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08 June 2004
Good afternoon and welcome to the Annual Meeting of Genesis Research and Development Limited. While I have always enjoyed the spirit of the Genesis Annual Meeting, I do so this time as your retiring Chairman. This advice and my explanation were included in the explanatory notes to the Notice of Meeting. At the completion of this address, I will make some retiring chairman observations. At last year’s meeting I announced two major initiatives. The first was our intention to restructure the business into two standalone companies, each operating independently from the other. The result of that activity saw the formation of the plant company, AgriGenesis, as a wholly owned subsidiary of Genesis. That was followed by a search for a suitably qualified CEO. It led to the appointment of Dr Peter Lee to the post. He returned to New Zealand after 25 years in the forest products industry including a number of years with International Paper, where he rose to Vice President, Global Research and Development. We welcome Peter into our business. Our intent was to make our core competencies, and the business opportunities they represent, more readily identifiable to both potential partners and the market, thus enhancing shareholder value. We also recognised that the business had grown to the point where the health and plant operations required quite different strategies to bring products to market and warranted separate management teams. We also considered that the separation would bring greater scientific and management focus, an attribute that will translate into faster and better outcomes. AgriGenesis Biosciences Ltd has the capability, resources, partnerships, intellectual property, and most importantly the vision, to become one of the leading companies in its chosen segment of the plant sciences area. To complement the Genesis equity, we appointed ABN AMRO Craigs to assist with a capital raising programme, seeking trade investors who could provide new stimulus, fresh partnership opportunities and commercial focus to AgriGenesis’ product development activities, as well as cash needed to fund those projects. The capital raising programme is in progress so I am not yet able to tell you the outcome. However I can say that a number of international businesses have shown interest in AgriGenesis’ research programmes. We have invited Dr Lee to give an address on AgriGenesis as well as Dr Watson’s address and review of the Genesis business. The second initiative was the restructuring of the Board. As I said at last year’s meeting, achieving the right composition for the Board of a biotech company represents a special challenge. Given the specialised nature of the subject matter, it requires both experienced scientists able to evaluate biotechnology complexities and capable business people able to understand how science can be translated into money. Additionally the regulators recommend that a majority of Directors be independent. Following the Wrightson investment at last year’s Annual Meeting, shareholders voted nine Directors onto the Board – too many for a company of this size, in my opinion. On reflection I was over-optimistic in expecting that the size of the Board could be reduced to six or seven in short order. Wrightson have been keen to maintain their two nominees, John Palmer and Alan Freeth, and other directors have felt the need to stay on the board to maintain adequate balance and independence. As to the condition of the company, I can say that, despite the failure of PVAC to clear the Phase II FDA hurdle, the company is in good shape. The company is well run and has a clear focus on seeking commercial returns on its scientific efforts. Dr Watson and his team have reviewed the health programmes and have made decisions, backed by the board, resulting in a strong forward programme. Dr Lee has looked to bring customer focus to the plant business as an outside look in, rather than an inside look out. Genesis is not viewed favourably by local sharemarkets: overseas exchanges have longer and deeper experience of biotech investment and a better understanding of the rate at which value is created. In this environment our approach has been to retain a clear focus on meeting milestones on the path to commercialisation, and to communicate clearly and honestly with our shareholders and the wider market. This company has grown considerably since we listed. The opportunities before us today are more extensive than at any time in its ten-year history. The quality of the people who work for Genesis is as strong as ever. We have a growing portfolio in both the health and plant fields about which our investors can be optimistic. We have strong, clear and well managed relationships with organisations with which we seek product commercialisation. The mechanisms and controls we have in place to ensure that we do so in the most cost-effective manner are more exacting. And Genesis has sufficient reserves to see selected projects through to revenue generation. Finally, the process for appointing your new Chairman. The Board will follow the rules of the Genesis constitution. They provide that the Chairman be elected by the Board annually at the first Board meeting following the Annual Meeting of Shareholders. That timing will also follow the outcome of the partial takeover offer for Wrightson. As I retire, I hope you’ll allow me to make two observations. The first relates to our role in global markets. One of the projects I undertook after retiring from Watties was as Chairman of Competitive Auckland. Our task was to identify how the Auckland region could grow and match faster growing international cities. We observed how many big companies were leaving New Zealand. It was clear to us that upstream positions in the global supply chain were “in our zone” and that Auckland should be a serious global research location. It is an attractive location for global citizens to visit and work. We are ourselves an innovative people. Our leading tertiary institutions house many capable academics. Spin offs to the agricultural sector are vital and possible. We must pursue and convince world leaders in biotech and IT & Communications to sign up for research in New Zealand. The second observation relates to this company. Genesis has lost the attraction it once held for investors. One recent headline described it as a “Failure.” That’s a glib statement, and it doesn’t do justice to the company, its staff or its prospects. This business still has a great deal of life in it and a valuable contribution to make. Genesis was founded ten years ago by Jim Watson as a spin out from Auckland University. At that time it was a novel approach: now it’s a recognised model for economic development, and Genesis’ success is important not just to shareholders, but to New Zealand as a whole. This company has been a flagship for the emergence of an entire industry, and it has carried with it all the scrutiny and responsibility that such a role entails. Often we have to look back to see how far we have grown. Despite the setback of PVAC Genesis is today a company of extraordinary opportunity. However it takes considerable resilience for highly talented science staff to work productively in an environment where the outside world consistently discounts your value by 80 percent. It places a burden and a particular responsibility on the Board to enable these staff when investor sentiment discounts their work. This enablement takes the form of a close alignment of the interests of shareholders, the Board, management and staff. Only then do you get productive decision-making and consistency of collective purpose, both of which are vital ingredients in lifting Genesis’ performance. And the responsibility for achieving such an alignment rests squarely with the incoming Board. It has been a privilege to chair New Zealand’s largest company in this fledgling sector. I will watch its progress with my 100,000 shares, secure in the knowledge that its success is in the hands of a good and capable team. Finally, I would like to extend my thanks to my fellow Directors. Working with a set of talented, articulate, driven and determined people is most fulfilling. My six years at Genesis have been some of the most rewarding of my career. Thank you. |