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Date:

September 4, 2003

Subject:

Jimmy Carter Speaks Up Again; Yes, We'll Still Have Bananas!; WTO

 

Today in AgBioView: September 5, 2003:

* Carter: Africa Needs GM Crops
* Carter Urges Japan, EU to Reduce Farm Subsidies
* Response To "WTO Fails The World's Poor"
* Yes, We'll Still Have Bananas!
* Scientists Boost Antioxidant Content of Corn
* Biotech Helps Women Farmers Provide for Their Families in Africa
* Biotech a Hot Career Choice for the 21st Century
* Sustaining Agbiotechnology Through Lean Times

**************


Carter: Africa Needs GM Crops

- Cnn.com, September 5, 2003

TOKYO, Japan (Reuters) -- Former U.S. president and Nobel Peace Prize
laureate Jimmy Carter said on Friday that genetically modified (GM) crops
could be of huge benefit to Africa and it was grievous that the idea had
spread that such crops were dangerous.

Carter said in a speech in Tokyo that biotechnology offered the chance to
produce crops that were almost immune to disease, helping to meet "the
most basic human right of all -- food to eat."

"It has been very grievous to me ... to hear some either misguided or
deliberately lying people in Europe, to propagate the idea that somehow
genetically modified seeds are poisonous," said Carter, himself a peanut
and cotton farmer.

"This is not true at all and has never been proven in any way," said he
added. "This has resulted in misleading sometimes gullible and
ill-informed African, and other leaders, that we cannot accept these
seeds," he said.

With more people adequately fed, there would be less disparity between
rich and poor, he said. "The results of this disparity are the root
causes of most of the world's unresolved problems...including violent
conflict, often causing the threat of terrorism," he said.

Carter, who won the Nobel Peace Prize in 2002, won acclaim during his four
years as president from 1977 by brokering a peace deal between Egypt and
Israel.

Since leaving office he has worked to improve life in developing countries
and as a crisis negotiator. He was in Tokyo for events sponsored by the
privately funded Nippon Foundation and the Sasakawa Africa Association, an
Africa-linked non-governmental organization.

****************

Carter Urges Japan, EU to Reduce Farm Subsidies

http://www.eubusiness.com/afp/030905053725.szq6e36l

Former US president and 2002 Nobel Peace Prize laureate Jimmy Carter on
Friday urged Japan and Europe to agree to further cuts in farm subsidies
to help give a fair competitive edge to agriculture products of poor
African nations.

"Industrial nations must continue to reduce farm subsidies ... to
encourage agricultural production in poor countries and to benefit
consumers of all communities," Carter said in an address in Tokyo on
assisting Africa.

This issue will be discussed when ministers from 146 member countries of
the world Trade Organisation meets in Cancun, Mexico, next week, he noted.
"The United States has shown some modest flexibility but Japan and Europe
have maintained their resistance to any real change," Carter said at the
UN University.

Carter also said the crucial element of foreign assistance to Africa
should begin with "letting African people increase the production of their
own food" rather than giving them food aid.
"I have seen the eagerness of African farmers to improve dramatically
their own production of food on their tiny farms," he said, underscoring
the need to give them a chance to have good seed, chemical fertilisers and
advice.

Carter also attacked opponents of genetically-modified (GM) food,
referring to "a false propaganda of some European extremists, who condemn
the use of genetically-modified seeds.
"Their misleading statements have been extremely damaging to Africa where
some misguided leaders have rejected such imports, even imports of grain
when their people are starving," he said.

"There's never been any evidence of a hazard to humans or animals," he
argued. "Many of the most widely used medicines in fact have come from the
same process of utilising genetic diversity
He said there was nothing wrong with using GM food with "a reasonable
precaution and proper labelling," as it helps farmers protect their plants
from diseases without costly toxic pesticide and so helps achieve higher
nutrition.

Carter, who arrived in Japan on Thursday for a four-day private visit, is
to meet with Prime Minister Junichiro Koizumi late Friday.

A media report said he was expected to press Japan to extradite former
Peruvian president Alberto Fujimori, charged with murder and corruption
charges at home but questions to Carter at the Tokyo gathering were
restricted to issues in his speech on Africa.

**********************************************

Response To The Sept. 4 Posting Entitled "WTO Fails The World's Poor"

- Nill, Kim"

John Redwood is wrong in his statement (7th paragraph) that "The only way
forward is to offer choice along with clear labeling and information..."
That statement has become the clever mantra utilized by those whose real
aim is to ban all biotech ingredients from foods. After all, it would be
"political/PR suicide" for anyone to be seen as "AGAINST" CLEAR LABELING,
wouldn't it?

In truth, their cleverness carried to its logical end would take the world
back to the days prior to WTO/GATT. Few people recall that the world's
nations first met in Havana, Cuba to begin the GATT process just after the
end of World War II. Why?... surely there were more pressing matters such
as post-war famine relief & rebuilding, etc.?

Those nations met at that time, because they realized that an earlier
generation's "activist" cries for "clear labeling" had led to the
near-halt of a lot of international trade during the 1930s. Those
activists happened to issue their cries for "clear labeling" of imported
goods in the name of protecting local jobs/nationalism, etc. via tariffs;
but the impact was nonetheless to stymie international trade. That led to
such extensive economic hardship around the world, that a lot of affected
nations' populations then found the siren call of fascist & Nazi dictators
too tempting to resist. If you don't believe this, log onto the GATT
Webpage and look at the GATT preamble.

In contrast to Mr. Redwood's assertion, the "only way forward" is for
governments to once again show the statesmanship and courage shown in that
post-war meeting in Havana. The nations of the world need to resist the
activist calls for trade-halting mandatory "GMO labeling"... just as they
(finally) resisted the earlier activist calls to "keep out all goods made
by foreigners".

The "clear choice" WAS offered to European consumers by members of my
organization prior to the EU's first mandatory "GMO labeling" law enacted
several years ago. Collectively, the farmer members of my organization
exported more certified organic soybeans than any other organization on
Earth. The EU's first "GMO labeling" law disrupted those organic exports,
while actually decreasing "choice" for EU consumers. The coming EU
"traceability & labeling" req. will make it even worse.

Sincerely,

Kim Nill
Technical Issues Director
American Soybean Association
St. Louis, Missouri

Why The WTO Fails The World's Poor
>> > - John Redwood, The Wall Street Journal - Europe, Sep 4, 2003
>> The protesters who will gather at the World Trade Organization meeting
>
**********************************************

Yes, We'll Still Have Bananas!

- Michael Fumento, Scripps Howard News Service, September 4, 2003
http://www.fumento.com/biotech/bananas.html

What would Carmen Miranda have been without bananas? The media often go
bananas over a sensational topic, but this time they literally did so.
"Yes, We'll Have No Bananas: A Fungal Disease Could Make the Tasty Fruit
Extinct Within 10 Years," one newspaper exclaimed. "Bananas In Crisis: We
Unpeel the Truth," declared one punny headline, while another detailed:
"Why Bananas Are Fighting To Save Their Skins."

These were in response to an article in the lay science journal, New
Scientist. But biotechnology, specifically the process of splicing new
genes into plants called "transgenics," will make monkeys out of the
media. Even more importantly, the same techniques will incredibly expand
agricultural biodiversity.

The banana is the world's most widely-consumed fruit. Rich in potassium,
calcium, phosphorus, vitamins A, B6 and C, nearly 100 million tons are
produced every year by about 120 countries in subtropical and tropical
zones. According to the United Nations Food and Agriculture Organization,
bananas are the world's fourth most important food crop.

The problem is that while there are about 500 banana varieties, virtually
the entire export market comprises one strain called the Cavendish. And
these are all clones, albeit not of the Star Wars variety. That's because
they're grown from cuttings, not seeds.

It's genetic variance, whether in plants, insects, or humans, that allows
survivors of a disease to confer resistance to offspring. Without such
variance resistance is futile.

In the banana's case, this allows the spread of diseases and pests such as
the funguses wilt and black sigatoka, root-munching worms, and weevils.
The lack of seeds also makes it terribly hard to use traditional
cross-breeding techniques to induce resistance.

The answer, which was actually discussed in the New Scientist article but
which the media unhappily ignored, is splicing disease-resistant genes
into the fruit. But how long must we wait for such futuristic technology?

Actually, it's here.
A disease called Papaya Ring Spot Virus began killing off the fruit plants
in Hawaii about thirty years ago, hopping from island to island and then
spreading like a lava flow. When it hit the Puna region of the Big Island
of Hawaii in 1992, papaya production dropped by a third in just four
years.

The crack cops of Hawaii Five-O couldn't stop it, but crack researchers at
the Agriculture Department, Pharmacia and Upjohn (now part of Pfizer),
soon developed a new variety with the viral coat of a mild strain of the
virus spliced into it. This new "Rainbow" variety virtually identical to
the old with one major difference: it is 100 percent immune to PRSV. And
it remains that way.

"Those biotech scientists have made a monkey of me!" Now researchers in
Africa, India, and elsewhere are already splicing such disease-resistant
genes into the bananas that are vital for export and to feed their own
people.

New genes may come from banks of banana germplasm (living tissue from
which new plants can be grown) that are maintained all over the world. One
in Belgium alone contains over 1,100 different specimens.

Yet one of the beauties of biotechnology is that resistance-conferring
genes from any plant can be spliced into the bananas.

Transgenics will also promote biodiversity not just in terms of predator
protection but in developing plants that can grow in more extreme
climates, with less water, and poor soil. The former trend towards
one-size-fits-all crops is already being reversed.

"Four or five years ago, you could count the number of canola hybrids
[made with both traditional cross-breeding and transgenics] on one hand,"
says Barry Coleman, executive director of the North Dakota-based Northern
Canola Association. (Canola produces an especially healthy cooking oil.)
"Today, there are about 150 to choose from." Argentina alone now has seven
strains of gene-spliced canola.

Even Population Bomb author Paul Ehrlich, as pessimistic a man who's ever
eaten a banana, told science writer Paul Raeburn that genetic engineering
could "play an important role in maintaining the genetic diversity of
crops, since it permits the simultaneous introduction of a given useful
trait into all varieties," and that "locally adapted varieties could be
genetically enhanced while remaining in production."

But we're not just talking banana health here. Scientists like Charles
Arntzen of the University of Arizona Biodesign Institute in Tempe are
splicing genes into bananas so that when eaten they will confer immunity
to such horrible diseases as hepatitis B, E. coli, and diarrheal illnesses
that kill millions of children in underdeveloped nations every year.

So yes, we'll still have bananas – more than ever, with more varieties
than ever. And once we've protected them, they'll be protecting us.
---

Michael Fumento is the author of numerous books. His next book,
BioEvolution: How Biotechnology Is Changing Our World, will be published
in October 2003 by Encounter Books.

**********************************************

Scientists Boost Antioxidant Content of Corn

- -Sarah Graham, Scientific American, August 4, 2003. www.sciam.com

Vitamin E is associated with a number of beneficial effects, including
reduced cholesterol, a decreased risk of coronary disease and improved
prenatal heath, but nearly 25 percent of people in the U.S. do not receive
the recommended dose. Now scientists have developed a new method of
engineering plants, including corn, containing significantly increased
levels of the antioxidant.

The term Vitamin E can apply to eight naturally occurring forms of
compounds known as tocotrienols and tocopherols. The synthesis of the
former in plants is well studied. In the new work, Edgar B. Cahoon of the
USDA-ARS Plant Genetics Research Unit and his colleagues investigated the
pathway that leads to tocopherols. The researchers isolated genes that
encode enzymes known as homogentisic acid geranylgeranyl transferases
(HGGT). Plants engineered to overexpress HGGT contained 10 to 15 times the
total Vitamin E content as normal plants did. In corn seeds, the increase
was sixfold. The authors write in the September issue of the journal
Nature Biotechnology that their results "demonstrate the ability to
enhance the antioxidant content of crops by introduction of an enzyme that
redirects metabolic flux."

Further work is required to maximize the dietary benefits of Vitamin
E-rich plants produced using this method, the authors note. But if the
process can be refined, there could be additional advantages. For one, the
plants will most likely be more resistant to oxidative stresses, leading
to seeds that can be stored longer and improved crop productivity. In
addition, vegetable oils manufactured from the seeds would have an
extended shelf life.

**********************************************

Biotechnology Helps Women Farmers Provide for Their Families in Africa

www.whybiotech.com

'Biotech cotton produces more than twice the yields for one South African
mother.'

Thandiwe Myeni knows firsthand how biotech cotton has helped improve her
life and the life of many other South African mothers.

She's the chairwoman of the Mbuso Farmers Association in Makhatini, whose
membership is 70 percent female. In addition to preparing food for her
family's dinner table, she grows the food and income-producing crops such
as cotton – like many women in Africa and in other developing regions. 1

That's why this 46-year-old widower of five and others like her are so
interested in adopting agricultural techniques that can improve yields and
put more money in their pockets.

She says Bt cotton – enhanced with a naturally occurring soil protein to
ward off insect pests -- does just that. And that's why upwards of 90
percent of the farmers in the Makhatini region plant biotech cotton.
"This has improved my lifestyle at home," she says. "We're earning a lot
of money – really. It's very easy to plant cotton now."

Before she began planting Bt cotton in 1999, yields were about four bales
per hectare (2.47 acres) with conventional cotton. With Bt cotton, they're
more than double – nine bales per hectare. And she only has to spray for
insect pests about two or three times with Bt cotton as opposed to 10 or
more times with conventional varieties. "We used to focus on spraying,
spraying, spraying," said Myeni. "With Bt cotton, we're able to focus on
other things."

That has lessened the farm chore burden for her children. "My children
are able to go to school because they don't have to walk the fields," said
Myeni, who also works as principal of the Kwadonsa Primary School. "They
have more time to focus on their school work."

The increased earnings from the 10 hectares of cotton she farms has
allowed her to buy a tractor and a van, and she is planning to expand her
cotton farming operation. She earns more money from farming than from her
other job as principal.

The boost in yields and income is consistent with several recent studies,
including a September 2001 one from the University of Reading in the
United Kingdom that found yields for Makhatini farmers planting biotech
cotton were 93 percent higher and their incomes 77 percent higher than for
farmers who stuck with conventional cotton.

Because 70 percent of the population of Africa depends on agriculture for
their sole source of income, increasing numbers of African leaders are
speaking out in favor of biotechnology.

"Biotechnology is one of the greatest sources of untapped knowledge that
is offering a mechanism to improve the lives of millions of people in
Africa," said Ben Ngubane, the South African minister of Arts, Culture,
Science and Technology, in March 2003.

Myeni couldn't agree more. "With Bt cotton, I've done many things," she
says. "I don't have any problems anymore."

**********************************************

Biotechnology a Hot Career Choice for the 21st Century

www.whybiotech.com

'Expert predicts 400,000 people will be employed in biotech industry by
2011'

Biotechnology has been called the cutting-edge industry of the new
century. But you can see the potential of a career in biotechnology in
something as simple, old and traditional as rice, one of the world's first
foods.

"The future of agriculture will be navigated using the rice genome map,"
says Stephen Goff, a geneticist at Syngenta Biotechnology. Goff was part
of a team that in 2002 finished mapping the complete genetic structure, or
genome, of rice — a breakthrough scientists say will lead to varieties of
rice (and other cereal crops) that taste better, provide more nutrition
and are easier to grow.

In The Coming Biotech Age, Richard Oliver of Vanderbilt University
estimates that already 100 million people have been directly helped by
biotechnology, such as farmers who are able to grow more and ordinary
people who have more to eat. Biotechnology will impact even more lives
when innovations like edible vaccines and cancer-fighting tomatoes reach
the market.

For people who enjoy the challenge of working with the innovative and the
new — and the satisfaction of tackling real-life problems like hunger,
malnutrition and disease — it's a promising time to enter the field. One
consulting firm specializing in biotechnology expects that by 2011 there
will be 400,000 people employed by biotech companies and another 350,000
in related businesses (compared to 250,000 and 150,000 today).

That growth is reflected in regional biotech centers like the Boston area.
"Right now, we're at 2,700 jobs and 60 companies in the region which
reportedly generate around $320 million a year in revenues," said Kevin
O'Sullivan, vice president for business development at the Massachusetts
Biotechnology Research Park, in an interview with bizsites.com. "We think
by 2010, we're going to be at 10,000 jobs and that about 100 companies
will be located here."

Most of these jobs are in the medical field. A February 2003 study by Bio
Economic Research Associates said that of the 1,200 biotechnology
companies in the United States, only about 10 percent specialize in plant
or animal agriculture. 3 Including universities and government agencies,
there are about 180 organizations engaged in agricultural biotech research
and development.

Increasingly, states, cities -- even countries -- are competing to attract
these high-skill, high-paying jobs. Currently there are nine biotech "hot
spots" on the east and west coasts, with Boston, San Francisco and North
Carolina's Research Triangle among the largest, but other areas are
pushing to catch up. Michigan, for example, is investing $1 billion over
20 years to nurture a life sciences and biotechnology corridor from
Detroit to Grand Rapids.

Moreover, it's an industry that's investing heavily for future growth.
Biotech companies on average invest about 35 percent of their profits in
developing new products like these, according to Oliver, more than double
of any other industry. The five largest companies spent an average of
$89,000 per employee in 2000 alone on research and development.

Bringing a new biotech plant variety to market can take between six and 12
years and can cost between $50 million and $300 million, according to Bio
Economic Research Associates.

There are several career paths into this growing industry:

* Research and development: R&D generates and tests the ideas that become
new biotechnologies. There are more jobs in this area than any other,
according to Canada's Biotechnology Human Resource Council, but many
positions require an advanced degree.
* Clinical research: Scientists in clinical research get the ideas
generated by R&D and take them into the field for "real world" tests and
observation.
* Quality control: Because biotech foods directly affect human health,
high standards are critical during their development. Quality control
ensures products are developed and tested safely in accordance with law.
* Sales and marketing: There's a strong need for sales and marketing pros
with a science backgrounds who can communicate effectively with
researchers and customers alike.
* Regulatory: Regulatory affairs workers play a key role in getting
products approved, by ensuring the company is in compliance with all
government regulations for new products.

While a large share of the research and development is being carried out
by biotech companies like those that make up the Council for Biotechnology
Information, 12 of the top 35 organizations that conduct biotech research
are universities. 9

The following are several links to help you get started in this
challenging, high-opportunity field. See
http://www.whybiotech.com/index.asp?id=2983

**********************************************

Sustaining Agbiotechnology Through Lean Times

- David McElroy, Nature Biotechnology, Sept. 2003, Vol. 21 N0. 9
pp 996-1002. www.nature.com. Reproduced in AgBioView with the permission
of the editor.

(David McElroy is at Verdia, Inc., 200 Penobscot Drive, Redwood City,
California 94063, USA. e-mail: david.mcelroy@verdiainc.com The views
expressed here are those of the author and not the author's current
employer.)

Most life science investors have historically shied away from supporting
agbiotechnology, but changing consumer acceptance and refinements in
infrastructure, intellectual property management and regulations may make
the sector more attractive in the coming years.
US venture capital (VC) investment in biotechnology increased from less
than 4% (of total VC funding) in 2000 (ref. 1) to 9% in 2002
(http://www.ventureeconomics.com). However, of those venture capitalists
who claim a significant interest in the life sciences, only a handful have
invested in agricultural or other industrial biotechnologies. Why has this
situation arisen, what are the potential consequences for research,
competition and economic growth in agriculture, and what can be done to
rectify this state of affairs so that an innovative and robust industry
can evolve to realize the full potential of agricultural biotechnology?

Opportunities abound
There is a broad spectrum of innovative product opportunities currently
being addressed in agbiotechnology (see Table 1). These opportunities can
be classified as meeting needs in crop productivity (input traits), food
and bioprocessing (output traits) or nutraceuticals and pharmaceuticals
(health or medicinal traits). There are also a number of genomics and
enabling technologies that have applications in agbiotechnology.

Thus far, the majority of approved crops under cultivation are transgenic
for input traits. Such traits (see Table 1) include genes for yield
enhancement and pest control (e.g., Monsanto's (St. Louis, MO, USA)
RoundupReady corn for tolerance to glyphosate-containing herbicides, and
Monsanto's Bollgard Bacillus thuringiensis (Bt) cotton for lepidopteran
insect control). These transgenic plant products generate economic benefit
for farmers and retail consumers by lowering the financial and
environmental costs of crop production. Input traits currently on the
market represent alternatives to the products of the agricultural
chemicals industry, such as sprays for insect control.

The cost savings to farmers associated with the use of agbiotechnology
products can be readily calculated and consequently the pricing of these
products at the producer level is relatively straightforward. Finally, a
value sharing mechanism, involving a distribution (between seed companies
and technology providers) of the technology access fees or seed premiums
collected from the farmer-producers is already well established for this
first generation of agbiotechnology products.

In the seven years since their first commercial introduction, transgenic
crops containing input traits have been rapidly adopted in a number of
important agricultural markets, and to date have been cumulatively grown
on over 700 million acres (283.5 million hectares). In 2002 alone, 145
million acres (58.7 million hectares) of transgenic crops were grown
globally, with an estimated market value of $4.25 billion (see Fig. 1).

Output traits include those for improving food and feed quality as well as
those involved in food processing and bioprocessing (see Table 1). They
target opportunities for differentiating commodity crop products, such as
generating soybean plants yielding oil low in polyunsaturated fats. Output
trait products (see Table 2) include the following: plants transformed
with genes for commercially valuable oils (including lubricants), proteins
and starches; plants transformed to alter fatty acid composition; plants
transformed to modify seed storage proteins and amino acid profiles; and
plants transformed to alter carbon-partitioning for novel starch
production2. A first generation of output traits was commercialized in the
1990s, including products such as Calgene's (Davis, CA, USA; now part of
Monsanto) FlavrSavr tomato with delayed fruit softening for longer
'on-the-vine' maturation and improved flavor (Table 2). However, this
first generation of consumer-oriented products have all been withdrawn
from the market because, for different reasons, they failed to capture
enough value to warrant their continued production.

Even so, ongoing efforts to minimize financial risk within traditional
agriculture continue to stimulate vertical integration within many
agribusiness value chains, encourage contract growing with farmers to meet
predefined product-quality specifications and promote an end-product
orientation among producers with an associated focus on the measurement
and categorization of crop-quality characteristics. The development of the
next generation of transgenic output-trait products will aim to take
advantage of these ongoing agribusiness developments, generating
additional value by improving the specific measurable properties of
commodity products to meet the cost, quality and health demands of
increasingly sophisticated consumers. This new generation of output traits
will have to do all of this in a manner that creates enough profit
throughout each step of the product value chain to support their ongoing
commercialization. For example, in the case of processed food products
containing a transgenic output trait (e.g., a high solids tomatoes),
benefit would have to be created and shared throughout a value chain that
includes growers, processors, shippers, wholesalers, retailers and
consumers.

Medicinal trait products include those containing genes that alter the
yield/efficacy of nutraceuticals or pharmaceuticals derived from natural
plant products, therapeutic molecules modified in planta or therapeutic
proteins manufactured using plant production systems (Table 1). The
'plants-as-factories' opportunity purports to offer a flexibility of
manufacturing scale at a lower capital requirement than competing
production systems. As such, plants represent alternative manufacturing
systems for a next generation of biopharmaceutical products that are
reported to be facing a potential near-term crisis in manufacturing
capacity3.

In addition to these transgene-based trait opportunities there are a
number of enabling and genomics technologies that are being used, among
other things, for the discovery and development of products that are not
genetically modified (GM) by plant transformation as well as the molecular
marker–assisted breeding of both transgenic and nontransgenic crops.
Advances in genomics technologies have led to an improved ability to
identify targets for new agricultural chemical products, such as the
discovery of new herbicide and insecticide targets. Others groups are
using new enabling technologies to develop screening methods to better
interrogate genomic diversity, including mutation-induced genomic
variation, with a view towards developing novel non-GM products.

Why funding agbiotechnology goes against the grain
Given this broad range of consumer-oriented product opportunities, why
have investors shied away from funding agbiotechnology? The fact that life
sciences investors don't support agricultural opportunities cannot simply
be due to a lack of familiarity with the research and development process
in agbiotechnology. The activities and timelines for the agbiotechnology
product development process4 are similar to those for biopharmaceutical
products5 (Fig. 2). Furthermore, the cost of product development in
agbiotechnology is significantly lower than that for biopharmaceutical
products6. Investors might argue that, although the technologies and
product development processes are similar (if not faster and cheaper) in
agbiotechnology, the overall risk/reward profile for opportunities in
medical/pharmaceutical biotechnology are always going to be more
attractive than any opportunities in agbiotechnology. In contrast to
healthcare and medicine, agriculture is perceived as a low tech, low
margin, low cachet business.

Public perception and consumer benefits. As indicated above, there is a
positive attitude towards transgenic crop products on the part of a
farming industry that is constantly looking for ways to improve
productivity and cut costs. However, resistance at the retail consumer
level toward the first generation of input trait products, especially in
Europe7, has generated uncertainty concerning the wide-scale adoption and
market acceptance of agbiotechnology products. Consumer acceptance may be
less of an issue in the biopharmaceutical industry where the public
appetite for new life-saving medicines remains undiminished, regardless of
whether recombinant technology is used. The first generation of
input-trait products in agbiotechnology has been widely criticized for
conferring little or no retail consumer benefit. This is despite the fact
that numerous studies have detailed the societal benefits of input-trait
agbiotechnology products at both the environmental level (e.g., through
improved soil and water conservation mediated by no-till agriculture
associated with herbicide tolerant crops) and at the economic level
(through improved farm productivity)8-11. It will be interesting to see
how history reflects on why this consumer benefit story has not been more
widely disseminated by an agrochemical industry purportedly seeking to
peddle the first generation of agbiotechnology products.

Regulatory challenges. The evolving regulatory process for agbiotechnology
products is disproportionately hampering the start-up end of the sector.
The lack of a practical European framework to enable the commercialization
of products derived from transgenic crops has restricted development to
the adoption of new traits in US dominant row crops, such as corn, for
which EU approval is unimportant for US exporters. Retail consumer demands
for ever-increasing regulatory oversight of agbiotechnology products,
although intended to allay concerns about the environmental safety of
transgenic products, have created a significant financial barrier to entry
for agbiotechnology startups, as well as for academic and government
groups seeking to advance transgenic crop traits. The regulatory approval
costs for agbiotechnology products are estimated to have increased from
$5–10 million per transgenic crop product during the nineties to closer to
$20–30 million today, as the extent of regulatory studies was expanded and
codified, especially for obtaining international approvals for transgenic
traits (my estimates, for major markets).

Increasing regulatory costs are contributing to a concentration of
commercial agbiotechnology products in the hands of a small number of
large agribusiness players. Ironically, this consumer advocate–driven
regulatory barrier is further encouraging the development of the kinds of
large corporate agribusiness that the very same groups complain about.
Given the escalating costs of regulatory approvals, only products
addressing opportunities in the large acreage crops (e.g., corn, soybean,
cotton and canola) can justify the required investment in gaining
regulatory approval for transgenic traits. This hinders the exploitation
of agricultural biotechnologies in the minor crops and restricts licensing
opportunities for both private and public sector technology providers in
these crops. This regulatory situation also excludes the public sector
from independently participating in agbiotechnology product development,
especially for those opportunities that are important to developing
nations, many of which could well benefit from these new agricultural
technologies. Escalation in regulatory costs will lead to the creation of
two classes of crops: first, those large acreage crops able to financially
justify the application of agbiotechnology and second, all other crops
that cannot afford these costs.

Industry consolidation issues. Declining revenues in the agrochemical
industry, in part brought on by the success of agbiotechnology products,
has led to consolidation as agrochemical companies seek to maintain
incomes by cutting costs, including rationalizing their merged R&D
activities. In 1995, there were eleven large agrochemical companies with
interests in agbiotechnology. Today, as a result of mergers, there are
only six, and by 2004–2005 there may only be four large agrochemical
companies left as Monsanto, DuPont (Wilmington, DE, USA), Dow
(Indianapolis, IN, USA) and BASF (Ludwigshafen, Germany), each with net
sales in 2002 of less than $3 billion, seek to exploit the economies of
scale and scope currently afforded to Bayer (Leverkusen, Germany) and
Syngenta (Basel, Switzerland), each with net sales in 2002 of around $5
billion12. Consolidation means fewer potential agrochemical customers for
both in-licensing new agricultural biotechnologies and acquiring the
VC-funded startups that developed them. Consolidation has also made it
harder for startups to do research deals with the major agrochemical
companies as they work through their post-merger organizational issues.

The exit strategies for agbiotechnology startups had, in recent years,
been almost exclusively confined to acquisition as the large agrochemical
companies sought to obtain key enabling technologies and transgenic traits
to combine with their newly acquired crop germplasm resources13. Examples
include the acquisition of Calgene by Monsanto in 1996 and the acquisition
of Plant Genetic Systems (Ghent, Belgium) by AgrEvo (now part of Bayer
Crop Science) in 1997 (Table 3). However, with the current consolidation
situation, and the agrochemical industry still looking to commercially
exploit its first round of expensive agbiotechnology assets, the near-term
exit strategies for new startups is becoming increasingly restricted.
Coincidently, as a result of the recent history of agbiotechnology startup
acquisitions, effectively no mid-level public companies currently exist in
agbiotechnology. Consequently, there is very little analyst coverage of
this space.

As a result of the public sector's historical propensity for providing the
private sector with exclusive licenses to key agricultural biotechnologies
(see p. 989), combined with the wave of agbiotechnology startup
acquisitions in the nineties, a small set of large agrochemical players
now controls much of the intellectual property (IP) covering those key
enabling technologies necessary for the commercialization of
agbiotechnology products13. Furthermore, much of the early IP protection
afforded by the US Patent and Trademark Office (Washington, DC, USA)
around agbiotechnology inventions involved broad claims. This challenging
IP environment has been further aggravated by a recent history of IP
exchanges to settle lawsuits between the large corporate agbiotechnology
players. These developments have created a virtual cartel situation with
respect to key IP in agbiotechnology. This situation significantly
constrains the aspirations of VC-funded agbiotechnology startups, and
public sector groups, that might be looking to 'go it alone' in advancing
their own products.

Numerous studies have outlined the potential negative consequence for
innovation and competition in the agriculture sector associated with
ongoing consolidation in the industry14, 15. A lack of VC investment will
further aggravate this situation, as small innovative enterprises find
themselves unable to fund the advancement of their own independent
products. With the routes to funding agbiotechnology startups perceived as
being especially challenging, entrepreneurs seeking a return on their
'sweat equity' may shy away from helping to build the kinds of
opportunities that would make agbiotechnology a more attractive investment
'space.'

Infrastructure problems. Some analysts view output traits as a potential
stimulant to both consumer acceptance and investor interest in
agbiotechnology. Even so, several technical, infrastructure and commercial
issues must be addressed to enable output traits to become commercially
viable (see Box 1). Some of the issues associated with commodity
output-trait products will also affect the commercial potential of
nutraceutical and pharmaceutical products derived from the modification of
natural plant pathways in transgenic crops. Finally, the realization of
the 'plants-as-factories' business models for therapeutic protein
production in planta is predicated on an expected near-term (2005–2010)
capacity crunch in the pharmaceutical biotechmanufacturing industry3.

Even if this biopharmaceutical capacity crunch turns out to be real,
technical issues, regulatory concerns about the equivalence of
plant-produced therapeutics, unknown timelines and development costs, an
uncertain IP landscape and public perception concerns (e.g., those
exacerbated by the recent Prodigene incident involving the contamination
of a soybean crop with potentially transgenic corn material producing a
pharmaceutical protein,
http://www.usda.gov/news/releases/2002/12/0498.htm) may still compromise
the full realization of the 'plants-as-factories' opportunity. However,
just one good success story in this area might lead to a flurry of
investment activities (and startup exit options) as biopharmaceutical
companies step in to embrace this opportunity.

The current state of affairs in startup agbiotechnology has led to the
development of a virtual oligopoly situation with a small number of life
science venture capitalists who, for various strategic reasons, still
actively invest in the earliest stages of agbiotechnology. This is a
disconcerting situation for both sides of the financing equation
(investors and entrepreneurs) as any associated inhibition in
agbiotechnology startup activity will result in a failure to generate the
kinds of attractive investment leads that would justify more life science
venture capitalists engaging in this space.

The agbiotechnology startup sector desperately needs investors who are not
only willing to support initial rounds of financing, where companies might
be looking for pre-money valuations of up to $25 million, but who will
step up to invest in more mature agbiotechnology firms with valuations of
$50–200 million. For such cases, investors would be looking to see these
companies garner at least a $400 million market capitalization in a 7--10
year period. Investors do not appear to be convinced that agbiotechnology
startups with this growth potential are out there today.

Encouraging investment in agbiotechnology
As most life science venture capitalists have historically not deemed it
worthwhile to invest in building agbiotechnology practices, they
consequently remain unfamiliar with the evolving risk/reward profile
afforded by new opportunities in agriculture. Thus, given that investors
(and analysts) are probably not tracking ongoing developments in this
sector, they are not in any position to appropriately value emerging
agbiotechnology companies or their products. What might happen to change
the preconceptions such life science investors have about agbiotechnology?

Consumer-assessment of agbiotechnology benefits. Within the next 10 years,
largely as a result of corporate and government investments today in
genomics, we will have a greater understanding of natural product
biochemistry in plants and we will be in a better position to manipulate
plants to exploit such pathways for the production of improved
nutraceutical and pharmaceutical products. However, marketing theory would
suggest that the acceptance of such innovative technologies will require
hands-on evaluation on the part of consumers who are fully aware of the
transgenic nature of the products16. The agbiotechnology industry has been
very successful in marketing its input-trait technologies to
farmer-customers, including the provision of incentives to encourage the
early utilization of these products upon their initial commercialization.

Such proactive marketing is now required for the next generation of retail
consumer-oriented agbiotechnology traits. Realization of the first
examples of any next generation of consumer-oriented products might well
benefit from the kind of private-public sector collaboration that we are
seeing today in the development of 'golden rice' (a rice genetically
engineered to produce elevated levels of -carotene which, when converted
in the human body, combats vitamin A deficiency). Alternatively, the next
generation of output traits might stem from the application of
nontransgenic gene knockout technologies to generate products such as
allergen-free peanuts or decaffeinated coffee beans devoid of the genes
for caffeine biosynthesis. The freedom of individual consumers to
transparently assess the benefits of more affordable and/or improved
quality products should act to develop a sustainable level of
consumer-driven market demand for a next generation of products developed
using agricultural biotechnologies.

Infrastructure developments. Improving consumer acceptance of
agbiotechnology traits will draw an increasing number of commodity food
company players toward the world of transgenic agriculture. Ongoing
developments in agriculture with nontransgenic crops have already
encouraged companies to develop the vertical integration, contract growing
and end-product orientation necessary to take advantage of the next
generation of transgenic crop products. Associated industry developments
include the formation of Renessen (Chicago, IL, USA), a joint venture
between Monsanto and Cargill (Minnetonka, MN, USA), aimed at better
leveraging each party's capabilities to address opportunities in
transgenic output traits across the agriculture value chain. In the same
vein, DuPont and Bunge (White Plains, NY, USA) recently formed a joint
venture, Solae (Fort Wayne, IN, USA), in part to develop transgenic output
traits for soybeans. By vertically integrating under one corporate roof
all of transgenic production, sourcing, marketing and distribution, new
ventures such as Renessen and Solae seek to address many of the
infrastructure issues currently compromising the widespread
commercialization of transgenic output traits.

With the realization of these aforementioned developments an
ever-increasing number of food companies may seek to obtain the new
generation of consumer-oriented products emanating from agbiotechnology.
Given that many of the established players in the food industry have been
hesitant to date to embrace agricultural biotechnology, an opportunity
exists for a new type of entrepreneurial food company to exploit the
benefits conferred by improved output-trait products. Given the degree of
regulatory scrutiny uniquely focused on transgenic crops, there is even an
opportunity for this new generation of food companies to market the safety
and quality aspects associated with any government 'approved' products
derived from transgenic crops. New types of commercial partnerships
between technology providers and food companies will both increase the
deal flow and improve the exit options for entrepreneurial companies
addressing new opportunities in agbiotechnology.

Private sector support. It is estimated that the agrochemical industry
finances around 85% of the world's agbiotechnology R&D, currently running
to around $900 million per year17. However, with the exception of
Monsanto, the agrochemical industry has been relatively inefficient in
discovering new agbiotechnology traits. An argument could be made that the
big agrochemical businesses should scale back on their internal discovery
and outsource this research to startup agbiotechnology companies, with the
large agrochemical players focusing instead on product development,
distribution and marketing. Of course this shift on the part of the
agrochemical sector towards outsourcing research will work only if the
investment community is willing to invest in supporting trait discovery
and early-stage product development by startup agbiotechnology
enterprises.

Government and public sector support. Given the current state of VC
funding in agbiotechnology, local and federal government might, for
strategic reasons, choose to kick-start the innovation process by altering
tax structures to favor investment in innovation, developing
infrastructure to support company incubation and directly investing (or
coparticipating through strategic investment) in the development of
entrepreneur-led agbiotechnology startups, investing especially in those
startups focused on developing healthier, more nutritious foods. In the
United States, state-led strategic investment in agriculture includes
Iowa's $43 million TecTERRA Food Capital Fund, targeted at food processing
and agricultural technology opportunities (http://www.cybus.com/), and the
$503 million Grow Iowa Value Fund targeted at biotechnology, life sciences
and value-added agricultural industries (http://www.ifbf.org/tif.asp).
While still on the drawing board, other US states are beginning to channel
revenue, such as Tobacco Settlement Funds, toward supporting local
agbiotechnology startups.

However, such startups will likely need several rounds of financing, not
just seed funding, so governments will need to parse out their support and
broadly encourage VC coinvestment to sustain successful startups through
each stage of their development. There may even be a role for government
(and other players in the public sector) in helping to mitigate some of
the prohibitive costs currently associated with the regulatory approval of
transgenic crop products, especially for startup products, for the
exploitation of current agricultural biotechnologies in minor crops or for
using these biotechnologies to address issues in crops of primary interest
to developing nations. This can been seen in the establishment of the
Agricultural Biotechnology Support Project by the United States Agency for
International Development (Washington, DC, USA), which aims to support the
development and commercialization of bioengineered crops as a complement
to traditional and organic agricultural approaches in developing countries
(http://www.absp2.cornell.edu).

Intellectual property issues. Government also has a role to play in
controlling IP protection so as to fairly reward innovators for their
investment while not overreaching to the extent that future innovation is
inhibited. Recent developments in US patent law would support the notion
that the US legal system is becoming less amenable to upholding broad
patent claims18. Meanwhile, the public sector is beginning to realize19
that if they are ever to exploit their own IP in the minor crops,
including those that are important to developing nations, they will have
to change the way they license their technologies to the private sector. A
resulting increase in the granting of nonexclusive licenses by the public
sector may make future IP more accessible to agbiotechnology startups.
Furthermore, much of the fundamental IP in agbiotechnology was developed
in the late eighties/early nineties and will soon be coming off patent.

Finally, those large agrochemical players that currently monopolize much
of the IP in agbiotechnology may realize that if they are ever to see a
next generation of innovative traits and technologies they will need to
develop a more flexible licensing mechanism for allowing small startups
access to their IP assets. Meanwhile, those few players that currently
represent the agbiotechnology startup space need to realize that they
can't wait for government or the agrochemical industry to get their act
together and they must therefore do a better job of working together to
advance their respective technology platforms and move their products
toward the market.

Conclusions
Today, most venture investors, and even many industry participants, might
be forgiven for being pessimistic about their ability to gain a
competitive return in agbiotechnology. This is a result of a combination
of factors, including the poor state of the agricultural economy, public
acceptance issues associated with transgenic crops, a lack of a clear
understanding of the future market potential for transgenic traits, and
uncertainty over exit options for investments in agbiotechnology. This
situation might well constrain near-term innovation and economic growth in
the agbiotechnology sector. However, looking forward, several potentially
beneficial trends are beginning to converge and the realization of these
favorable developments may eventually help to improve the situation in
agbiotechnology. The potential afforded by ongoing efforts in plant
genomics will eventually deliver on the promise of generating both
environmentally beneficial input traits and consumer-oriented output
traits. Vertical integration in crop and food production chains will
further enable the development of suitable value capture systems for
output traits. Finally, the eventual establishment of a workable European
Union regulatory process should provide an opportunity for the global
commercialization of agbiotechnology traits across the significant
remaining worldwide row crop acreage that is not currently planted with
transgenic crops (Fig. 1a).

In the end, realizing a return on any investment is all about delivering a
product that meets some unsatisfied customer need. No matter what
consumers might say in market surveys about GM foods, for example, their
actual behavior could be quite different if they were given the
opportunity to try out products that satisfy their needs16. Ironically,
many of the anti-GM consumer advocate groups that play lip service to the
concept of 'consumer choice' have done everything they can to ensure that
consumers are denied an opportunity to evaluate the benefits of
genetically enhanced products. So someone is going to have to take the
lead and proactively market GM food products to get them into the hands of
retail consumers, despite the near-term conditions. If the established
industry players are not up to the task then maybe insightful and
pioneering investors should consider funding startups that have the fresh
ideas and market maneuverability to take up the challenge.

REFERENCES: see original paper