RTI International

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Agricultural Biotechnology:

Market Analysis

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Outline

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Acronyms and Definitions

• Bacillus thuringiensis (Bt) – a gram-positive, soil-dwelling bacterium,

commonly used as a biological pesticide

• FAO – Food and Agriculture Organization of the United Nations

• GE – genetically engineered

• GMO – genetically modified organism

• ISAAA – International Service for the Acquisition of Agri-biotech Applications

• OECD – Organisation for Economic Cooperation and Development

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RTI Task The North Carolina Biotech Center and RTI International worked to identify

agricultural biotechnology assets, opportunities, and barriers across the state in

order to meet the ambitious goal of growing the state’s agricultural economy by

$30 billion by 2020.

Approach:

1. Define and Categorize − Determine the definition of Ag Biotech for this assessment

− Categorize the subtopics incorporated within Ag Biotech

2. Inventory Assets − Discover relevant research within NC universities, organizations, and

companies

− Identify relevant degree, certificate, and training programs in the state

− Identify the companies in NC that compose the ag biotech sector

4. Identify Opportunities − Recommend and prioritize opportunity areas

− Identify near- and long-term action items

3. Analyze Markets and Industry − Understand new definitions of ag biotech

− Understand current domestic and global ag biotech trends

− Identify potential areas of opportunity for NC

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North Carolina’s central role in Ag Biotech

Highly Diversified

• NC has a broad range of climate conditions due to its regional distinctions

• NC has over 400 different soils to promote varied crop growth

North Carolina’s Past

• Deeply rooted tradition in agriculture, with an emphasis on research and education

• Agriculture contributes nearly $70 billion to the state economy every year (about 18%

of the state income) and employs over 700,000 people

• More than 27 years of biotechnology growth, resulting in 58,000+ employees at over

530 biotech companies

Utilizing the Tools of Biotechnology

• NC has the potential to produce more Ag on less land, at a lower cost, and with

less environmental impact

• Biotech tools can grow new crops or find new uses for existing crops

• With NC’s history in Ag and its highly developed biotechnology community, the

state is primed to take advantage of the world’s changing needs

This industry/market analysis provides an overview of historical trends,

areas of innovation, and small and large companies (both worldwide

and in NC), thereby framing NC’s potential role in ag biotech.

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Outline

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Ag Biotech: Historical Perspective

Today’s agricultural biotechnology market/industry data tracks

just 15 years of data, since introduction of GMOs in the 1990s.

Testing of biotech foods began in the early 1980s, leading to the

FDA approval of the FlavrSavr® tomato in 1994. Classical definition

of agricultural biotechnology primarily captures genetically modified

organisms (GMOs).

Rate of adoption was slow at first due to confusion over biotech

practices, which led to misperceptions and activist movements.

However, market trends indicate a fast-growing, innovative, and

robust market.

Using biosciences for agricultural purposes has occurred

since 2500 B.C. when Egyptians developed fermentation

techniques for wine production. Other milestones: pasteurization of

milk, 1864; Mendel genetics, 1865; hybridization, 1926; DNA helix

discovery, 1953; insulin gene isolation, 1978.

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Key Drivers: Overview

The future of global agriculture will depend on the successful

adoption of biotech practices to overcome growing dilemmas,

in conjunction with ingenuity, innovation, and implementation.

Near- and Long-Term

Challenges Facing

Global Society

Overpopulation

Demographic shifts

Food security

Sustainability

Biodiversity

Environmental concerns

Climate change

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Population growth, demographics drive demand

Facts and Figures

• Today, 1 billion people go hungry; more are malnourished

• From 1960 to 2007, the global population grew from

3 billion to over 6.5 billion

• By 2050, global population is expected to increase to

9 billion

– Majority of growth will be in developing countries

– Urbanization will accelerate, accounting for 70% of

world population, up from 49%

– Consumption patterns will change; more diverse diets

will include meats and packaged foods

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Water, land, energy needs compound the issue Facts and Figures continued

• Average increases of 70% in food production will be

required by 2050, with developing world requiring

increases of 200%

– Adding to the challenges of food production: yield gains

have dropped in recent years, from 3.2% per year in 1960

to 1.5% in 2000, for example

• Water and land scarcity will worsen

– Today, agriculture uses 40% of the world’s land surface

and 70% of all available fresh water

• Bio-based energy sources will increase needs

– The Energy Independence and Security Act (EISA)

mandates minimums in biofuels production

Arable land per person

(hectares)

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Past performance measures show strong growth

While definitions of Agricultural Biotechnology are expanding, historical trend data

focuses on primary market drivers: genetically modified crops. Despite some

negative perceptions of GMOs, numbers reflect robust adoption.

• 87% increase in hectarage between 1996 and 2010 makes biotechnology crops the

fastest-adopted crop technology in the history of modern agriculture

• Strong double-digit growth of 10% in 2010, reaching 148 million hectares

– The 2010 increase is second largest in 15 years

• Developing countries grew 48% of global biotech crops and will exceed industrial

countries before 2015

• 75% of the world’s population live in the 59 countries that have approved biotech crops

for planting or import

• Accumulated hectarage from 1996 to 2010 exceeded an unprecedented 1 billion

hectares for the first time, signaling that biotech crops are here to stay

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Planting trends indicate robust adoption of GMOs

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Adoption in developing world matches industrialized

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GMOs diversifying, extend beyond large row crops

Facts and Figures

• GMOs have extended beyond

large acre cash crops – trials

have been conducted for ~130

plant species

• New GM varieties likely to be

in maize, soy, cotton, and

rapeseed

• Others will include peanuts,

barley, peas, and sugar cane

• Big increases expected in

agronomic traits (i.e., traits

that improve yields and

provide stress resistance)

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Stacked traits increasingly common

Stacked traits crops

becoming increasingly

common. In 2010, 22%

were stacked

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Ag Biotech: A Look Ahead Looking ahead, companies are making big investments in ag

biotech and strong growth is anticipated.

• 12 countries are projected to adopt biotech crops for the first time,

bringing the total number of biotech crop countries globally to

approximately 40 in 2015

• The countries with leading adoption rates are predicted to be China,

India, Brazil, Argentina, and South Africa

• Next generation biotech crops will focus on trait stacking and quality

traits; definitions of Ag Biotech will continue to expand into a broad

range of biotechnology applications and solutions

• Crop biotechnology in the production of biofuels will continue to

optimize the cost-effective yield of biomass/biofuel per hectare,

providing more affordable fuel

• The focus on innovations in supply chain could lead to more

affordable products and processes

• Key drivers remain the same: overpopulation, demographic shifts,

security, affordability, sustainability, biodiversity, environmental

concerns, climate change

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Ag Biotech: Definition Is Expanding

Expanded definition includes broader categories/applications.

Solutions will span range from bio-based energy to animal diagnostics.

Plant-based genetic manipulations

• Pest-resistant plants

• Pesticide-resistant plants

• Nutrient supplementation

• Plants with increased protein content and

reduced anti-nutritional content

• Agronomic traits (e.g., drought, salinity,

cold resistance)

• Seeds of higher purity

• Bio-based energy production

• Industrial enzyme production

• Microbe-based pest control and growth

enhancers

• Aquaculture improvements, e.g.,

diagnostics

• Human and animal therapeutics and

vaccines

• Industrial materials and fibers

• Environmental restoration

• Animal diagnostics and marker-

assisted animal selection (MAS)

Classical Definition Expanded Definition

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Expanding definitions of ag biotech: livestock applications

Facts and Figures

In OECD countries, livestock accounts for

40%–50% of the value of ag production via

dairy, eggs, meat, and fiber

Three main applications

• Breeding via marker-assisted selection

• Advanced propagation, e.g., transgenics

• Therapeutics and diagnostics

A Look at New Horizons in Livestock

• Human and animal therapeutics and

vaccines

• Animal diagnostics and marker-assisted

animal selection

Therapeutics will include

Monoclonals Vaccines Blood factors

Hormones Cytokines

Enzymes & Proteins

Propagation technologies will use

cloned animals to manufacture

therapeutics and as breeding stock

Marker-assisted selection

• Morphological, biochemical, genetic markers

used for animal selection

• Largest commercial application

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Expanding definitions of ag biotech: aquaculture applications

A Look at New Horizons in Aquaculture

• Diagnostics and therapeutics

• Use of MAS for breeding

Facts and Figures

• Capture production is considered fully

exploited; however, in a 10-year period,

aquaculture increased from 13 million to

33 million tonnes

• An indication of disease impact: annual

losses due to disease in 16 Asian

countries: US $3 B

• Between 2002 and 2007, 54 new animal

diagnostics were launched in U.S.

• Technologies could include microarrays

that allow farmers to screen for variety of

pathogens

Crustacean Diseases Pathogen Commercial tests

Crayfish plaque Fungus No

Infectious hypodermal and haematopoietic necrosis Virus Yes

Spherical baculovirus Virus Yes

Taura syndrome Virus Yes

Tetrahedral baculovirus Virus Yes

White spot disease Virus No

Yellowhead disease Virus No

Fish Diseases

Epizootic haematopoietic necrosis Virus No

Epizootic ulcerative syndrome Fungus No

Gyrodactylosis Parasite No

Infectious haematopoietic necrosis Virus No

Infectious salmon anaemia Virus No

Koi herpesvirus disease Virus Yes

Red sea bream iridoviral disease Virus No

Spring viraemia of carp Virus Yes

Viral haemorrhagic septicaemia Virus No

Mollusc Diseases

Abalone viral mortality Virus

Infection with Bonamia exitiosa Parasite Yes

Infection with Bonamia ostreae Parasite No

Infection with Marteilia refringens Parasite No

Infection with Perkinsus marinus Parasite No

Infection with Perkinsus olseni Parasite No

Infection with Xenohaliotis califomiensis Parasite No

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NC company example: Novozymes New Horizons in Ag Biotechnology

• Bio-based energy production

• Industrial enzyme production

• Microbe-based pest control and

growth enhancers

• Aquaculture improvements

• Human and animal therapeutics and

vaccines

• Industrial materials and fibers

• Environmental restoration

• Animal diagnostics and marker-

assisted animal selection

Novozymes

• North American HQ in Franklinton, NC

• Offering bioinnovative products, including

industrial enzymes, beneficial microorganisms,

biopolymers, and other proteins for food, energy,

and environmental applications

• NC-based operation focuses on biofuels, with

custom enzyme blends to match specific needs

for extraction, liquefaction, saccharification,

fermentation enhancement, and viscosity

reduction

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NC company example: BioDyne

BioDyne Group

• BioDyne provides biological wastewater

treatment systems and services for a

wide range of applications

• Advantages include small plant footprint,

outstanding performance specs, lower

capital costs, co-treatment of solids and

liquids, and removal of harmful nutrients

Applications – waste H2O from:

New Horizons in Ag Biotechnology

• Bio-based energy production

• Industrial enzyme production

• Microbe-based pest control and growth

enhancers

• Aquaculture improvements

• Human and animal therapeutics and

vaccines

• Industrial materials and fibers

• Environmental restoration

• Animal diagnostics and marker-assisted

animal selection

Municipal sources Slaughterhouses

Food processing Pulp & paper rendering

Fisheries/feed lots Hog waste

Distilleries Cosmetics

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Ag Biotech Corporate highlights

Companies in the Ag Biotech Sector

• Have undergone considerable consolidation

– seed and research companies acquisition

targets

• Forging joint ventures and cross-licensing

arrangements, particularly around seed traits

• Fostering new sources of innovation through

large-scale investments in R&D and externally

via universities and research institutes

• Seeking value chain partnerships and solutions,

such as those described by the Syngenta

Foundation

Source: Syngenta Foundation

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Consolidations, partnerships transform the industry

Figures reflect rapid and extensive

industry transformation

• Between 1990 and1994, five firms accounted

for 36.7% of biotechnology plant patents;

between 2000 and 2004, 80.5% of biotech

plant patents were held by top five firms

• Between 1995 and1999, 146 firms applied

for a GM field trial; from 2005 to 2009, the

number of firms declined to 76

• As of 2009, top four seed firms account for

56% of brand name seeds; top three firms

account for 85% of transgenic corn patents

• Cross licensing is also a major consideration,

particularly with the advent of stacking

multiple transgenic traits within a single seed

Monsanto and Dow have announced plans to־

commercialize a corn seed with eight different

transgenic traits

Historically, Monsanto

has been central player

Source: Sustainability 2009, l, 1266-1287

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Monsanto highlights

Key Facts and Figures

• Monsanto has been most active, with

50 acquisitions since introduction of

GMOs

• Acquisitions include Delta Pine and

Land, Cargill, DeKalb Genetics,

Holden’s Foundation Seeds

• Monsanto licenses its seed traits to

over 200 seed companies

• Seeds and traits may account for as

much as 85% of gross profits by 2012

Visualizing Consolidation

Study by Philip Howard at Michigan State provides

graphical representations of the industry structures

and trends in consolidation

Arrows represent ownership connections

Source: Sustainability 2009, l, 1266-1287

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Syngenta highlights Syngenta recently underwent significant restructuring, new alignment

by crop. Other highlights:

• Established a 50/50 joint venture with DuPont – Greenleaf Genetics – to

sell foundation seed

• On September 30, 2010, acquired the Maribo Seed sugar beet business

from Nordic Sugar

• Established Syngenta Ventures to invest in new technologies that support

overall company mission; investment in Metabolon (NC-based

metabolomics company) is an example

• Continues to acquire small seed companies, e.g., Monsanto’s sunflower

seed business and U.S. lettuce seed companies

Two North Carolina

Companies Partner:

Syngenta Ventures and

Metabolon

Syngenta Ventures made

Series C Equity

Investment in Metabolon

and will assume a Board

seat.

Metabolon will use its

metabolomics profiling

approach to provide

mechanistic insight and

biochemical markers for

complex biological

processes.

This technology aims to

accelerate the

development of plants with

innovative new native and

genetically modified traits.

Source: Sustainability 2009, l, 1266-1287

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Bayer CropScience highlights Bayer CropScience (BCS) has made a big push to expand biotech business

and been very active in acquiring seed companies and research capabilities.

• In 2007, acquired Stoneville from Monsanto for $310 million

• For $350 million, BCS completed acquisition of biotech company Athenix Corp

for extensive herbicide tolerance and insect control trait development platform

• Acquisition of Aventis, particularly AgrEvo subsidiary, provided most seeds

• In March 2011, BCS and KeyGene, a biotech company headquarted in

Wageningen, the Netherlands, announced that they had entered into an

exclusive trait development agreement

A North Carolina Ag

Biotech Success:

Bayer Crop Science

acquisition of Athenix

Athenix was acquired for

its extensive herbicide

tolerance and insect

control trait development

platform.

The company also had

the largest collection of

Bt genes in the industry–

genes that are crucial for

insect resistance of

plants.

Many of the original

Athenix team continue to

operate within BCS as a

trait discovery engine.

Source: Sustainability 2009, l, 1266-1287

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BASF highlights

Two North Carolina

Companies Partner:

Precision Biosciences

and BASF Plant Sciences

RTP-based Precision

BioSciences, recently

announced that they have

entered into a collaborative

agreement with BASF Plant

Science to create site-

specific genome

modifications in plants.

The agreement provides

BASF Plant Science with

non-exclusive access to

aspects of Precision

BioSciences’ proprietary

Directed Nuclease Editor™

(DNE) technology, which

can be used to develop

advanced agricultural

products.

• In 2010, BASF and Monsanto announced expansion of JV to develop

higher-yielding and stress-tolerant crops to include a fifth crop, wheat, up

from corn, soy, cotton, and canola. Formerly, budget was potentially $1.5

billion. The new agreement would result in a potential additional investment

of more than $1 billion by the companies over the life of the collaboration.

• BASF Plant Science, Genomine, the South Korean venture company and

POSTECH, the South Korean university, recently entered a license

agreement. Focus of the agreement is discovery of new genes that

maximize yields in staple food and feed crops such as rice and corn,

including yield under normal circumstances and adverse environmental

conditions such as drought.

BASF strikes both large and small deals and research collaborations.

• BASF Plant Science and Bayer

CropScience entered into a long-term

collaboration agreement to improve rice

productivity through plant biotechnology

with identification of traits that will enable

yield advances of 10% or more over

conventional hybrid rice seeds

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Investment in R&D

• Bayer CropScience to build $20-million, 60,000-sq-ft

greenhouse and announced $400 million in

investments to U.S. headquarters in RTP

• Syngenta announced construction of new state-of-

the-art biotechnology research facility; the

$71-million investment will focus on discovering

and developing new agronomic traits

• Monsanto investor reports highlight benefit of RTP

divisions to global R&D infrastructure

Big firms seek new sources of innovation As companies seek new sources of innovation, they make big investments in internal

R&D, as well as look externally for new technologies, talent, and capabilities.

External Partnerships – examples

• BASF Plant Science and the Botanical Institute of

the University of Cologne entered into cooperation

in plant biotechnology to increase the yield of crops

like soybeans, rice, and canola

• Bayer formed 5-year collaboration with Nature

Source Genetics for pre-breeding and

enhancement of corn germplasm

• GrassRoots and Monsanto form 3-year

collaboration to identify novel technologies for gene

expression

• Syngenta enters into global technology partnership

for development of bio-nematicides

• Piedmont Pharmaceuticals of Greensboro, NC,

strikes deal with Bayer Animal Health Division for

platform technology and late-stage products in

development

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Firms partnering across supply chain

Examples

• Bayer CropScience forged partnership with PepsiCo

to increase the adoption of sustainable agricultural

practices along the production chain of PepsiCo’s

potato suppliers

• Syngenta and John Deere partnered to create

equipment suited for a unique method of sugar cane

harvesting—“Plene” for biofuels production

• Frameworks like those developed by researchers at

Louisiana State (left) have been developed to assist

in identifying firms that exhibit innovativeness and in

identifying gaps in supply chains

As the Ag Biotech sector redefines traditional markets to

include energy, industrial products, and therapeutics,

companies will also seek to broaden value chain.

The need for sustainable solutions will extend the reach across

company divisions and industries, up and down the supply

chain

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Foundational role of universities, research institutes

As firms seek new sources of innovations, they will look to universities and research

institutes as sources of technology and talent.

• The public research sector conducted an estimated 20.7% of all GM field trials in the OECD* between

2004 and 2008

• Between 2001 and 2006, 23.8% of biotechnology plant patent applications at the EPO and 21.9% at the

USPTO were filed by public sector institutions

• Between 1987 and 2008, the public research sector within the OECD accounted for 19.2% of all plant field

trials >> higher share of trials focused on agronomic and product quality traits as well as foundational/

platform advances in ag biotechnology

Universities and institutes continue

to be a significant player in R&D

and often establish foundations for

new advances in biotechnology,

reflected in higher percentage of

technical and agronomic trials

Fostering Innovations

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Ag R&D heavily supported by public sector

Public Sector continues to play major role in R&D funding

in both high-income and developing countries

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North Carolina’s Role: highly diversified

North Carolina has a strong basis for an ag biotechnology economic ecosystem, including

large corporate presence, diversified biotechnology community of small and mid-size

companies, universities, talented workforce, and long ties to an agricultural economy.

A broad range of climate conditions, from the Appalachian Mountains to the coastal Outer

Banks, provide an abundance of natural resources.

Ag biotech companies in North Carolina can coalesce around diverse economic sectors

of forestry, marine, agriculture, biofuels, medicine, and health.

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NC is home to 5 of 6 major ag biotech companies

BASF

– Locations in RTP,

Charlotte, Enka,

Holly Springs,

Morganton, and

Wilmington

– RTP location serves

as headquarters for

the BASF Crop

Protection NAFTA

division and BASF

Plant Science LLC,

with ~800 employees

DuPont

– Multiple locations

across the state, with

Ag-specific facilities

in Laurinburg and

Kinston

– DuPont’s Pioneer Hi-

Bred $2.3-million

research center in

Kinston focuses on

corn and soybean

seed development

with an increase of

local product

development and

testing investments

Bayer

CropScience

– Established in 2008,

the RTP site is home

to U.S. corporate

headquarters and

570 employees

– Research at Biotech

Innovation Center

supports traits

across a range of

crop platforms,

focusing on

agronomic

performance and

yield stability

Syngenta

– Located in RTP and

Greensboro, with

1,000 employees

– Syngenta

Biotechnology, Inc.

recently announced

$71-million

expansion plans to

pursue new traits

Monsanto

– Facilities in Mt. Olive,

RTP, and Kannapolis

– Monsanto signed a

long-term lease with

the NC Research

Campus to establish

research facilities

focused on taste and

nutritional

composition of

vegetables and

enhanced nutrition

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… and smaller, rapidly growing companies

In addition to the Big Players, North Carolina is home to a number of mid-sized

and small biotechnology companies that, consistent with new definitions of ag

biotechnology, span sectors and industries.

Industries and capabilities include bioremediation, industrial enzymes, plant-based therapeutics,

testing and diagnostic services, metabolomics, DNA-based technologies, and more.

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NC universities seed ag biotech

North Carolina’s Universities – Providing Foundations

for Ag-Biotechnology

Degree Programs and

Workforce Development

• BS, MS, DVM, PhD, JD, ED

• Programs in economics, science &

technology, medicine, environment,

law, agribusiness, husbandry, forestry,

and many others

R&D and Grant Funding

Corporate Collaborations

and Sponsored Research

Technology Transfer and

Economic Development