Barren ground for agricultural research in Europe

Investors are just not interested. “As soon as I mentioned we were in agriculture and insect control and genetic technology, they yawned and that was that,” says David Brooks, CEO of Oxitec an insect control company set up in 2002 to commercialise a novel transgenic insect sterilisation technology developed by Luke Alphey of the University of Oxford’s zoology department.

In the end, the company obtained funds from Oxford University’s Challenge Fund and East Hill Advisors, a US investment company based in Boston, Massachusetts. “We’re working in advanced genetic techniques, which are much more acceptable in the US than in the UK,” says Brooks.

The mass release of sterile insects is an established method for controlling insect pests in the US. It involves sterilising male insects with radiation and then releasing them into crops, where they prevent the females from reproducing. The problem is that using radiation to sterilise male insects is expensive and can harm them, reducing their chances of mating with females.

The technology developed by Alphey offers a more effective way of sterilising insects, by creating transgenic strains that cannot produce viable female offspring without a specific dietary compound, which isn’t found in the wild. Oxitec is currently working with the US Department of Agriculture to develop its technology and has so far successfully used it with four major insect pest species, including the Mediterranean fruit fly and the pink bollworm.

Picture courtesy Oxitec.

In June 2005, the company completed a second round of fund raising, obtaining further investment from Oxford University and East Hill Advisors, as well as £550,000 from Oxford Capital Partners, a UK investment company specialising in high-technology businesses. “I think we’ve now established what we’re doing to the extent that we’re probably acceptable to UK or European investors,” explains Brooks. “But at start-up that was not the case.”

Attacking the grain pests

It’s been a heady few months at another insect control company, Exosect. Since the beginning of the year, this spin-out from the University of Southampton has joined a consortium to develop biological methods for controlling pests that attack stored grain; signed a regional product development agreement with Makhteshim Agan Industries, the world’s largest generic pesticide company; and acquired a new managing director. It is also just about to move into new, larger premises in Winchester, which will allow it to house its expanded sales and marketing, manufacturing and R&D activities under one roof.

But at the start no one was really interested in investing in an insect control company, according to former managing director John Chandler, who recently retired. Much of Exosect’s initial funding came from private individuals with a personal interest in reducing the use of chemical pesticides.

The company was set up in 2001 to commercialise an innovative pest control technology developed by Philip Howse of the University of Southampton’s School of Biological Sciences. This is based on fine wax and metallic powders that naturally stick to insect cuticles, via electrostatic attraction or magnetism. By adding small amounts of insect pheromones (signalling molecules) or an insecticide to these powders, Exosect has developed a highly effective means for controlling insect pests.

Since its formation the company has produced a range of pheromone-based products, under the name Exosex Auto-Confusion, for controlling various insects, which it hopes soon to launch in the US and the UK.

“We have a clear three-year strategy that will see Exosect focus its development and commercial programme into six key product lines for pesticide-free control of certain Lepidoptera (caterpillars) in agriculture as well as in the storage sector,” says Martin Brown, managing director.

The same story of lack of investor interest and undeveloped markets occurs across the spectrum of crop science. Someone with a good overview of activity is Jan Chojecki, managing director of Plant Bioscience Ltd (PBL), the commercial arm of the Biotechnology and Biological Sciences Research Council, which funds much of the UK’s public sector agricultural research. “From our perspective, we do look beyond the UK for markets for UK technology,” he says.

The old routes are closed

A common problem for agricultural researchers across Europe is that many of the old routes to commercialisation are no longer open. The consolidation in the sector over the past few years means there are fewer big company partners around to invest in new technology, and those remaining have moved their research activities elsewhere.

The issue has been exercising the European Commission, which two years ago set up the inevitable investigation into how to encourage plant genomic research, stating at the time, “From a flourishing plant science research base in the 1970s and 1980s, Europe has over the past ten years experienced a decline in activity in plant science research in genomics and biotechnology in the academic and public sectors.” These prognostications are ongoing but are due to translate into a portfolio of research to be carried out under Framework Programme 7, starting at the beginning of 2007.

While anti-GM sentiment is widespread throughout Europe, Chojecki notes there remain one or two favourable niches for commercialising agricultural research. This is especially true in the Benelux countries, where several clusters have taken root around the leading research institutes.

“Certainly in Belgium, quite a few companies set up around Ghent, for example,” says Chojecki. These include CropDesign, which develops agronomic traits, such as enhanced yield, for the seed industry, and DevGen, which applies its functional genomics platform to discover novel pesticide compounds and plants with enhanced resistance to pests and diseases.

But in many respects these two spin-outs of VIB, the Flanders InterUniversity Institute for Biotechnology, exemplify the problems of commercialising research from even the most prestigious institutes. When CropDesign’s last funding round of €16 million closed in August 2004, it was the largest round anywhere in Europe for three years, and while DevGen succeeded in raising over €30 million in an IPO last year, it did so on the back of a dual business model in which its applies the genomics platform for drug discovery as well as agricultural applications.

Indeed, Chojecki believes this strategy of looking at commercialising non-agricultural applications of plant science research may be the way forward. For example, PBL has recently helped to set up Novacta Biosystems to develop antibiotics based on compounds produced by soil microbes.

“I think that setting up companies based on GM crops and agriculture has been difficult,” he concedes, “but that doesn’t mean we can’t do them in other areas, based on plant science.”