Biotechs become all the rage as Otago unleashes its gene genies

Friday 17th August 2001

By Chris Hutching

ON THE WEB

More information on bioSouth is available at www.biosouth.co.nz

The close "town and gown" relationship in Dunedin has spawned a raft of Otago-based biotechnology company floats. It has also led to the formation of bioSouth, an incorporated society that will develop and facilitate industry initiatives in the region.

Recent new ventures include A2 Corp, Abacus Technology, Blis Technologies, Botry-Zen, CG Surgical, Global Technologies, Fecpak International and, most recently, Pacific Edge Biotechnology.

At the launch of bioSouth, Dr Max Shepherd, executive director of Zenith Technology Corporation, noted the role of local entrepreneurs such as Howard Paterson in commercialising University of Otago research.

Pacific Edge plans to commercialise cancer gene research and will be floated on the unlisted securities board of the Stock Exchange. The public share offer will seek $5 million to fund laboratories, research equipment and staff to commercialise research that improves the diagnosis and management of cancer and other diseases.

The New Zealand Seed Fund, a $15 million private investors' fund that is already backing research at the University of Auckland, will contribute a further $5 million. Pacific Edge's founders include scientists from the University of Otago's cancer genetics laboratory.

A maximum of 20 million shares are being offered at 25c a share. The company is also issuing up to five million convertible preference shares - half to the Seed Fund and half to co-investors. These will be converted to five ordinary shares at $1 per share.

Ten million ordinary shares have been issued to the University of Otago for the transfer of intellectual property. Pacific Edge intends to grant share options for up to 11 million shares to its staff, directors and scientists, and to a scientific advisory board.

The interim chief executive is David Farmer, founder and managing partner of the New York-based Ulysses Group, which manages the Seed Fund. Other Pacific Edge directors include chairman Trevor Scott, representing the University of Otago; Jerry Balter, a Ulysses Group partner; Professor Tony Reeve, director of the cancer genetics laboratory; Peter Menzies, a director of the Seed Fund; and John Gilks, a Dunedin businessman, representing the underwriters.

The company's first projects include investigating and tracing genes involved in kidney development and cancers such as leukaemia.

The company, which will be based in the University of Otago's new $8 million purpose-built Centre for Innovation, plans to select and market three to four products based on gene profiles within the first three to five years of operation.

Mr Scott said it aimed to develop less invasive diagnostic, disease management and drug discovery tools based on identifying genes involved in cancers of the stomach, cervix and bowel.

"The identification of genes that are responsible for cancer onset and progression will lead to the development of new, smart drugs that have greater efficacy and fewer side-effects," he said.

Innovation centre director John Scandrett said the evolution of university research projects into a branded company product took a different path each time.

"It's a case of identifying which intellectual property packages have commercial relevance and we embark on a process of negotiation ... We're not in the business of offering to all and sundry. We look at whether there are research links with any particular party, how much money will be required, who would be interested in that field. These are high-risk companies and we're going to see more of them yet. Someone has to back them for starters.

"At the same time there was a massive over subscription of $100 million for Botry-Zen, which suggests there's a very positive outlook for seed capital," Mr Scandrett said.

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