Investing in Agriculture with Arcadia Biosciences

World food production will continue to be a challenge as the population increases while arable land remains the same. While a controversial topic, genetically modified crops or GM crops can be used to exhibit certain positive traits that increase crop yields, decreases costs, and keep the global food supply accessible to a growing population. GM is estimated to have reached a market share in excess of 90% in key crops and countries as of 2013. One company, Arcadia Biosciences, is looking to develop a portfolio of 50 products based on their patented traits and then sell them to the $39.4 billion global seed market. With $16.5 million in cash on hand, Arcadia is looking to raise around $100 million when their IPO debuts this week.

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Aracadia Biosciences (NASDAQ:RKDA) has 50 products in development incorporating their traits, 13 that have demonstrated efficacy in field trials, one that is in the process of completing the regulatory process, and one that is currently on the market, a GLA Sunflower Oil marketed under the brand name “Sonovo”. According to Arcadia, “Gamma-linolenic acid (GLA) is an omega-6 fatty acid your body needs for a healthier you, inside and out“. The Company’s safflower oil product has the highest concentration of GLA available in any plant oil at 65% with conventional plant oils ranging from 10 to 22% GLA. The safflower oil is primarily being marketed as a health supplement and is being distributed in capsule form through stores like GNC. Arcadia sold only $355 thousand worth of the Sonovo product line in 2014, down from $1.1 million in sales for 2013.

Estimated to address a market worth upwards of $8.8 billion, the Company’s portfolio of traits includes Nitrogen Use Efficiency, Water Use Efficiency, Heat Tolerance, and Herbicide Tolerance. The Company’s current pipeline along with their collaborators are listed below:

Arcadia_Pipeline

Perhaps the most interesting trait is Arcadia’s salt-tolerance technology which will allow plants to produce normal yields and quality under saline conditions through saltwater irrigation. With agriculture consuming 70% of freshwater usage, this could be seriously disruptive. Maybe we can’t drink seawater but if we can use it for agriculture then we free up 70% of the freshwater being used today. This also stands to increase current yields since according to Arcadia, 20% of all irrigated land is salt-affected leading to a loss of crop yield totaling $27.3 billion.

According to Arcadia’s S-1 filing, Monsanto, DuPont Pioneer, Syngenta, Dow, and Bayer are the big players in this market accounting for 85% of the 2013 seed trait R&D spend of $4.1 billion. Of these big players, Arcadia has a collaboration with both DuPont and Dow. Through the DuPont relationship, they will be developing a safflower oil with high levels of Arachidonic Acid (ARA) which is a key ingredient in more than 90% of U.S. infant nutrition products, a market estimated at $160 million. A collaboration with Dow AgroSciences was announced just last month under which they will establish a joint venture called Verdeca which will focus on the development and deregulation of soybean traits on a global basis. With GMO being a controversial topic, it’s worth noting that in addition to engaging in genetic modification, Arcadia also operates a proprietary non-GM research platform, TILLING, which enabled them to find and further develop valuable rare genetic traits.

The S-1 filing doesn’t provide any specifics about what Arcadia Biosciences plans to do with the estimated $100 million that will be raised from this week’s IPO. The Company begins trading this week on NASDAQ under the symbol RKDA.

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