How Cibus Uses Gene Editing to Produce Better Crops
We recently wrote about how the world’s growing population will require us to use technologies like precision agriculture to feed everyone. Land is expensive, and we can’t just start planting new crops. Instead, we need to better utilize existing farmlands by increasing yields to create more food. Another way to create more food is by making food production more profitable, which means more people will grow food. One controversial method to create better crops is through using Genetically Modified Organisms (GMO), something that’s far more prevalent than most people think. The $17 billion conventional seed market is actually eclipsed by the $21 billion GMO seed market. GMO seeds have been historically created by large agricultural chemical companies that have introduced desirable traits by integrating foreign genetic material into a plant’s genetic code. Now, there’s a company that’s creating desirable traits using a gene editing technique that’s non-GMO.
Cibus Files for an IPO
Founded in 2001, San Diego startup Cibus has taken in $127 million in funding so far with their last round of $70 million closing this past summer with Fidelity as a lead investor. Just days ago, Cibus filed for an IPO which means we can now dig into their S1 filing and learn all about how the company is using gene editing to develop plants with desirable traits. We’ve talked before about whether or not gene editing constitutes “GMO,” and Cibus spells this out quite clearly. What they are doing is non-GMO, and therefore not subject to the same rules and constraints as GMO-developed crops. When developing plant traits using GMO techniques, Cibus says “it can take more than a decade and cost up to an estimated $135 million to develop a single plant trait, assess it for safety and receive regulatory approval prior to commercialization.” With the Cibus technology platform, they can “develop a desirable plant trait, such as disease tolerance, and introduce it into multiple crops within months, enabling trait commercialization within five years.” Let’s talk about their platform.
The Rapid Trait Development System (RTDS)
Cibus is commercializing a proprietary and highly differentiated gene-editing technology, which they refer to as the Rapid Trait Development System (RTDS). It’s effectively a “trait machine” that enables them to isolate a single plant cell, make the desired genetic edits in the cell, and regenerate the cell into an entire plant. They can then “stack” traits so that a single seed variety can have multiple benefits. Here’s how their platform compares to “traditional” gene editing methods like CRISPR or transgenic methods that constitute GMO:
The first products being commercialized on the platform are canola seeds that were first released in 2016, and have since captured 4% of the United States canola market. Let’s talk about canola for a bit.
Building Better Canola Seeds
Globally, nearly 90 million acres of canola and oilseed rape are planted each year of which approximately 25 million acres, with a seed market value of approximately $1.4 billion, are planted in North America. Approximately 90% of North American canola acreage is in Canada, which is why Cibus is preparing for a full launch of their product in Canada this year. Turns out that farmers who use non-GMO canola seeds receive a premium from the companies that buy their products. Now, they can get all the benefits of GMO without all the stigma associated with it. Here’s an example of how much more profitable it is for farmers to use Cibus canola seeds:
And they’re just getting started. Cibus expects to launch up to three next-generation canola hybrids in 2019 and each of their yield protection trait (pod shatter reduction) and their disease tolerance trait between 2020 and 2023.
The Cibus Financials
The company classifies themselves as a biotech firm, and like most biotech firms they’re burning through lots of cash as they scale their business. With more than 300 patents protecting their platform, it’s no surprise to see money being poured into research and development:
Given that they’re currently selling their seeds directly to farmers, it’s no surprise to see that their admin costs are high as well. In the future, Cibus also intends to license their RTDS-developed crop traits to leading seed companies in exchange for royalty payments which will carry gross margins in excess of 98%. They hope to raise $100 million from the IPO which will be used to continue scaling the company in the face of competition from companies like Indigo Ag, the world’s biggest AgTech startup which we profiled this summer.
By developing traits such as disease-resistance, Cibus makes farming more profitable. Turns out that farmers around the globe spend more than $15 billion on fungicides. In addition to canola, Cibus has also built customizable crop platforms in rice, flax, potato, and cassava, and are now developing platforms for wheat, corn, and peanuts. Half of the world’s population subsists wholly or partially on rice, so improving production in rice is essential for global food security. If the company keeps on the same path, seems like it will only be a matter of time before the whole GMO thing just goes away entirely.
Are you paying too much in transaction fees to your broker? Check out a brokerage firm called Zacks Trade that's offering $1 trades on U.S. stocks and options until 2019. After that, you'll pay just $3 a trade or a penny a share, whichever is greater. It's one of the cheapest brokers out there and you can also trade stocks on 91 foreign stock exchanges. Click here to trade US stocks and options for as low as $1 per order until July 4, 2019.