Out of cow muck comes magic
Although it has grizzly beginnings in the blood and gore of the meatworks, there is a fairytale element to the story of biomaterials company Southern Lights.
A little like the Brothers Grimm's goblin Rumpelstiltskin, who spun straw into gold, the Napier company transforms cow byproducts which would otherwise be destined for pet food and fertiliser into extremely lucrative Type 1 polymeric collagen.
At about $50,000 a kilogram it is no exaggeration to say the polymeric collagen is worth its weight in gold - only a few thousand shy of the price of bullion.
Not to be confused with the collagen found in the lips of Hollywood, Southern Lights' highly refined collagen is used in membranes for the medical healing of wounds.
Although it does take a fair bit of hocus pocus to extract the miracle collagen found in cow tissue, Southern Lights' managing director, Geoffrey Bennett, says he is more cowboy than alchemist.
"It's a very messy business that starts with killing a cow, but I think of it as goldmining. There's a lot of rocks you've got to go through before you get a nugget."
Canadian-born Bennett and his American business partner, Peter Meyer, set up Southern Lights in Napier in 2003, just as the North American biomedical industry turned into the Wild West after the discovery there of bovine spongiform encephalopathy (BSE), or mad cow disease.
The aim was to export tissue from BSE-free New Zealand to North American biomedical companies making devices such as heart valves and healing membranes.
"Peter and I were initially in the venture development business, and were working on something else in regenerative medicine, a sheep product that wasn't going particularly well, so we were looking at other opportunities," Bennett says.
"We knew about the tight regulations around xenograph tissue - taking tissue from something that's not a human and putting it in a human - so we weren't deterred by all the barriers to entry."
It was not cheap - the quality system cost $400,000, compared with the $1 million cost of setting up the firm's processing facility at Marton, in Rangitikei.
After three years of selling raw tissue, Bennett started looking for extra ways to create revenue because of the risk of incoming competition. Southern Lights discovered some biomedical companies were willing to pay extra for it to crosslink its heart membrane pericardium - a process in which the tissue is stabilised for implantation by removing DNA markers to avoid bad immune responses. Then it began investigating using cross-linked tissue to produce polymeric collagen.
"Collagen is tricky and expensive to make. We thought there might be customers who didn't want to go to the trouble of creating it themselves," Bennett says.
"Southern Lights teamed up with biochemical engineer John Higgins and Massey University's Riddit Institute in 2009 to develop the technology, and exported its first batch of collagen in 2011.
"The original patents for making collagen expired long ago, but producing collagen is a black art," Bennett says. "They don't put in the patent the real tricks to making it."
When it got its product to market Southern Lights discovered it needed to vary its production based on an individual customer's requirements.
It now enters into R&D partnership with each client and requires them to fund some of the research costs.
"One of the lessons we learned early on was we undervalued our own contribution to R&D and we didn't screen our customers properly."
Along with its raw and processed tissue exports, Southern Lights has the capacity to make 200kg of collagen a year, charging up to $70,000 per kg depending on the processing involved and quantity ordered .
* Emma Rowson is a reporter for Unlimited, New Zealand's leading digital business magazine dedicated to entrepreneurs, start-ups, leaders and innovators.
The Dominion Post