at 18% or $449m. Interestingly, the private sector carried out most of this – 16%.

If you were a betting man, you’d have to hope that this implies there’s a few interesting products about to emerge from this sector. They’re not in the habit of spending for no particular reason – and a recession’s as good a time as any to dust off an idea or two that may’ve been lurking.

Kiwi angel investors pony up with more money in 2010 Peter Kerr Mar 28

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Angel investors are increasingly seen as the first source of outside money for promising start ups; as with the rest of the world, venture capital funds become ever more difficult to source.

And there’s some interesting numbers behind the numbers in the announcement that Kiwi angel investors ponyed up a record amount last year. (See the figures here at NZ Venture Investment Fund).

During the year, $53.8 million was invested, up 5.3% on 2009′s $51.1m. A larger amount of this was follow-on deals. That comprised almost $30m, with just under $24m were first round.

In terms of stage of investment, $5.3m was seed, $39.2m start-up, $6.6m at the early stage expansion, and $2.8m at the expansion stage.

It is also interesting to note the number of syndicated deals – those involving different groups of investors.
In 2006, just 27% of deals were syndicated. In 2010 47% of deals were syndicated and 53% were not.

Activity was also particularly strong towards the end of last year. During 2010, 103 deals were completed, compared to 76 the previous year. There were 25 deals in the third quarter, and 41 deals in the fourth quarter. The average investment declined during the two years, $522,000 in 2010, compared to $672,000 in 2009.

Since 2006, by region, 51% of angel investment has been in Auckland, 17% in Wellington, 11% in Christchurch, 7% in Dunedin and 4% in Palmerston North.

Software and services have received 26% of the amount invested, pharmaceuticals 23%, hardware and equipment 18% and food and beverage 10%

Random points of interest from NZBio, two Peter Kerr Mar 25

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A second lot of interesting points – you know, the ‘what did you learn’ answers you give to people.

• Photonz Omega-3 EPA production by fermentation of micro algae set to provide second reliable source after fish oil. EPA plus statins appears to be an excellent cholesterol lowering formulation. Photonz’s IP around the fermentation method that others have attempted, but not succeeded in doing. Will initially contract manufacture the product, could build own production facility in NZ once it becomes profitable (predicted for 2014)

• MSI sees biomaterials as being a source of competitive advantage for NZ – Dr Max Kennedy

• LanzaTech’s process can use a broad range of CO:H2 ratios in its conversion – Dr Will Barker

• Every hour the world uses 413 hours of stored energy (as in oil, coal etc). Carbonscape (microwave charcoal production) offers a platform technology, from nutraceuticals to gasification for generating electricity. High value products is the initial focus. Nick Gerritsen.

• Globally, 80% of venture capital raised by 20% of companies

• Most venture capital divestments in NZ will be by trade sale to larger, often corporate, companies. Andrew Kelly, BioPacific Ventures

• Six of the world’s top 26 biomedical universities are in Australasia – Joshua Funder, GBS Ventures

• Most Australian and NZ venture capital companies haven’t been in the area long enough to have realized the initial investment to again invest in promising companies – Joshua Funder

• 60 NZ companies last year exported $600 million of biomedical devices. NZ district health boards could be much more proactive in promoting/helping these companies in their clinical validation of products- Faye Sumner, Medical Technologies Association of NZ

Random points of interest from NZBio Peter Kerr Mar 24


Back from NZBio’s annual conference, with a tonne of notes and not sure how to make them all make sense.

However, some random points of interest – unthemed.

• When talking with the media, scientists need to overcome their embarrassment at constantly repeating a message. Scientists should still stick to the facts, let the journalist form an opinion. Stephen Goldson, strategy advisor to the office of the Prime Minister’s Science and Advisory Committee

• Living Cell Technologies encapsulation semi-permeable membrane is one of its main pieces of intellectual property – allows the transplanted pig insulin producing cells in a human body not to be rejected by the body’s immune system. Prof Bob Elliot

• Thermophilic bacteria from geothermal hot pools are an attractive potential vehicle in the bioenergy and biochemical industries. One major reason is that because they exist in silica rich environments, they immediately ‘grab’ any carbon (i.e. tree that falls into hot pool) that comes their way. Isolating and identifying potential candidates for commercial application is one of Scion’s many goals

• Scion’s TOGA (titremetric and off-gas analysis) machine, which allows realtime adjustment of anaerobic environments/fermentation, has attracted considerable purchasing interest from other parties.

• A sense of simplicity is a growing food trend. A general opposition to genetically modified foods may also push into possible nano foods and other new types of food products. The educated, globally aware and health conscious food buyers (where higher value food products are aimed) may in fact reject novel foods. Dr Karin Cronin, ESR, ‘sustainable decision-making for future food technologies’.

• The linear, conveyor-belt push of new food products needs to be balanced with an understanding of society and citizens into the markets – before too much product development is carried out. Karin Cronin again

• Why is working with big pharma so difficult/challenging….some numbers. In 2010, Merck received 7000 opportunities to review. 1000 of these were taken through to committee, 400 of which went to confidentiality agreements. Merck signed 46 significant deals/licences. Dr David Nicholson, Merck Inc (USA).

• Bomac Animal Health (recently purchased by Bayer), actively gathers information and industry ‘gossip’, collects competitors’ IP activity information, obtains ongoing feedback from researchers, distributors and vets. “Does its research, knows its markets, positions its IP around the market not the product.” Kate Wilson, James & Wells.

NZ V.C. industry needs more money Peter Kerr Mar 18

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From what I gather, the NZ Venture Investment Fund needs more capital input to be able to continue backing seed and start up companies.

It hasn’t (yet) made enough of a return on its investments to start pumping that money into new ventures.

As NZVIF chief executive Franceska Banga says, “we do need to see new venture capital funds emerging if young technology companies are going to consistently have access to New Zealand investment capital.”

Of course even as New Zealand’s angel investment scene grows ever stronger, along with the rest of the world everyone’s seeing a shortage of venture capital funds.

In spite of a so-called shortage of fund though, last year America achieved the following:

Venture capital firms invested US$21.8 billion in 3,277 companies in 2010. Angel investors ponyed up another US$16-$20 billion in over 50,000 early stage start-ups.

In comparison, since its establishment in 2002, NZVIF has invested NZ$123 million into 100 seed and start up companies, and combined with private investment, these 100 companies have received $308 million in funding.

NZVIF gave an interesting breakdown on some of these investments.

  • 79 are exporting
  • 29 have received investment from offshore investors
  • 23 emerged from either universities or CRIs and 19 have been part of business incubators
  • Auckland has 53 of the companies, Christchurch 16
  • 9 have been sold and 7 written off or liquidated
  • 28 of the investments were into seed stage enterprises, 56 were into start-up companies, 15 into early expansion companies and 1 company is at the expansion stage

Banga makes the point that typically the companies have developed new technologies, backed by patents, which gives them a distinctive niche into high value international markets.

Key traits are an export focus, high growth and high productivity in sectors such as software and internet, agricultural technologies, medical devices, niche manufacturing and biotechnology.

“If New Zealand was able to ramp up the formation and growth of new companies in high value industries, and if only 10 to 20 percent of those companies were to realise their full potential exporting high value goods and services around the world, this would have a considerable impact on New Zealand’s future economic prosperity,” Banga says.

Who keeps a real eye on the ‘space’ beyond R&D Peter Kerr Mar 17

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Nothing keeps an oversight of the New Zealand innovation ecosystem.

Science and R&D gets a good looking to, but beyond this engine of ideas and discoverer of knowledge, the next parts are not as connected as they could be.

What other parts?

  • The part that allows someone to scale up and test a process – be it food, energy, or an innovative product.
  • The part that develops and encourages best routes to market.
  • The part that helps facilitate distribution of high-value NZ products – often requiring finance assistance at crucial parts.
  • The part that enables entrepreneurs to improve on areas of weakness, or for NZ Inc to train up specialists in particular areas of internationalisation practice.
  • The part that sees us look at technological solutions as a way to move up the value chain.
  • The part that says there is no failure, only experience.

New Zealand’s hands off style of economic management has tended to the view that market forces would be enough to drive prosperity.

But there’s nothing, no body that’s charged with identifying gaps and opportunities, directing efforts and allocating resources to take high-value goods and services to market.

Partly because there’s no oversight body, the statistics and data on differentiated goods exporters is limited – which is not the case for other export sectors in NZ.

Other small successful countries have aggressively intervened in their economies by driving from an innovation perspective.

If it’s good enough for Denmark, Singapore et al to have a high level overview that makes sure all the ducks are flying in formation; surely it is good enough for us?

Americans call it experience, not failure Peter Kerr Mar 16


Americans don’t use the word failure – they call it experience.

Now wouldn’t that be a good change of thinking to develop in New Zealand. There’s a suspicion we’re changing in our thinking with regards to ‘failure’, and Don Dodge gives a few more thoughts on the subject (see here).

In his blog about thoughts on business and technology, Dodge says setting impossible goals and shooting for them gives a whole new mindset.

“Think about the trajectory required to hit a target at 1,000 feet versus a target at 100 feet,” he says. “That difference in trajectory, and thinking, will create a much better result than aiming for 100 feet. That is a fundamental difference in philosophy that drives us towards success. Failure is not viewed as shameful, and will not prevent you from achieving future success.”

Dodge seems to know what he’s talking about, having seen over 300 start-ups at recent American ‘do’s’.
He posits; Start-ups? We need more finish-ups.

To give an example of the scale that the USA brings to the game, here are some of its stats.

Venture capital firms invested US$21.8 billion in 3,277 companies in 2010. Angel investors ponyed up another US$16-$20 billion in over 50,000 early stage start-ups. There are over 500,000 new companies started every year in America.

In the first half of 2010, there were 31 start up investments by angel investors in New Zealand.

Dodge makes the point that 30% of new companies fail in the first year, and 50% fail within five years.

Second time entrepreneurs have a higher success rate than first timers (my emphasis).

He continues, saying failure is experience.

Which in a nutshell says, let’s not be too hard on ourselves Kiwis.

Key’s only sharp arrow — as Minister of S&I Peter Kerr Mar 15

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OK, another reason John Key should take up as Minister of Science & Innovation – apart from it being the only sharp arrow in his quiver.

This is on the presumption that we want to quickly grow knowledge intensive, value adding businesses and employment, that are scalable and partnerable around the world.

And as Mr Key has observed, the relatively low payback of tourism means this part of the economy is never really going to kick in with more paying power, so he can drop that without being seen to be too callous.

Key as Minister of Science & Innovation sends the right message for a country aiming to get ahead.

It is an authentic position for Key and his take on the world, and his view of how New Zealand must be part of that growth – much of which will be ‘green’.

As well as being Minister of S&I, having Key in charge of a group charged with ramping up our ability to turn ideas into income would galvanise New Zealand. Such an innovation council approach has been behind countries such as Denmark, Finland and Singapore concentrate their national efforts.

From the R&D to technical side, the investment, funding and routes to markets perspective; by drawing on the connections of new New Zealanders back to their birthlands, and focusing endeavours across the entire innovation ecosystem, Key could help provide a stimulus for many different sectors of our community.

The opportunity for him to lead, in what is effectively the only area of government spending where some influence is possible, must surely be tempting.

Go on John, tell us you’ll at least thinking about it.

New U.S. universities V.C. fund a model for New Zealand? Peter Kerr Mar 14

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The roles and abilities of universities to create and maintain start-ups is a challenge all over the world.

New Zealand’s no different, and Victoria University’s Viclink looks like it is going to get a make over, with its back office infrastructure brought back into the main university (see sticK story here).

One main problem is that our universities don’t have too much spare cash floating around to invest in new ideas.

One challenge for universities is that while they may be good at inventing technologies, they aren’t necessarily that good at extracting the full measure of profit from those innovations. That start-up investment is usually meant to come from venture capitalists – usually with the university diluting its stake in the new business as they decline to participate in the later financing rounds.

A report out of the New York Times briefly outlines a new V.C. fund, Osage University Partners fund, put together by Marc Singer, Louis Bernmeman and Robert Adelson with $100 million in it. (Check the original article here)

Research universities like Penn, the California Institute of Technology, Duke, the University of California, Berkeley and Columbia assign their investment rights to it, and hold sizeable ownership stakes in the fund.

Singer and his partners are entirely motivated by profit they say, rather than altruism, and the fund will avoid consumer internet plays, if only because these are rarely what the universities produce. Instead they will invest in areas like material science, battery technology, therapeutics and energy.

Some of their projects may also require significant amounts of labour (again unlike internet plays), because their projects generally lead to manufacturing.

Based on a profit motive, Singer says “one of the questions we had to ask ourselves is whether this is the area we’d want to invest in,” he says. “What would be the returns?”

They built up an index of start-ups from 50 top-flight universities that had licensed their technology to those start-ups but not invested in them.

There was a very respectable 33% rate of return, with few strike outs. In fact, about 40% of the investments had a positive return.

Singer says, as a result, if universities have a bigger stake in companies, they will make more money and can finance other start-ups. And many can fulfill a mandate to create local jobs.

“The tech transfer community has become increasingly oriented toward job creation,” Louis Berneman says. “In a lot of ways, we are part of a larger puzzle that universities are trying to solve.”

It is a conundrum that NZ Inc is also trying to solve.

The availability of a wider fund, in which universities are members and participants, and which allows outside capital to be invested in commercialising their ideas, seems at first blush a good idea.

It will be interesting to see whether a fund of this type could be considered a goer in New Zealand.

Is there the appetite?

Would the venture capitalists find enough deal flow?

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