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Short-term pain for long-term gains

Innovation is at the heart of New Zealand’s Douglas Pharmaceuticals - it has kept them at the forefront of the way medicines are manufactured.  

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New Zealand’s largest drug developer and manufacturer, Douglas Pharmaceuticals supplies prescription consumer medicines as well as health and beauty products to a number of international markets.

"Research and development is vital in the pharmaceutical industry.” 

It’s also West Auckland’s largest employer with 580 staff based at their Henderson manufacturing site and a further 120 staff in Fiji and 20 in America.

To support the ongoing innovation, over the past five years Douglas Pharmaceuticals has received a series of grants from Callaghan Innovation.

“Research and development is vital in the pharmaceutical industry,” says Chief Financial Officer Kent Durbin.

 “The grants from Callaghan, in particular the Growth Grant, have enabled us to take on more risk in our new product development. 

“This year our research and development spend will be around $NZ30 million up from $NZ12 million in full-year 2013, the year immediately prior to the Callaghan Growth Grant commencing.”

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R&D, boosted by the grant and funding for up to ten graduate positions every year, helps create opportunities to chase the lucrative development of novel drugs which are patentable.

Durbin says the stakes are higher than in generic development but a successful clinical program for a new drug and approval from the American Federal Drug Association would be transformational for a company of Douglas’ size.

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In the five years since the soft gelatine line was established, Douglas has commercialised three brands of capsules. 

“Without support from Callaghan Innovation we would have been more cautious about growing our R&D and I doubt we would have achieved the same results,” Durbin says.

“Investing in innovation and R&D actually has a detrimental impact on profit in the short term. As pharmaceutical developments typically take four to five years but with a projected internal rate return of 20-40 per cent, long term profits are possible.”

Solving the productivity puzzle

A new report from ANZ Insights, ‘Innovation and Productivity,’ has urged New Zealand manufacturers to invest in innovation to boost their productivity.

The report includes profiles of four businesses, two of them recipients of grants from Callaghan and two other firms which have also put an emphasis on innovation.

Douglas Pharmaceuticals is one of those businesses – and you can keep an eye out for continued coverage of other innovative NZ SMEs over the coming weeks.

Briar McCormack is New Zealand editor at bluenotes

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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