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FuturaGene: getting to the root of crop technology

23 October 2009

Dr Stanley Hirsch knows that one of the biggest challenges his company faces in the coming years is getting companies, governments and consumers to think differently about what can be achieved with genetically modified crops.

It’s a subject that has caused consternation among environmental lobbyists everywhere, and left proponents of these new technologies treading very carefully. But with widely predicted food and fuel shortages triggered by rapidly growing populations and the effects of climate change, it looks like there is a thawing in some quarters towards what can be achieved with science.

This week the Royal Society, the UK’s national academy of science, called for an extra £2bn to be spent on research into global food security. In order to achieve the estimated 50% increase in food crop production that will be required by 2050, the society is calling for a grand plan that involves developing improved crop varieties using conventional breeding and genetic modification.

Dr Stanley Hirsch.jpg

FuturaGene's CEO, Dr Stanley Hirsch

This is old news to Hirsch, who has spent more than 25 years running biotech ventures. Nine years ago he merged his CBD Technologies business into AIM listed crop specialist FuturaGene plc. Since then, the chief executive has been leading efforts to develop genetic solutions that both boost crop yields and protect plants from harsh conditions.

Biotech success

FuturaGene’s multi-billion dollar core markets include global forestry, where it has developed a fast-growing variety of eucalyptus tree for the pulp and paper sector; and biofuels, where it has come up with an elite variety of poplar tree to provide a carbon-neutral fuel for power stations. It also boasts a string of non-core growth-enhancing gene traits for a variety of other crops.

As well as using some of its own in-house development, FuturaGene has focused on building strong relationships with universities all over the world, from which it takes promising genetic advances and turns them into commercial products.

While it has yet to make any money – and a new funding round is likely to come soon – the most surprising aspect of the company is the progress it has made in just three years. Biotechs are notoriously vulnerable to either failure or being taken out by larger players. In the case of FuturaGene, it has managed to take its technology from the lab, into field trials and has now signed commercial deals with industry players.

In effect this means that the company is succeeding in a field dominated by just a handful of giants – such as Monsanto, Syngenta, Bauer and DuPont. In Brazil, for instance, a long term tie-up with the country’s second largest eucalyptus grower, Suzano, looks likely to be the source of the company’s first revenues.

Suzano operates more than 300,000 hectares of company-owned forest sites in Brazil and is planning to expand that to over 600,000 hectares in the next five to six years. Having pioneered the use of eucalyptus for paper and pulp, the group has turned to FuturaGene to boost its productivity by a possible 25%, once it gets Government approval.

“We have done initial field trials with them and in 2009 they exercised a commercialisation option with us,” Hirsch said. “The market just through Suzano is 300m trees – growing to 600m trees. We get a fee per tree planted and a share of the premium generated by our technology. This is an incredibly lucrative deal for the company and will be the start of our recurring revenues.”

Not only that, but three and a half years later Suzano is obliged to sell the science on to the rest of the South American market. The Brazilian eucalyptus estate alone accounts for 3.7m hectares – more than 4bn trees. “These are huge potential markets,” Hirsch said.

Growth surge

Hirsch puts much of FuturaGene’s progress down to its focus on specific markets and the synergies between its two main platforms. On one hand, its plant cell wall modification technology helps crops grow faster and makes them easier to process. On the other, abiotic stress tolerance enables plants to grow in harsh, dry, salty environments, which again improves productivity.

“We have been very focused on a particular market sector which has allowed us to be very capital efficient,” Hirsch said. “We have a long-term, focused management team that has defined a strong strategic sector and we have kept that up through what were difficult years in the genetic modification business – but we are now seeing a strong thawing in that, driven by global drivers.”

Its technology has now attracted embattled crop producers all over the world, with the company’s eucalyptus crops being targeted at a string of countries in the southern sub-tropical crescent, which begins in Brazil and runs through southern Africa, India, South East Asia and into China.

“Apart from the major deal in Brazil and one in South East Asia, we also have partnerships in the US, East Asia, Israel and China, including one with the China Academy of Forestry, which is the Government forestry development agency,” Hirsch said. “We are also talking to other players in that crescent, in southern Africa and India to broaden our hold on that market.”

Aside from targeting the paper and pulp industry through its work in plantation forestry, the company is also tapping into the increasing use of wood as a biopower, particularly in the US. It is also exploring ways in which its technology can make it easier to remove the cellulose from non-food crops like wood, which can then be turned into biofuels.

“We see the biofuels market maturing,” Hirsch said. “As the technology matures over the next four to five years we will be very well positioned to supply fast-growing trees into that market.”

Elsewhere, FuturaGene’s portfolio of technologies means that it can do a lot of additional deal-making with other crops. According to Hirsch, the next few years will see the company increase its management depth to open up new partnering opportunities, as well expanding its own R&D capacity to offset the, albeit low, level of royalty commitments it has to universities. “All of that put together gives us a high level of gross profit projection,” he said.

Hirsch’s views on genetically modified crops are obviously positive, but his comments appear valid on the basis of some of the figures coming out of the world agricultural industry. He reckons that just in terms of production, the world would have needed another 12 million hectares of land in agriculture in order to produce the same amount of food in 2007 than it needed with GM crops.

“The other fact is that GM crops have led to a reduction in Co2 because there has been less need for agricultural treatment of fields and improved crop methods because of GM,” he said. “The carbon reduction in 2007 from GM crops was the equivalent of taking 6.3 million cars off the road – that’s 24% of the cars in the UK.

“If people looked at the science behind GM instead of the incorrect public perception, they would actually see that these technologies are phenomenally beneficial for the environment.”

Ben Hobson, SmallCapNews.co.uk