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Principal researcher Prof David Green said yesterday he was "absolutely thrilled" to receive the $9,930,000 contract, spread over six years.
Prof Green, who heads the university anatomy and structural biology department, said the funding, from the Foundation for Research, Science and Technology (FRST), would significantly extend earlier Otago research in the field.
Much swifter, cheaper and more convenient testing of patients' "complete metabolic profile", including key health indicators, such as white cell counts, would be possible if creating the hand-held devices was realised, Prof Green said.
If successful, the new devices - testing blood in pin-prick amounts - could significantly boost the Dunedin economy through being manufactured in the city, he said.
The potential value to New Zealand was estimated at $US2.1 billion annually by 2020.
The devices could be used in GPs' offices, or pharmacies, and could allow testing of some patients at their homes, with results regularly transmitted by wireless computer or cellphone to remote medical clinics.
Other team members were: Dr Jo-Ann Stanton, Dr Mark Stringer, Dr Chris Rawle, Chris Mason and law faculty dean Prof Mark Henaghan.
Otago University gained $18,636,000 from FRST in its latest research contract round, which provided a total of $785 million, significantly up on last year.
The Otago funding, for five research projects, was more than double the $7.4 million gained by the university to support two research programmes in the previous round last year.
Auckland University topped New Zealand universities in the latest round, gaining $50 million, to support eight projects and one programme.
Prof Geoff White, the Otago University deputy vice-chancellor, research, said all five Otago projects funded by FRST in the latest round showed the ways that fundamental scientific research undertaken at universities could produce positive health and economic outcomes.
The four other Otago projects focused on the further development of smart gels useful in surgery; further South Island precious metals exploration with minimal environmental impact; developing pharmaceuticals with targeted bioactive small molecules; and intelligent delivery systems for brain chemicals.
Funding details were: smart gels, principal investigator Dr Stephen Moratti, chemistry, ($3.5 million over four years); precious metals exploration, principal investigator Prof Dave Craw, geology, ($2.4 million over six years); developing pharmaceuticals, principal investigator Prof Rob Smith, chemistry, ($1.8 million over three years); brain chemical delivery systems, team led by Dr John Reynolds, anatomy, and Associate Prof Brian Hyland, physiology, ($1.05 million over three years).