NZ Roadshow: Why agbiotech must break free

It's the Tasman paradox: although Australia and New Zealand are the world's leading exporters of grazing-derived products, they have both struggled to develop viable agricultural biotechnology industries. Why?

Dr Andrew Kelly says new agbiotech companies are thin on the ground, and investment in new companies is lagging, despite the great strengths of both nations in agricultural research. In contrast, their medical research communities have spun out a host of new companies in the past decade.

The problem lies in a "conservative, monolithic infrastructure" that has grown up around agriculture in both countries, according to the former Celentis executive, now chief scientific officer for Life Science Ventures, Auckland's brand new, $100 million biotech venture capital fund.

Kelly told an audience of Australian biotech executives and researchers at a dinner marking the launch of the Biosphere New Zealand

Roadshow 2004 in Melbourne on Tuesday that the very institutions that had served the grazing and agricultural industries so well for more than a century were now inhibiting the development of their agricultural biotechnology industries in the 21st century.

Australian-born Kelly said agriculture had evolved as a mainstay of the economies of both countries, despite their starkly contrasting geological history and climate, and had resulted in "fascinating complementarities" in their industries, and their research capabilities.

He said New Zealand is geologically young, with young, fertile soils, a maritime climate and very reliable rainfall. There's always green grass -- it leads to a much denser, richer agricultural environment, with large number of grazing animals per hectare. Australia, meanwhile, is geologically old, with thin, infertile soils, much lower and highly variable rainfall, and with a very low per-hectare carrying capacity.

"For a long time, New Zealand and Australia have dominated international trade in a number of commodities -- New Zealand dominates in dairying, Australia dominates in wheat. New Zealand dominates in sheep meat, Australia in wool and beef," Kelly said. But in Australia, CSIRO and state agriculture departments provided research support for these industries, while single-desk authorities like the Australian Wheat Board and Wool Innovation Australia handled marketing. In New Zealand, research is dominated by the Crown Research Institutes, and the dairy industry is dominated by the giant Fonterra cooperative.

"These big companies tend to suppress growth around them," Kelly said. "It's hard to get a young dairy company or crop-breeding start-up when the big companies dominate research, and patronise the research monoliths."

In contrast, the biopharma industry was similarly undeveloped only a decade ago, but after starting virtually from scratch, is now thriving. Kelly said the agbiotech industry did not have accept the status quo -- it had many factors working in its favour. It has a strong research base, and many of the executives working for its monolithic companies have experience marketing products internationally, that could be adapted to marketing agbiotech products.

There is an abundant supply of source materials -- grain, milk, wool, and meat -- for high-value agbiotech products, and many of the big companies operating in these industries have relevant manufacturing skills, as well as onshore manufacturing and processing facilities.

"Our other natural advantage is that many of the people in our agbiotech research community are well grounded in agriculture -- we're just a generation from agriculture being our dominant industry," Kelly said. "Researchers in new agbiotech companies in places like New York or San Francisco would not have this familiarity."

Above all else, Kelly said, agricultural biotechnology was an enterprise in which New Zealand and Australia had complementary research strengths -- it was a natural area for collaboration.

"It's our strong suit, and we have to look for opportunities. It's been too easy to get starry-eyed about medical biotech, and ignore our strong suit."