Adding scale to accelerate and revolutionise crop protection
Novo Holdings is investing in two agtech companies, BioPhero and Vestaron, that are on the verge of redefining crop protection. Highly sustainable insect pheromones from BioPhero and peptide-based biopesticides from Vestaron provide new solutions to replace the use of traditional insecticides for pest control in agriculture.
Transforming key industries for a more sustainable future requires a combination of cutting-edge science/engineering and capital in sectors with a big business potential. To be successful, the technical hurdles must be solved, and the market must adopt the product rapidly, driven by a strong customer interest. Successfully executed truly revolutionary products can redefine the market. The recent development at breakneck speed of COVID-19 vaccines demonstrates ambition and success.
Biotechnology applied to the agricultural sector continues to be a powerful, enabling tool. There is a growing demand for products that address climate change and sustainable food production driven by regulatory and consumer demand [1]. Innovators and investors are responding to the challenge and in recent years venture-backed companies in agtech have attracted significant capital to develop innovative products, and the funding levels are expected to remain high.
Figure 1. Agricultural biotechnology has attracted significant venture capital (numbers in $ million). The deal activity in 2020 reached $2.2 billion across 68 deals [2].
Pheromones for sustainable pest control
Pest are a major concern for farmers and today there are multiple chemical pesticides available to prevent crop damage and yield loss. Agrochemical companies have established and finetuned manufacturing and distribution channels to serve farmers world-wide and turned pesticides into a gigantic $85 billion global business. However, the use of traditional pesticides has also triggered health and environmental concerns around the globe.
Pesticides, while useful to maximise food production, have serious challenges. Designed to be toxic, these chemicals are indiscriminate and harm natural biodiversity, including beneficial pollinators. Table 1 lists commonly used pesticides that have been banned across different geographies, and we expect this tendency to continue. The US has banned fewer pesticides than the EU, but a change in US policy could further accelerate the need for alternatives to current pesticides.
Table 1. About 1,400 metric tons (MT) of agricultural pesticides that the WHO considers ‘extremely’ or ‘highly hazardous’ were used in the US in 2017 (usage of more than 1 MT), according to the US Geological Survey [3].
Consumer and regulatory pressure drive the need for a reduction of pesticides as well as new solutions, and this is a business opportunity for innovative start-ups [1]. BioPhero, a start-up company incubated by Novo Holdings from 2014, explores deep expertise in fermentation-based manufacturing to combat certain insect pests.
Insect pheromones are signalling molecules naturally produced by primarily female insects. They can be used effectively to control the build-up of pest populations in farmers’ fields by disrupting the mating process. They are highly sustainable as they are insect-specific, naturally degradable, and non-toxic. They replace classical insecticides and can reduce over-application by helping to prevent the build-up of resistance against both chemical insecticides and genetically modified seeds.
Until now, the use of pheromones for pest control has been limited to high-value crops, e.g. pome fruits, berries, and vegetables, due to high cost of pheromone production. Pheromones have a complicated chemical structure, and hence they only can be synthesised from expensive raw materials via multiple chemical steps. However, a scalable biological pheromone production platform with lower cost has the potential for biological and sustainable pest control in row crops, and potentially expanding the value of the market to more than $3 billion. In addition, there will be significant environmental benefits associated with reducing pesticide usage broadly across the hundreds of millions of hectares used to grow maize, soybeans, and rice.
Fermentation-based production at scale
The drive towards biological pest control has resulted in several new and innovative product types. Novo Holdings portfolio company Vestaron has developed a new class of peptides for crop protection based on a proven mode of action. The biological products have same efficacy as traditional synthetics, but with the safety and environmental friendliness of biologic solutions. BioPhero, Vestaron and most of the companies below rely on scalable fermentation as the manufacturing platform for bringing cost effective technology to market.
Table 2. Examples of innovative venture backed agtech start-ups in 2021. The products applied to the field are not only limited to traditional chemicals but includes pheromones, peptides, antibodies, RNA and engineered microorganisms. Data from PitchBook [4].
BioPhero discovered the enzymatic pathway to a series of pheromones and has developed and scaled a new and efficient fermentation process for pheromones using an engineered yeast. The production processes use simple renewable raw materials, and – crucially – can deliver the final product at the cost, quality, and volume required for use in row crops such as wheat, maize, rice, and soybeans. BioPhero has successfully demonstrated that it can produce pheromones at tonne-scale and is ready to make it available to customers and partners around the world.
Novo Holdings’ approach and investment thesis
Based on our heritage with world leading bioindustrial companies like Novozymes and Chr. Hansen we believe in the ability of biotechnology to deliver global sustainable solutions also in the agricultural sector. Vestaron and BioPhero potentially provide solutions to key challenges of the sector and we continuously look for more opportunities.
Box 1. Investment of Novo Holdings in Vestaron [5] and BioPhero [6] in 2021. The companies belong to the venture backed bioindustrials portfolio.
Scientific and product innovation is important, but we also believe that the capability to scale-up and meet challenging cost targets are a necessary requirement for commercial success. Today, agrochemical companies have expertise in chemical manufacturing but, with a few exceptions, they have limited experience in developing microbial expression systems and large-scale fermentation. We believe that scale-up and large-scale production are key enablers to unlock the strength of biotechnology agtech and is at the centre of our investment thesis.
Links
1. https://ec.europa.eu/food/farm2fork_en
2. https://pitchbook.com/news/reports/q4-2020-emerging-tech-research-agtech
3. https://thecounter.org/the-us-still-uses-many-pesticides-banned-in-other-countries/
Deeptech venture investor| | Start-up board professional | Serial Entrepreneur | Data sciences researcher
4yBig congrats Thomas and team on an impressive financing round - the European deeptech ecosystem needs syndicates like this!
BioProcess Science &Technology Leader at Corteva Agriscience
4yGreat to see Novo investing in sustainable crop protection. I worked with Vestaron on their process development years ago while at the BFF in Georgia. Great to see their technology progressing.
Biotech venture builder & operator @ Novo Holdings
4yVery insightful, Thomas!