Biotech profile: NemGenix

Twelve months ago billions of dollars evaporated virtually overnight as the global financial crisis hit world’s economies like a tsunami. Yet every year – boom and recession alike – the world suffers billions in losses due to plant parasitic nematodes; it’s estimated these pests cost the agricultural industry on the order of $175 billion every year. Puts it all in perspective, doesn’t it?

One company hit by the former phenomenon is feverishly attempting to solve the latter problem. The Western Australia-based NemGenix is working on developing new varieties of genetically modified wheat, barley and sugarcane that are resistant to plant parasitic nematodes. As you can see from the figure above, it’s a potentially highly lucrative market.

Yet NemGenix is also a small early-stage biotech – just the kind of business that is most vulnerable to fluctuations in the economy and investor sentiment. However, NemGenix CEO, Dr Sean Hird, is confident the budding biotech will blossom, not because of any special magic formula but because he’s committed to sticking to good old-fashioned business basics.

“As always, you need to get the fundamentals right. You need to have a good market opportunity and a credible story to tell. Try to have one or more validating third-party collaborations with a serious player, then get your government grant applications in and get some funding. And run a tight ship. Then you have a fair chance of getting through to calmer waters,” says Hird.

At the core of NemGenix’s business is an RNA interference technology that the company licenses from the CSIRO. This is first being put to use developing a pest resistant GM wheat under a grant from Department of Education, Science and Technology (DEST) under its International Science Linkage programme, in collaboration with the Indian Institute of Technology in Kanpur, India.

Hird believes that making the most of grants such as this essential to a small biotechs. “You have to look at all the different grants that are out there, such as the ARC Linkage Projects, or you can partner with an academic institution and have them do the ARC Discovery Project grants. You can also look at other research funding bodies,” as NemGenix did with the Sugar Research and Development Corporation. “There’s also one just out: the Australia-New Zealand Biotechnology Partnership Fund. For little biotechs in the current economic conditions, your main emphasis must be to go after all these government grants.”

Not that they all pay off – particularly in the case of Commercial Ready, the loss of which proved costly for NemGenix. “We spent a lot of time and money on preparing our application for a Commercial Ready grant last year. We were fairly confident we’d get it, but two days before we were supposed to put it in, the whole scheme was scrapped,” says Hird. “It has been a double whammy for a lot of local biotechs. Not only with the global recession, but also the loss of a major source of funding in Commercial Ready.”

However, NemGenix is one of the lucky few biotechs that can take advantage of Commercial Ready’s spiritual successor: Climate Ready. However, applying for a Climate Ready grant is substantially different from applying for Commercial Ready. “You’ve got to have a climate change dimension,” says Hird. “Some companies, like ourselves, have managed to couch the problem/solution area that we’re in in climate change terms. We are arguing that anything that affects roots, affects water take up, and efficient water take up is necessary in reduced rainfall conditions.”

While taking such an approach might help in securing much needed funding, Hird also has a word of caution about working exclusively under the umbrella of grant funding. “The trouble with grant applications is that your own business plan tends to be overly influenced by meeting the requirements of a funded programme. If you didn’t have the grant and your money came from investment from a third party, you’d have better control of your R&D.”

For this reason, Hird is pleased with the change to the R&D tax breaks, which gives him more control over the direction of the company. “It’s a major source of income and we do factor that in to our forward plans. I applaud the government for improving that.” Hird also aggressively pursues funding from private sources, recently securing a collaboration with Dow AgroSciences that is funding several researchers full-time working on nematode resistant crops.

As for the road ahead, Hird shares the cautious optimism of many in the industry today when it comes to the next 12-24 months. Beyond that, things could get even brighter. “Agricultural biotech is the Next Big Thing,” says Hird. “If you look at the take-up of GM crops around the world – the amount of work being done in places like China and India as well as the US – they’re putting huge amounts of money into this area. The ag-biotech sector is going to be the big hot sector over the next decade.” And if Hird gets his way, NemGenix will be growing along with it.