AgTech Accelerator Brings Biopharma Models to Ag Investing Strategy

Xconomy Raleigh-Durham — 

For many early-stage companies, raising money is the hard part. But after raising $10 million last spring, Boragen ran into another obstacle common to agtech startups: There are few greenhouses available for companies to run their tests.

John Dombrosky, CEO of the Research Triangle Park, NC, company checked with universities and agricultural companies and found, at best, Boragen would be waitlisted. But in June, Alexandria Real Estate Equities (NYSE: ARE) reached a deal to acquire a Syngenta site in RTP. Syngenta had consolidated its agbiotech operations elsewhere in the Park, leaving Alexandria an opportunity to snap up the property, including its greenhouses.

Alexandria is currently remodeling the former Syngenta site into what will become the Alexandria Center for Agtech. Boragen is the first tenant. Dombrosky says tests of its lead boron-based fungicide candidate in crops such as corn and soybean have laid the groundwork for field trials set to begin in South America this winter. By the second quarter of next year, Dombrosky expects to begin talking with agriculture companies that may be interested in partnering with the startup. It’s a timeline he says would not be possible if not for greenhouse access.

“If we didn’t do those trials, we would have lost a whole year,” Dombrosky told Xconomy in an interview. “You can maybe stomach something like that at a big company. At a startup, it’s devastating.”

Greenhouses are scarce because they are specialized structures that require a large capital investment—more than many startups can afford, says Oliver Sherrill, Alexandria’s regional market director for RTP. With its greenhouses already in place, the former Syngenta site gives Alexandria a head start on its RTP expansion plans. Sherrill says work on the rest of the site should be completed within a year. By then, other startups will have the opportunity to join Boragen. [Disclosure: Alexandria is a business partner of Xconomy—underwriters, sponsors, and partners have no influence on editorial operations.]

Boragen was the first investment of AgTech Accelerator, which launched last year to help form new agtech startups and support them until they’re able to secure venture capital investment, or reach a deal with a large agribusiness company. AgTech Accelerator has raised $22 million in funding. Dombrosky, who also heads the accelerator, says investments will be made in up to four companies per year.

The accelerator’s investors include Pappas Ventures and Hatteras Venture Partners, two venture capital firms that invest primarily in human health technologies. That experience is proving helpful to the accelerator. Dombrosky notes that the “build-to-buy” strategy, in which VC’s back a pharma startup with the goal of advancing a drug’s development far enough to entice a larger company to acquire it, could also apply to agtech.

Bayer, Syngenta, and Eli Lilly’s (NYSE: [[ticker:LLY) animal health unit, Elanco, are investors in the accelerator, as is Alexandria. Those financial commitments don’t give these strategic partners preferential access to technologies developed within the accelerator. But Dombrosky, a former Syngenta executive, notes these partners provide advice and guidance that helps the accelerator and its portfolio companies.

Dombrosky walked Xconomy through the greenhouse space recently and talked about the accelerator’s progress, its investment strategy, and his thoughts about agtech investment broadly. The conversation has been edited for length and clarity.

Xconomy: Where do you see things going with Boragen?

John Dombrosky: Obviously there’s not as big of an IPO market [in agtech]. That’s not to say one won’t be there for the right opportunity. For the most part, because we have the strategic [investors] on our board, we think about trade sales. Can we do build-to-buy? Because we have this 2,000-plus library [of compounds] that we’re building, unique chemistries that ag has never seen, we think Boragen might be something that becomes a source of perpetual value. We might think about standing it up as a unique, ongoing player.

X: So the value is not just the fungicide that you develop?

JD: Although we would say we’re an ag chemistry development company with our first product focused on fungicide, we have multiple fungicide families we’re working on, as well as herbicides, insecticides, antimicrobials. And we’ll probably find some human health leads. We’re not a human medicine company, we’ll find partners to progress our human medicines.

X: Earlier this year, you were scrambling to find greenhouse space. What happened to make that so critical at this point?

JD: April 1st, we closed that $10 million A round and we quickly knew that our first 30 days were [not] going to be doing scientific work, but working on … the economic viability of what the lead product could be. Let’s look broadly at the unmet needs in ag, across a wide array of crops, and where the optimal opportunities would be for that first lead product. All too often in an early stage startup, you get enamored with the science without thinking about … who will care, what unmet need are you trying to address, and how big of a marketplace. We did that work first, which led us to, we think, a bigger opportunity for this lead molecule.

X: Is that a different approach than you would have taken when you were with Syngenta?

JD: This is not just Syngenta. A good chunk of energy [at big companies] is placed around what is already working today. It’s difficult to get out of that mindset. Syngenta, and the big agriculture industry, is finely tuned to what the grower’s needs are across each of the markets and each of the crops. Big, early-stage research projects, although they might be interesting, tend to be underinvested at large companies. That’s exactly what happened in pharma. They realized that early-stage work ought to be done through venture [backed] companies, not in the halls of Pfizer, Lilly, and J&J, et cetera.

X: What did the economic analysis tell you?

JD: It told us what protocols we needed to run and how much space in the greenhouse we need. We realized the opportunities were going to be bigger, and our needs for greenhouse space were exponentially higher than we originally thought. We realized we were thinking about these three crops and these three diseases, which would have been pretty simple and we could figure out a way to do that. But now we’ve really dug into what the opportunities are, we’ve got about seven crops and about 13 different use profiles that we really want to test efficacy on.

X: Where were you looking for greenhouse space?

JD: We talked to Duke, we talked to [North Carolina] State, we talked to our strategics. In desperation, we arranged to go up to St. Louis. To do some of the detailed fungicide testing, you need compartmentalized, specialized space. That’s what we have here [at Alexandria Center for AgTech]. A lot of money gets invested in greenhouse trials. If something gets contaminated midway through, you throw everything out and start from scratch. That’s not just a delay in time, it’s a delay in resources.

X: Are university greenhouses adequate for what you need or do you have different requirements?

JD: They’re good for early-stage startup incubation. [AgTech Accelerator] looked at an early-stage biotech trait that, in the lab, showed early-stage stress tolerance, which was very interesting to us. At a university setting, they could incubate that project, get it into a viable economic crop like corn or soybean. That’s a quarter of a million dollar investment you need for a university and some post docs to work on. Until that stage, it’s not a company. But we can look at it at AgTech Accelerator and say, let’s bring it off campus now. You can still keep the research relationship open [with the university] and also build a bridge to the company that we’ve formed here, but then, have a commercial focus.

X: You have two companies in the accelerator now. How are things looking for adding more?

JD: We might look at 200 technologies, do deep diligence on 20, and end up … Next Page »

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