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Interview - Marcus Meadows Smith

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Marcus Meadows-Smith - Head of Strategy & Business Management - Biologics at Bayer CropScience
What has Bayer’s acquisition of AgraQuest meant for both companies, and for you?

For Bayer, they bought the best research and development (R&D) platform and pipeline in the industry in terms of biologics. So, as you’ve seen, Syngenta’s now interested, BASF are in the process of closing the acquisition of Becker-Underwood, which is a microbial company, focused on seed treatments. Bayer was lucky enough, in our opinion, to get the company with the strongest R&D platform, and strongest R&D pipeline.

In terms of what AgraQuest got as employees, we are totally enthused by being acquired, which is an unusual state – usually people have some resistance and reluctance to being acquired. But in our case we had this mission to do the R&D for our products and then to partner with companies to get them to market. Now it’s just like the perfect partnership, whereby we’ve got over seven thousand sales and marketing personnel to take our products worldwide and increase the sales, whereas our previous model would see us sign deals with Monsanto, BASF, DuPont, Iharabras, and Bayer was one of the distributors in certain markets for us. This just makes our business model that much more efficient: we can focus on the R&D, and the sales organisation focuses on selling.

Has this streamlining of the whole process helped in terms of meeting regulations and registering products?

I think the resources are going to be impactful: we’re going to be able to register in multiple countries in parallel. As you’ve heard there’s frustration in some of the smaller countries where we haven’t taken our technology yet. We’ll be able to get to those countries much faster because we’ll be doing things in parallel, due to having so many more resources, instead of doing them in sequence.

I think another area is going to be the fact that we’re bringing together our R&D capabilities: although our R&D will be a discrete unit in California, we’re now part of a bigger R&D community, and we will be able to make combination products with chemistries and biologics together and we’ll be able to do joint research with our colleagues around the world. And I think that’s going to accelerate innovation, it’s going to accelerate new products coming forward, particularly on the formulation side. Bayer has outstanding, world class formulation chemists, whilst to be honest it was a weakness at AgraQuest - we didn’t have all of that application technology. There are just so many more resources that you have available as a large company, so we expect a mini explosion in our R&D capabilities as a result, and a very big explosion in our sales and marketing capabilities.

And, even more so, I imagine with Bayer’s announced €5 billion investment in R&D?

Well, this is €5 billion over the period from 2011 to 2015. So today we’re spending somewhat less than €800 million on R&D, so this is a step up in how much we spend each year. Also it’s a refocusing of that R&D and a greater proportion of it is going to be spent on seeds and on biologics, with an ultimate aim that the seeds plus biologics will be about 50% of the spend, and 50% of the spend on chemistry. Now, as time goes by that will adjust, depending on where the most exciting leads are in the pipeline.

Leading on from that, in recent years, there seems to have been a bigger increase in R&D of seeds and traits as opposed to agrochemicals. What’s brought that about and is it likely to continue until it reaches that 50/50 mark, or perhaps even more?

Well I think a lot of companies have refocused – for example, Monsanto was a chemical company, it’s now totally switched, it spends no money today on agrochemical research, all of it goes into traits, and they’ve created, as a result of that research, more than a $10 billion market, the GM seed market. That has been fuelled by R&D, and they’re still seeing that by adding traits, you’re adding a value to the grower that he’s ready to pay for.

If you look at what’s happened to the price of seed over the last 20 years, it has grown incredibly because it is delivering a much higher yield: for example yields of corn and soybean have doubled. But if you look at something like wheat, where there wasn’t GM technology going in, and they’ve just been reliant on conventional breeding, the yields have not increased so substantially. So when you create value that people are ready to pay for, that’s where you can re-coup it, and that’s why you can justify investments in R&D. 

We believe the same thing is going to happen with biologic products: they’re going to add value to the grower, they’re going to bring an attribute that people are going to want to pay for because it increases the yield or it controls disease in a better way, and therefore it justifies the spend on R&D – which today, in global terms, is very small versus the spend on traits or chemistries. With the big companies, such as ourselves, coming in, there are going to be more significant R&D dollars spent in this space. And it will turn out like the pharmaceutical industry whereby 50% of all new pharmaceuticals come through from a bio source – and when you go to the doctor you don’t say, can you give me a biological drug? You say give me the drug that’s most effective, has least side effects, and thirdly you ask about price. Now, a grower will start off by asking about price, but then it will be efficacy, and it will be cost efficacy that he’s concerned about, so it is that balance when you’re running a business. When you’re talking about your own health you tend to go for the most effective!

I read a quote from you where you said that now, being part of Bayer, you can create “revolutionary, tailor made biological solutions”. How does one specifically tailor-make such products?

At AgraQuest we had collected about 20,000 microbes from around the world. Now as Bayer, they’ve already got microbial collections from the acquisition of Athenix, plus their own in house, so we’ve now got, I don’t know, maybe 100,000 microbes (don’t quote me on that number!), and then we go through and we do assays. We ask, where are the unmet needs that a grower has? For example corn stalk rot is a key disease that isn’t being controlled well by conventional crop protection products today. Or nematodes aren’t being controlled well today. So what we do is set up an assay with nematodes in, and then we screen all 100,000 microbes against that, to see which one will actually control it. And now we have automated systems, so we go through and it’s like finding a needle in a haystack, but it’s in a very tailored way.

Then, once we’ve identified something we use the genetics: we work what is the natural product chemistry, what is the gene that produces that chemistry, and then we can screen the rest of our collection of microbes to identify other microbes that contain that gene, that therefore are likely to control that pest or disease.

We’re also looking now for microbes that help the plant overcome drought stress. There you’d be looking for a microbe that helps the plant grow its root system: you’re also looking for a plant to be able to shut down, but not die – like an animal going into hibernation in the winter, plants can effectively hibernate and not die during a drought process, assuming it’s not too prolonged, and then it will recover. Therefore, we ask what are the microbes that help that recovery process, once the rains and water become available again?

How long does such a screening process take, let’s say for 100,000 microbes?

Well, of course it’s more complicated than pouring the microbe onto the nematode! So, working out how you best set up the assay in order to see if this microbe, in a living system, is going to kill the nematode, or protect – sometimes they don’t kill, they simply protect the root system from the nematode through a physical barrier – then to carry out the screening itself, you’re probably talking about anywhere between a one to three year period, to go through and screen a library of that size. A lot of it is making sure that assay works before you can then try to automate it in some way, so it’s the initial set up that takes around 12 months.

Biopesticides still suffer from a bad image with consumers. How can this be changed?

We see them as having a very positive image. Many consumers perhaps don’t know what biopesticides are, but when you tell them that these are the natural products that allow farmers to grow organic food, most consumers have a positive image around organic food.

So how can you make that positive connection more obvious to people?

You can explain to people that this is very like producing yoghurt, or producing wine or beer: explain that many biologic products are actually also food sources, for example some people use mustard and garlic (although we don’t), they use those sorts of products as biological control mechanisms in agriculture.

You have to prove to the regulators that these are safe. You are surrounded by bacteria: you have 50 million bacteria per square inch of skin, you have bacteria in your mouth, you have them in your gut: in the absence of bacteria, you would not be healthy. But of course there’s a big difference between beneficial bacteria, and pathogenic bacteria. So if you got salmonella of e-coli in your stomach, it is very different form the microflora, the beneficial bacteria that you have in your gut when you’re healthy. For example, we also sell a probiotic which is one of our bacteria which is fed to chickens in food production, so they don’t need to give them antibiotics. So it allows us to keep antibiotics for human use, because if they get used in animal production, they tend to develop resistance very quickly, because it’s such an intensive breeding system. So the alternative approach is to feed the chickens a probiotic so they’re healthy, and they’re better able to fight off disease. With giving beneficial bacteria to the plants, we’re doing exactly the same thing: you put beneficial bacteria on the surface so the pathogenic fungus or pathogenic bacteria can’t hurt and infect the plant.

So if you can get to each consumer and explain that it’s a natural process and it’s happening all around you, all the time, there is a level of confidence and comfort in that. And as I said, most people feel very comfortable about eating organic food, in fact many people pay a premium for that and believe it’s better for them, and we plug into that message to some extent.

But, to be honest, as an industry, what we’re trying to do is give those perceived benefits to everyone. We want low cost, affordable food that is abundant so we don’t have a billion people around the world going to bed starving. It’s quite ironic that we have a billion people who are obese and a billion people who are hungry. It could just be a simple model of redistribution of food, and we would solve some problems – but Bayer does not claim to be able to solve those political issues! But what we can do is help farmers to get the maximum yield off every acre in a sustainable fashion and minimizing environmental impact.