Grant McLachlan - Stuff - Column
Pig-headedness the cause of Auckland Island pig facility closure
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What future awaits the Auckland Island pigs at Awarua?
Following the decision by a Japanese-New Zealand joint venture to consider shutting down an Auckland Island pig breeding facility at Awarua, near Invercargill, has been like watching an avoidable shipwreck in slow motion.
After researching the story for some time now, I believe it would be irresponsible to just stand by and watch the carnage.
The Auckland Island pigs were initially meant to be the saviour for castaways, then became the potential saviour for people afflicted with debilitating illnesses, and are now hostage to the pig-headedness of the pharmaceutical industry.
The Rare Breeds Conservation Society recovered 17 pigs in 1999, formed a trust with the Invercargill City Council, and called it the Southern Heirloom Breeds Trust.
It's a non-profit trust that owns 15 of the pigs at any time and leases them to the joint venture.
Living Cell Technologies is a New Zealand-based company formed specifically to find medical benefits from the Auckland Island pigs.
Professor Bob Elliot, who was instrumental with the formation of Starship Children's Hospital and Cure Kids, is New Zealand's most prolific medical discoverer and formed Living Cell with David Collinson, who wanted to find a cure for his ill son.
Living Cell, which 50:50 joint-ventured with Otsuka Pharamaceutical, is the poor partner.
Formed in 1996 under the name Diatranz, the undertaking has faced many setbacks from the moving goalposts of Government regulation. It has, however, continued to find many uses for the pigs' cells.
The Awarua pig-breeding facility is the only one of its type in the world. Its opening coincided with the approval of human trials in 2009 for a type-1 diabetes product called DIABECELL.
Those human trials are now in their final phases of New Zealand and United States regulatory approval, along with another product called NTCELL to treat Parkinson's.
When two ground-breaking treatments are close to being available to the market, the focus should be breeding enough Auckland Island pigs for market, not shutting down its facilities.
Otsuka Pharmaceutical, however has the rights to DIABECELL in the United States and Japanese markets and is looking to use Amish pigs from Minnesota, which are a poor substitute to the Auckland Island breed.
DIABECELL has been in development for 20 years and Living Cell has spluttered along with funding from Government grants, multiple share floats, and philanthropic investors but is yet to produce a dividend.
At only 9 cents a share on the ASX, Living Cell's market value is less than A$45 million.
Living Cell once valued their pigs at $250,000 each. The pigs are now worth more than their company.
I can understand why Otsuka has chosen its course. It would want its money back and the US market pays top dollar for healthcare.
Whereas, in this country, Pharmac and the Ministry of Health are in a powerful position to bargain prices down.
The irony is that the New Zealand taxpayer may not be able to afford what they have effectively already pitched in for.
New Zealanders took the greatest risks.
The Rare Breeds Conservation Society recovered the pigs and Invercargill ratepayers funded the initial quarantine period before anyone knew the pigs' scientific worth.
Taxpayers funded research grants.
Medsafe developed a world-class medical trialling regime.
And what is there to show for it?
One year out from potential commercialisation, there are only 30 pigs in the Awarua facility. It would need over 8000 pigs just to treat the 25,000 type-1 diabetes and 8000 Parkinson's sufferers in New Zealand.
It would need a further 50,000 pigs to supply the Australasian market.
To keep the facility running in Awarua, including staff, it only costs $500,000 a year.
The joint venture spent over $2 million to build the facility but leases the land from the widow of the man whose idea was to recover the pigs from the Auckland Islands.
Normally, developing such drugs costs over a billion dollars. With a fraction of that, Living Cell has achieved world-changing medical discoveries.
They just don't have the money to fund human trials for all the potential uses for their products.
With over a thousand deaths a year from type-1 diabetes and Parkinson's, treating those diseases costs the taxpayer $500 million a year. Compare that to the $187 million that the Ministry of Health spent developing a Meningococcal B vaccine – a disease that has infected less than 5000 and killed 190 people since 1990.
There are around 1500 type-1 diabetes sufferers in the Southern DHB area. The annual cost of treating those patients is around $20 million.
Ministry of Health often buys in bulk at a discount.
Considering they could be the biggest customer, such an advance purchase would allow the company to plan ahead and maintain a secure supply of pigs.
Invercargill has bent over backwards to plan ahead.
There is land in Invercargill specifically zoned for such a major expansion in pig numbers. There were even modular building plans drawn up, research and training programmes at SIT, and air freight feasibility studies. The delays in regulatory approval, however, has seen plans and local investors come and go.
The worst case scenario is that the Southern Heirloom Breeds Trust returns its 15 pigs to its Donovan Park facility while Diatranz Otsuka strip the Awarua facility and pay out the remainder of its lease.
If that happens, shareholders should expect that all their investment in the pigs doesn't end up in the hands of potential competitors.
Such a pig's breakfast is totally avoidable as the stakeholders all want the same thing. What they need to do is figure out a way of pooling their resources to secure a sustainable outcome.
Grant McLachlan is a New Zealand-based writer, columnist and screenwriter who has been researching the Auckland Island pigs saga.