EXPORT CASE STUDY: ICPbio – an added value story

Isolation does have its benefits – particularly in the biotech sector where distance from markets is balanced by distance from diseases that have affected animal populations in the rest of the world.
It’s why company like ICPbio is very happily investing to expand manufacturing capacity in New Zealand at time when the economic viability of the make-here-to-export-there model is increasingly under question. It recently completed stage one of its new plasma fractionation facility in Henderson – doubling its manufacturing space and making the company one of the top producers of bovine plasma proteins in the world.
ICPbio benefits from its local base, says Earl Stevens, major shareholder and, until recently, the company’s CEO.*
“We have special advantage here because we take meat industry by-products and process them into high value products in the country of origin. If you were to take it anywhere else in the world you’d have the barrier of having to prove it wasn’t adulterated in any way en route. So it’s better to process it here.”
The company can both leverage off the country’s well-established agricultural base and its clean, green, disease-free status. “New Zealand biosecurity is very important to us,” says Stevens.
And the margins on its products are high enough to make money – despite unfavourable exchange rates. It’s quite possible for New Zealand to export profitably, Stevens believes, if it focuses on the things it’s good at.
“Fonterra takes high value proteins out of milk and makes some money; we take high value proteins and enzymes out of meat by-products and make some money – so we’re bit of value add to agriculture story at this stage.”
It’s also in sector the Government has identified as destined to make big contribution to the New Zealand economy – focus that’s been helpful in terms of building industry cohesion and attracting investment attention, says Stevens.
Capital is and has always been one of the company’s biggest challenges. There are times, laments Stevens, that he might as well be in investment banking given the amount of time he devotes to raising dosh.
“Unfortunately most of New Zealand’s investing public is bit coloured by the ‘discovery’ biotech where you can throw millions of dollars at something and end up with nothing so we’ve had to work quite hard to explain ourselves.”
As Stevens puts it, the company is at the “boring but profitable” end of the biotech spectrum – ie, low risk and cash generating.
“Our business is more based around manufacturing and making money now.
“My view is that the Government should be encouraging more companies like ICPbio because we’re the missing link in sense in that we’re focused on process development. We extract the high-value products that others at the front-line high-risk end of the business need in order to make, test, store or deliver their products.”
In other words, ICPbio can continue to make sales and profits regardless of the customer’s discovery process. But it is also well placed to make the leap into generating some serious returns from its intellectual property in the generic bio-pharmaceutical space, says Stevens.
“What we’ve done is assemble all the skills you need to separate high value mole-cules – we actually have all the skills and tools to produce our own version of these generic biotech drugs that are coming off patent now.”
Stevens is interested in that biotech space because that is where the money is in future – and it’s where the company could do some serious value-adding to New Zealand’s economy.
“I think we need more industry in New Zealand that is generating good cashflow and can then afford to pick up the intellectual property and fund it through to the next stage [of development] and then eventually perhaps bring it to market.”
That said, he doubts New Zealand has the depth of either financial or human capital to bring major new drugs to the market – especially when compared with countries like India which does have both the people and, increasingly, strong investing base.
In an industry that depends on high-skill workforce, Stevens worries we’re losing many of our best and brightest offshore.
“It seems sciences are not the most attractive options for kids going into uni and the ones that do come through we compete for quite strongly with the dairy industry or the big OE. My experience recently is that you hire New Zealand graduates and they’re only there for five minutes before they head offshore or find job with ‘manager’ in the title.
“So we’ve ended up with league of nations – probably about 60 to 70 percent of our workforce of just over 100 people are immigrants from all round the world who are very well qualified and happy to look at our sort of environment.”
There’s some similarity, he suggests, between what happens to our skillbase and our IP – we do good job of creating it then lose it offshore because we don’t offer comparable sorts of opportunities for development.
“Human capital is just like financial capital – it goes where it can operate best and get the best rewards and lot of New Zealanders are forced offshore because that’s where the funding is.”
In reality there aren’t too many companies that can offer graduates rewarding jobs in the biotech space – the country has its “big old manufacturing and big old commodities”, then we’ve got services, says Stevens.
“In the middle there’s not lot of value add.”
Plus well-qualified people often feel they need to get management job to move up the pay scale.
“Industries tend to reward people for moving into the management class rather than keep them in technical roles they’re really good at. What we’ve tried to do is provide good salaries in technical roles because what we do is really quite specialist.”
Stevens’ own speciality is biochemistry – though he started life as dairy farmer’s son.
“My dad had New Zealand’s [then] largest dairy farm – 900 cows up at Helensville. But I decided life was too short to be dairy farmer so went to Massey University, did ag science, got my doctorate in biochem.”
At 29, he was lecturing in animal science when he decided to abandon academia for the business world – keeping science in the mix. In 1987, he joined Roche, selling scientific equipment before moving into divisional management role. He liked the Roche business model.
“They made things, sold things and brought the money back home. We don’t see enough of that happening here.”
There followed series of management roles: sales and marketing manager for Trigon Packaging, group marketing manager for Carter Holt Harvey’s corrugated box business, corporate development manager for Fernz and chief executive of Excell Corporation.
“At that point I decided I should really go into business for myself. This is the second company I’ve floated. The first one was Certified Organics. We listed on September 11, 2001 – it wasn’t the day to do it if you wanted to raise equity.”
He then built up technology company Bio-Strategy from scratch, selling it in order to help fund his 2005 purchase of ICPbio which he took public in May the following year.
“Every family has budget and limit – that’s why we decided to float the company because it needed more funds than I could personally lay hands on.”
Since Stevens took the helm, ICPbio which was established in 1983, has more than tripled its staffing levels and doubled its manufacturing space. It has also extended its product range and now makes over 75 specialist biological products, the bulk of which are exported to America, Europe, Asia, the Middle East and South America.
A $402,832 grant from the Government’s Technology for Business Growth fund matched dollar for dollar by the company last year funded an R&D programme to develop two new plasma protein products designed to provide an entry point into key international active pharmaceutical intermediate (API) markets.
Although the company recently had to downgrade previously projected sales targets f