Transcript DunhamTrimmer Biological Control Market — Jefferies May 10 2015

Biological Pest Control
in Global Agriculture
William C. Dunham
Managing Partner
DunhamTrimmer LLC
1 May 2015
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Overview
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Introduction
Climate Change
Sustainable Agriculture
Biological Ag Industries
Global Landscape / Stats
“Snake Oil” to Science
Market Attractiveness
1 May 2015
Market Drivers
Multinationals
M&A
BioControl Companies—
Types--Limiters
• Case Study—Brazil 2014
• Closing
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Introduction
Personal Background
2007—Founded International Bio
Consultants LLC
• >35 years in global agri-business
• Crop protection-Seeds
• AgraQuest, BASF, American Cyanamid,
Dekalb Genetics, ICI, Stauffer Chemical
• Worked in Argentina-Spain-UK-USA
• >10 years in Biological Industries
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2011—Co-Founded DunhamTrimmer
LLC
2013—Launched 2BMonthly
• The Global Biocontrol & Biostimulant
e-Newsletter
• Joint effort New Ag Int’l &
DunhamTrimmer
• Subscribers: Companies, individuals
interested in biological industries
• Premier Biological Industries
Market Research Firm
• Clients: Multinational CPC; Bio
Companies; Investors; NGO’s
• Due Diligence, Multi-client market data,
Single client studies
1 May 2015
Global BioControl Industry
Global Project Management
Launch companies internationally
Launch product internationally
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Climate Change
Climate Change Impacts Crops Through:
 Increased CO2 concentration
 Higher temperatures
 Altered, more variable precipitation patterns
Extreme weather events will be more common:
 Heat waves, droughts, freezing, floods………
 Timing & location of these events during crop development
can greatly influence the impact
Source: US EPA
1 May 2015
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Sustainable Agriculture
70% more food by 2050, using…..
 Less land
 Less water
 Less Fertilizer
 Fewer pesticides
To produce…..?
WATER
 1 Slice Bread—11 gallons
 1 bag Chips—50 gallons
 1 Hamburger—630 gallons
o 1 Steak—1850 gallons
Source: Dr Jack Bobo Sr Advisor for Biotechnology US State Dept
1 May 2015
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Sustainable Agriculture
Companies are striving to meet this opportunity/threat:
“We look to innovation as a way to preserve and protect the environment, whether by using energy and
resources more wisely (which also helps reduce energy costs), pioneering profitable business and
product lines that make use of renewable raw materials or helping customers shrink their
environmental footprints.”
“We strive to ensure the responsible management of natural resources in order to guarantee access
to quality food while ensuring long-term sustainable agricultural, forestry and fishing practices which
help to preserve biological diversity..”
“We strive to ensure that every step of the McDonald’s supply chain contributes positively to the safety,
quality and availability of our final products. We also want our product ingredients to be produced in
ways that contribute positively to the development of sustainable agricultural and food manufacturing
practices..”
“By 2020, we will halve the environmental footprint of our products, help more than 1 billion people
take action to improve their health and well-being, and source 100% of our agricultural raw materials
sustainably.”
Source:
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Biological Ag Industries
• Biocontrol
Control damaging pests
• Insects / Diseases / Weeds
• Biostimulants
Alleviate abiotic stress
• Stress from drought, heat/cold, etc
• Biofertilizers
Enhance nutrient uptake
• Nitrogen, phosphate, potassium, others
1 May 2015
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BIOLOGICAL MARKET OVERVIEW
--INTRODUCTION—PRODUCT TYPES
Biological Products
Biofertilizers
BioStimulants
Microbials
Abiotic Stress Mgmt
N
Fixing
P2O5
Solubiliz
ing
K
Mobilizers
Others
Amino
Acids
Microbials
Organic
Acids
Biological Control Products
BioPesticides
Biochemicals
Plant
Extracts
Seaweed
Extracts
Biofertilizers
Biostimulants
• Microbials used
to enhance plant
nutrient uptake
from soil
• Nitrogen fixing
bacteria make up
largest group
• Others include
mobilizers of
specific nutrients
(zinc, sulfur) and
mycorrhizal fungi
• Biofertilizers
regulated under
country/state
fertilizer
regulations
• Seaweed Extracts make up the largest
segment in this group
• Microbials, primarily bacteria, often used
as seed or soil treatment to aid in
nutrient assimilation
• Organic acids are humic and fulvic acids
used as soil amendments, formed by the
microbial degradation of plant matter.
• Definition and regulation of biostimulants
is still under development in most parts
of the world
Semiochem
Plant
Extracts
Minerals
Microbials
Organic
Acids
Bacteria
Fungi
Protozoa
Virus
Insects
Mites
Nematodes
Yeasts
Others
BioPesticides
Macroorganisms
• Biopesticides are derived from natural materials, such as plants, bacteria and certain
minerals. Biopesticides target specific pests and are inherently less toxic than
synthetic pesticides.
• Insects; Mites;
Nematodes
• Insects followed by mites
makeup the largest
groups
• Unique in that the live
organism in the form of
eggs, larvae, pupae or
adult is used.
• Most important challenge
for Macros is logistics—
shipping live organisms
that have to have special
care to survive
• Normally not classified as
a Biopesticide—only as
Biological Control
Products
Biochemicals
Microbials
• Plant Extracts; Minerals & Others;
PGRs; Semiochemicals; Organic
Acids
• Plant Extracts make up the largest
segment in this group
• Semiochemicals (pheromones) has
the largest actual number of
products
• Largest challenge for Plant Extracts
is manufacturing and consistent
quality in the active ingredient(s)
• Bacteria; Fungi; Virus; Protozoan;
Yeasts
• Bacteria, followed by Fungi make
up the largest groups
commercially (>90%)
• Microbials are the largest market
of biopesticides at US$1.3 Bn.
• Biggest challenges for microbials
are formulation related: 1) Shelflife; 2) Stability; 3) Performance
enhancement
Source: DunhamTrimmer LLC
1 May 2015
PGRs
Macroorganisms
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Global Landscape
Global BioControl Market Benchmark Values (USD)
$US 100
Million
1993
$US 500
Million
1999
2005
2009
$US 250
Million
$US 1,000
Million
BioControl Market (Bn USD)
5
4
3
2
1
0
1993
1999
2005
2009
2012
2014
2016
2020
Source: BioMarket Database DunhamTrimmer LLC
1 May 2015
$US 3,000
Million
$US 1,500
Million
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2012
2014
$US 2,000
Million
2016
2020
$US 4,000
Million
Biocontrol Market Stats
2015 Biocontrol Market
2015 Biopesticide Market
Plant
Extracts
Microorganisms
USA/Can
Pheromones
Lat Am
ROW
Europe
Asia/Pac
Macroorganisms
2015 Biopesticide Market
BioFungicides
BioNematicides
BioInsecticides
BioHerbicides
Others
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“Snake Oil” to Science
History
History
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400 BC—dried flowers of Tanacetum
17th Century—Nicotine >plum beetle
19th Century–Beauveria >silkworm
19th Century—Mineral & oils
20th Century—Bt insecticide > moths
1920s/30s—France commercial Bt
1950s—Bt Commercial fermentation
1973—First viral insecticide
1977—New Bt strain > flies
1979—EPA 1st pheromone registered
1983—New Bt strain > beetles
“Snake Oil”
Science
• Biological “enthusiasts”
• Non-scientific, non-replicated data
• Promoted marginal activities
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• “Over Promised—Under Delivered”
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Scientific designed replicated trials
Scientific data
Improved fermentation technology
Understanding of “Mode of Action”
Deliver on promised results
Market Attractiveness
New Product Discovery / Development
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Synthetic Pesticides Launch Costs == Total Costs $US $150 - 256 Mn*
DiscoveryUS$85 Mn
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RegulatoryUS$25 Mn
Label
Launch
Biopesticides Launch Costs == Total Costs $US 10-20 Mn (multiple countries $20-$50 Mn.)
DiscoveryUS$ 1 Mn
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DevelopmentUS$146 Mn
Development
- US$ 2-3 Mn
RegulatoryUS$ 1-2 Mn
Label
Launch
Up to 10 years for registration of a synthetic pesticide from time of discovery
Only one out of 139,000 compounds*
Development program includes many long term toxicology, environmental fate, and crop residue
requirements
Much shorter time for a biopesticide approval in USA
Discovery shorter – less crowded IP
Development requirements less stringent in most countries
Return on investment for effective biopesticide products is very attractive
*Source: Crop Life America
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Bio Market Drivers
Manufacturers
•Regulatory
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–Lower cost & shorter timeline
•Pest Resistance
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–Multiple MOA (Mode of Action)
•Portfolio Mgmt Tools
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–Full Program Offer
•Food Marketers/Consumer Demand
–Reduced chemical residues
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•Worker safety/flexibility
•Sustainability
1 May 2015
Growers
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Multinationals
> $650 Mn
+RNAi Assets
>$300 Mn
>$500 Mn
Osage Mftg Plant
>$ ?? Mn
> $1 Bn
>$150 Mn
> $ ?? Mn
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Acquisitions
Acquisitions by "Major Six" CPM Companies
Chemical
Seed
Biopesticides
Syngenta
46
19*/5**
3
Bayer
33
24/5
3
BASF
11
2/1
1
Dow
8
17/5
0
Monsanto
0
76 / 12
5
DuPont
3
5/6
1
TOTAL
101
143 / 34
13
50 years
20 years
4 years***
* Acquisitions (direct & indirect)
**Partial Ownership
*** >$US 2 Bn
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BioControl Companies
>300 Bio Companies*
>200 Biocontrol Companies*
>100 Biostimulant Companies*
*(outside of India/China)
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98% of Bio Companies are Privately Held
<5 Biocontrol Companies have > $100 Mn AR
80% of Biocontrol companies have <$10 Mn AR
Biocontrol Companies are Found WorldWide
 Founded by Research individuals
 Most apparent weakness is Market Access—lack resources
 Generally lack funding for rapid market growth
 Crop Protection Market Characteristics
 “Manufacturers create demand”
 “Distributors take orders”
 A typical multinational in US has >300 field personnel
 A Typical Biocontrol Company in the US has 5-10 field
personnel
1 May 2015
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Case Study-Brazil 2014
Pest – Corn earworm (Helicoverpa armigera)
Background
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Widespread in Old World, first found in Brazil in 2012
Quarantine pest, likely arrived by import
Voracious feeder in many crops – corn, cotton,
soybeans, many vegetable crops
BT crops do not control; no registered insecticides
“Perfect Storm” due to continuous cropping &
tropical climate
2013 crop losses estimated 5 to 10 billion Real
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Biocontrol
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Regulatory system delays
Government approved biocontrol products
(baculoviruses) under emergency provisions
Biocontrol products are main viable control
option available
Changing mindset of growers to biocontrol
solutions
1 May 2015
Market Growth
 Biocontrol Market Grew by over
$100 Mn in 2014
 Growth for the total CPM
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Closing
• Biological Ag Industries
– Biocontrol / Biostimulants / Biofertilizers
• Green technology / Sustainable technology
• More efficient use of resources
– Pesticides / Fertilizers / Inputs
• Rapidly growing entrepreneurial companies
1 May 2015
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THANK-YOU FOR YOUR ATTENTION
DUNHAMTRIMMER.COM
Bill@ or Mark@ DunhamTrimmer.com
1 May 2015
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