GreenLight Biosciences Stock for RNA Therapeutics
The so-called Green Revolution industrialized agriculture, exponentially increasing yields and leading to unprecedented growth of the human population in the process. We’ll let the philosophers debate the wisdom of unleashing more humans on the planet, but the heavy-handed use of chemicals and other methods for strong-arming the land such as tilling and irrigation have taken their toll. Soil health is a mess. Bees are dying. Some fruits and veggies are even less nutritious. The poster child for everything that’s wrong with the current agricultural system is glyphosate, commercially known as Roundup. The herbicide from Monsanto, which Bayer bought for $63 billion in 2018, allegedly causes cancer. Bayer thought it was buying a product with nearly $5 billion in annual sales but ended up inheriting thousands of lawsuits for which it has already spent billions to settle.
The next green agricultural revolution promises to be easier on the health of both people and the planet (and maybe the pocketbooks of companies, too). That’s why investors are pouring millions into plant science startups to do things like replace chemical fertilizers with bacteria using synthetic biology. GreenLight Biosciences (GRNA) is taking a very different approach to protecting plants, pollinators, and even people by developing RNA-based products to destroy agricultural pests and viruses. The Massachusetts-based company completed a merger with a special purpose acquisition company (SPAC) just last month and currently has a valuation north of $1 billion.
Companies like Moderna (MRNA) have shown us both the viability and volatility of the RNA-based technology businesses. Is this something that GreenLight can capitalize on or will it capsize like so many other biotechs?
Pesticides Made from RNA?
Just like the Oracle of Omaha, we don’t invest in anything that we can’t understand – at least from the 30,000-foot view – so let’s briefly discuss the technology behind GreenLight Biosciences before we jump into the business details.
RNA is a genetic building block of life similar to DNA. Many of us may now be familiar with messenger RNA (mRNA) thanks to the Rona vaccine. One of the key roles of the mRNA molecule is to transcribe from DNA the blueprint for making proteins, which are responsible for many biological functions. In the case of the vaccines, mRNA is programmed to teach cells how to make a protein that will trigger
complete transformation into a lizard being an immune response inside our bodies to create antibodies to fight the virus.
Another “type” of RNA is known as double-stranded RNA (dsRNA), which can exploit a natural biological process called RNA interference that stops the ability of an organism to produce certain proteins. In effect, one could develop a dsRNA molecule to disrupt the ability of a pathogen to reproduce or even weaken its immune system. And because all of this works on the genetic level, it’s possible to target RNA-based pesticides to specific species without affecting the health of the plant, other bugs, or the humans who consume it.
About GreenLight Biosciences Stock
That was more or less the original vision of GreenLight Biosciences, which was founded way back in 2008 and had raised about $235 million as a private company before it began trading on the Nasdaq on Feb. 3 of this year. While the merger with Environmental Impact Acquisition Corporation did manage to go through, most of the money held in the SPAC’s trust didn’t make it across the finish line. GreenLight grossed about $136 million from the transaction, before deducting $25 million in fees. It should have been closer to $331 million, but investors redeemed nearly $195 million, so most of the cash actually came from additional private equity. Not exactly a vote of confidence, even if nearly 80% of ENVI’s shareholders approved the merger.
Let’s not dwell too much on the numbers. After all, GreenLight does “not expect to generate any revenue from the sale of products in the next several years.” Investors who are willing to bet on a pre-revenue company – something we adamantly refuse to do – are left to base their decision on the strength of the product pipeline and strategy to execute. In biotech, you probably have a better chance of picking the winning lotto numbers than the next (and less lethal) Roundup, but it’s still worthwhile to understand some of the potential applications. Not to mention the fact that dsRNA science has caught the attention of some mainstream media.
GreenLight Platform and Pipeline
GreenLight Bioscience claims its RNA drug discovery platform uses machine learning and proprietary algorithms to identify the best gene candidates to disrupt. It then runs trials on thousands of distinct RNA sequences to design its products. It is able to produce dsRNA products through a proprietary cell-free system, which it says can beat costs on traditional methods using fermentation. The goal is to scale production to hit about $1 or less per gram of active RNA ingredient.
To understand what that means in the real world, take the company’s most mature product: A dsRNA product to combat the Colorado potato beetle, a pest that is reportedly responsible for $500 million in crop loss annually. The spray-on treatment is designed to cause the beetle to stop eating and expire from its own toxins, while sparing any other insects, including precious honey bees. In addition, treatment requires only a tenth of the spray typically used with chemical pesticides. At about 10 grams per hectare, that’s the equivalent of spreading a spoonful of sugar on a football field – and at about $10 per hectare based on $1 per gram. If all goes to plan, GreenLight will get the green light from the Environmental Protection Agency (EPA) this year, with commercialization in 2023.
The Colorado potato beetle dsRNA pesticide is one of seven agricultural products GreenLight hopes to launch over the next five years. Next up is an RNA-based syrup that targets Varroa mites, which attack and feed on honey bees. This was originally a product that the company acquired as part of Bayer’s topical RNA intellectual property portfolio. But it still needs some work: The original formula also took out ladybugs, so GreenLight is tweaking the product using its platform.
Should You Buy GreenLight Biosciences?
By now, you get the idea: RNA treatments can potentially replace pesticides and fungicides, a combined market that GreenLight estimates at $33.5 billion. Unfortunately, the company is years away from tapping into any of that money. It hasn’t even gotten its first EPA approval. If that happens, then maybe there’s a reason to keep this company on a watch-every-other-year list. If not, it would be difficult seeing the company survive.
More recently, GreenLight has pivoted to human health with a side hustle developing mRNA vaccines for coronaviruses and the flu, as well as RNA gene therapies for diseases like sickle cell anemia. This is where we start to lose interest in the story. This move into a second market is based on GreenLight’s “manufacturing process know-how” that the company “gained from our experience making dsRNA,” which naturally allows it to “understand some of the key aspects of producing mRNAs.” Talk about chasing a trend.
Why spend limited resources away from your core competency (i.e., dsRNA-based plant protection products) in a market where the competition is already way ahead of you? This could work for a company like Bayer but not for one that took a major hit on the SPAC transaction. In fact, GreenLight says in its SEC financial filings that the proceeds will probably only last through the end of this year. That likely means more debt or shareholder dilution through a secondary stock offering – or both. Or the end of GreenLight Biosciences.
The retail investor can’t afford to float a company’s R&D. That’s for rich people, which is why we never invest in pre-revenue. In the case of GreenLight Biosciences stock, which has already see-sawed from being down 50% and back up to its IPO price in six weeks, you’ll have years of watching your money mold. Incidentally, another one of GreenLight’s products is designed to combat the fungus botrytis. So there’s that.
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