What Investors Need to Know About Biotech

Bob Kodrzycki Uncategorized

by Bob Kodrzycki

Originally published on LinkedIn 26 Mar 2019

Biotechnology is an exciting sector. There are lots of new tools available like gene editing, high throughput DNA sequencing, increasing use of drones and sensors as well as a huge push to digitize everything. Along with the tools comes the promise of synthetic biology to integrate this stunning array of technologies into engineered biosystems.

At the same time that technological advances are appearing at a dizzying pace there are significant grand challenges to address. Climate change, a rapidly growing world population, concerns about farming practices impact the environment, the desire for healthier food, reduced water use, eliminating food waste and ending the suffering of animals.

Like any area of emerging technology, the difficulty lies in separating the noise from the music.

Here are a few realities of biotech to consider.

Biotechnology is still more science than engineering.

We like to think about building products from an engineering point of view. Establish the specifications and dimensions of the product, go into the shop and build it. Like producing a car.

Unfortunately, bioscience and engineering operate under different rules.

Think about tolerances and variation. While engineers measure their variation in thousandths of an inch, biology measures variation in percentage points.

Bio-engineering is about understanding variation…that’s why biologists use statistics and engineers use calipers.

Biological organisms are fundamentally different than manufactured products. Most manufactured products don’t react, or need to react, dramatically to changing environments the way living organisms do. Keep in mind that reacting to changing environments is a good feature of biology that allows survival.

The trade-off is variation. To be an effective, commercial crops, livestock and microbes need to have desirable features that exhibit a predictable level of variation under changing circumstances.

What this means is that bio-based product development requires extensive testing to understand the extent of variation under changing environments. Whether a product is the result of breeding, genetic engineering, gene editing or a natural microbe selected from the environment, it needs to pass through a testing process subject to statistical selection.

Typically, a product candidate will usually be subjected to multi-year testing over a variety of locations to determine if the results are repeatable and are acceptable to the end user.

“Bio” is about the genes.

Just like in thoroughbred horse racing, breeding matters. It all comes down to the genes…and understanding how the work and interact…and there’s still a lot to learn.

The entire plant and livestock industry are built on breeding and selection of superior varieties that can thrive under a variety of environments. The same situation exists with industrial microbes used for fermentation to create bio-based products…the superior varieties are selected for their consistent performance.

This is a case of keeping the main thing the main thing. The main thing is unlocking to power of genetics to grow more food, fiber, feedstock and bio-based products.

New tools in biotech are exciting and their application is enabling progress in ways that were not possible just a decade ago. But be wary of falling in love with a technology.

In the end it’s the use of tools to understand and improve the genetics of the organisms. The tools unlock the potential and tweak what’s already good into something that’s great. Then these new, great varieties become the basis for more improvement.

Given the complexity of genetics and the sophistication of the tool to manipulate genes there’s a lot more engineering and tweaking coming in the future.

Digitization of Agriculture…and Everything Else Too

Digitization of almost every industry is going forward at a rapid pace…and this is a good thing. Not only can digital applications save resources when implemented properly, they can be used to create new ways of analyzing data, selling product and getting people to communicate.

Traditionally, agricultural has been one of the least digitized industries worldwide…that situation is changing rapidly.

Digital tools like sensors and imaging are great for helping to manage on-farm applications of water, nutrients and crop protection agents but don’t overlook the potential for digitization to advance breeding and knowledge of gene function.

Digital tools are not new in research or in screening through commercial candidates in a laboratory or greenhouse setting. But look for the recent advances in sensing on the farm to find applications in developing new breeding lines and enhance our knowledge of gene function and regulation.

Gene editing is a precision version of genetic engineering.

At the most basic level gene editing, like CRISPR, and GMO techniques are really the same thing, they are used to make specific modifications to a DNA sequence. They are both useful, but one is much more accurate than the other.

This is a logical progression in the realm of technology development. In addition to greater accuracy, gene editing techniques have a low barrier to entry in terms of time, cost and training needed to successfully modify an organism.

Keep in mind that while the accuracy of gene editing is very high, it is not yet a flawless tool. The main concern with gene editing is the generation of off-target modifications. Just like GMOs, edited organisms can have modifications in places not intended albeit at a much lower incidence rate. The accuracy of gene editing tools is rapidly improving along with the number of gene edits that can be introduced into a single cell.

One critical area of gene editing is checking for unintended modifications.

These off-target modifications may, or may not, present a problem depending on what the goal of the project is. The response to off-target modifications is, you guessed it, testing your product and eventually making improvements to the tool.

Also keep in mind that in the hands of creative scientists these “problems” often are converted into useful tools.

Gene editing is not a substitute for microbials or biologicals.

Use of microbes and microbe-derived biological agents is a powerful technology but it is not the same as gene editing or using GMOs.

Gene editing makes direct changes to an organism’s DNA.

Microbials, on the other hand, are the use of living organisms that influence the crop or livestock growth. It is essentially the interaction between two living organisms. That means it’s very complex.

Biologicals are agents derived from (usually) microbes and are deployed as a substitute, or enhancement, for synthetic chemicals.

The modes of action of gene editing, microbials and biologicals are completely different…and can be complementary.

The different modes of action can be used in complementary ways. Just like microbial agents have different efficacies on different varieties of the same crop, different crop varieties react differently depending on where they are grown. Likewise, different mixtures of microbes will produce different results.

Development of a gene editing variety that performs a specific function does not rule out microbial or biological products that achieve the same function. In fact, look for development of specific crop and livestock varieties that are paired to work specifically with microbials and biologicals to take advantage of the differing modes of action.

What to do before investing in biotechnology?

Biotech investment is full of promise and risk and without doubt will continue to rise as we make our way through the “Century of Biology”. Like anything that is complex it’s important to tread carefully and engage subject matter experts to assist with due diligence.

Not discussed this article is the even more complex array of competition that arises through the use of different technologies and modes of action, the unpredictable market for biotech products and the complex logistical considerations. Then there’s the intellectual property portfolio. All this in future articles.

Investments in biotechnology should be preceded by careful analysis of the data sets supporting the claims. Also make sure that any biotech-based product is carefully tested over a range of environmental conditions as well as over multiple growth cycles for consistency and predictability.

Bob Kodrzycki, PhD, is the Principal at Encompass Biotech LLC, a consultancy serving the AgBiotech and Renewables sectors. Encompass Biotech works with investors to provide due diligence and with growing biotech companies to become investment-ready. Contact Bob at bob.kodrzycki@encompassbiotech.