Lutherville's AgriMetis eyes growth after raising $23.5 million
When John Draper heads out to seed his fields this spring, he’ll rotate where the corn and soy beans grow.
Plant the crops in exactly the same spot too many years in a row, and he’d end up with weeds that aren’t bothered one bit by the herbicides he sprays on his 300 acres in Queen Anne’s County.
Just like viruses can develop an immunity to drugs or morph slightly so they’re not affected, crop pests become resistant to the chemicals used to kill or repel them. It’s one of the biggest problems Draper and farmers across the country contend with every planting season, and one leading chemical companies spend millions trying to address.
A Lutherville company, AgriMetis, sees a business opportunity in helping manufacturers of agricultural chemicals accelerate their research and development into new pesticides, herbicides and other crop protection products, by offering up promising compounds that are nearly ready to begin the lengthy regulatory approval process.
The company recently received a $23.5 million injection of money from an oversubscribed Series B funding round that AgriMetis CEO Steven Tuttle called a vote of confidence in its approach to product development.
Rather than searching for promising new products, AgriMetis starts with the molecules that serve as the basis for existing products to create new chemicals, which company leaders say is more likely to yield promising results.
“Raising the B round was the validity that we are doing something people believe is going to be done in the future,” Tuttle said. “This is now going from, ‘Wow, what a great idea, what good concepts, good, theory, good hypothesis,’ to ‘Jeez, this is becoming real.'”
The funding round was led by Anterra Capital, a venture capital fund with offices in Boston and Amsterdam focused on the food and agricultural industry.
“AgriMetis has demonstrated the incredible efficiency of its approach in generating novel products that have the potential to displace small molecules,” said Philip Austin, Anterra’s founding partner.
AgriMetis was founded in 2014 by another Lutherville company, Acidophil LLC, with an investment from Syngenta Ventures, the investment arm of Syngenta, which was created by the merger of the agribusinesses of Novartis and AstraZeneca. Much like AgriMetis, Acidophil uses synthetic biology and chemistry to develop promising compounds but primarily for the pharmaceutical industry.
Both aim to save larger manufacturers time and money with an innovative approach to research and development at a time when publicly traded companies are under pressure from stockholders to improve results.
Operators in the agricultural chemical industry are under pressure “to cut costs, improve margins and fund further research and development in the wake of falling crop prices and reduced farmer incomes,” which is driving consolidation in the business, according an August 2016 market report by IBISWorld.
The manufacturers also face growing consumer demand for new crop protection technologies such as genetically modified crops and seeds that protect themselves against pests amid ethical and environmental concerns about chemicals, said Josh Arnold, the director of business development for agribusiness at Battelle, a life sciences research firm.
Still, agricultural chemical manufacturers dedicate much of their signficant research and develop budgets to new chemical development, according to a survey of their spending plans commissioned by industry’s trade organization, CropLife America, CropLife International and the European Crop Protection Association.
Eleven companies that responded to the survey, published in March 2016, said they spent nearly $2.4 billion on research and development, dedicating 93 percent of it to chemical products.
“When you look at the multi-nationals and the amount they have to spend just to go and find something that might work — it’s very expensive,” said Tuttle, AgriMetis’ CEO.
Bringing a new chemical to market can take a decade and cost $285 million, according to CropLife.
Tuttle thinks his company can make inroads with large chemical companies by offering up that “something that might work,” allowing the big companies to press fast-forward on the development process.
With the influx of cash, AgriMetis hopes to triple the number of products in its pipeline, from four to as many as 13. It also will doube its staff to 10 people.
The new funding should be enough to get its first products ready for a development partner, a larger chemical manufacturer that would ultimately buy the license and manufacture the product within two to three years, Tuttle said.
Galen P. Dively, a professor emeritus of entomology at the University of Maryland, isn’t so sure. While he agreed that there will be continued demand for new herbicides and pesticides even as new technologies emerge, he’s is skeptical whether a company like AgriMetis can find a place among the heavy hitters.
“I just don’t see it,” said Dively, whose research has focused on pest management and pesticide resistance. “It’s a small company, so there’s only so much their scientists can do. The big companies are probably creating thousands of potential compounds every day.”
But Arnold, the Battelle analyst, said large manufacturers may begin to seeking out smaller research and development operations like AgriMetis in the future.
He likened the business model to small biopharmaceutical companies that develop new drugs based on intellectual capital they own, then sell them to bigger pharmaceutical companies with the resources to manufacture and sell the drugs.
“If I could predict a trend,” Arnold said, “it sounds like it’s leading in that direction.”
The company’s founders, chairman Philip Goelet and Brian Green, vice president of research and development, are briging their background in pharmaceutical research to AgriMetis’ development of new agricultural chemicals.
The company’s origins and approach caught the attention of RA Capital Management, another Boston venture firm that typically invests in health care companies.
“The parallels between AgriMetis’ strategy and that of healthcare biotechnology companies are striking,” said Peter Kolchinsky, a managing director at RA Capital, in a statement. “We think innovation related to agriculture is best appreciated in the context of global human health and certainly should interest sophisticated healthcare investors who see the bigger picture.”