The New Zealand bioscience sector is showing healthy growth but too many young companies are being driven overseas, a New Zealand Bio Industry report released yesterday suggests.
The report was commissioned by the Ministry of Science and Innovation, the third in a series on the growth of bioscience in New Zealand.
The $7 billion industry has reportedly grown by more than 20 percent and New Zealand is now ranked 10th in the OECD for biotechnology applications per capita with 365 patents granted between 2007 and 2009.
The report said said overseas investors were loathe to consider New Zealand, however, as the tax treatment of patents differed from other forms of intellectual property such as trademarks and brands.
“It is often a condition of overseas investors that the intellectual property (including patents) of a New Zealand company is moved into an offshore entity before they will invest, or while the value is still low. In this way, very young companies are driven overseas – potentially taking their staff, jobs, activities and assets with them.”
This is despite the total $426 million the government invested, through various agencies, in bioscience research made between 2008 and 2010.
NZ ahead of the curve
The OECD predicts that by 2030 the potential share of Gross Value Added (GVA) resulting from biotechnology will skew toward industry and agriculture rather than health.
The NZBIO report concluded New Zealand may be "ahead of the curve" and well placed to capture share of future potential value in that regard.
It identified three key groups in the bioscience sector: a dedicated group that focuses on producing bioscience goods and services; an active group (making up 46 percent of the industry) that relies on bioscience to manufacture products; and a research group.
The truly startling growth, however, occurred in net profit of the “dedicated group”, which more than tripled.
Dedicated bioscience organisations focus 78 percent of their expenditure on primary applications within the bioeconomy (including animal, foods and human health, plant and marine biosciences), 8 percent on health (including biomedical science and drug discovery) and 13 percent on industry and the environment (including bioprocessing and biomanufacturing).
This aligns very closely with the value of New Zealand’s trade in primary, health and industry and the environment.
“These organisations decreased their expenditure while increasing exports and total revenue. Bioscience in New Zealand is maturing and providing increasing economic contribution,” the report concludes.
However, initial startup capital is difficult for scientists to obtain at $2 to $5 million, which is needed for the next stage of development. This combined with a high tax system for the sale of patents encourages scientists to register offshore.