Targeted Growth has a business strategy that leads straight to your morning bowl of cereal. The Seattle-based biotech company is taking its technology to the market with a high-yield seed crop that can be turned into biodiesel, but it sees a bigger future in boosting production of what it calls “small grain cereals,” the type that end up in those pricey boxes marketed by Kellogg’s and General Mills.
This struck me as surprising when I heard it during an interview with Targeted Growth president David McElroy and Don Panter, the senior vice president for crop development. I met them after they spoke on a panel yesterday at the Biotechnology Industry Organization’s Pacific Rim Summit on Industrial Biotechnology and Bioenergy in Vancouver, B.C.
“We’re a seed company, and we plan to sell to growers,” Panter says. “Ultimately it ends up in your Rice Krispies.”
In his presentation on the panel, Panter didn’t cover any of that. He focused instead on developing more efficient raw material for biofuels, known as “feedstock” in industry lingo. Targeted Growth’s technology, Panter explained, modifies a couple of plant genes known as REV and KRP, which has been shown in field trials to boost yields of camelina by more than 20 percent. The company is now working to commercialize modified camelina, a member of the mustard family. It’s a high-yield source of raw material for biodiesel refiners, and can be grown on marginal agricultural lands in the Northwest and Canada with existing farm equipment. That product is actually going through a joint venture called Sustainable Oils, which Targeted Growth has established with Houston-based Green Earth Fuels.
Apparently, this is all just a beginning. Targeted Growth hit an “inflection point” in the fall of 2007 when it got results in from a real-life field trial (as opposed to a controlled greenhouse environment) that showed it could boost crop yields by more than 20 percent. “A 1 to 5 percent improvement on yield is pretty significant, so this is significant,” Panter says. The company parlayed that result late last year into a partnership in which it licensed rights to use its gene-modification technology to one of the top global seed companies, for “major row crops,” McElroy says.
Targeted Growth can’t say yet who the partner is, the deal terms, or which crops are involved, McElroy says. But the technology has also proven itself capable of raising yields as much as 35 percent in a second seed crop, and the unnamed partner is conducting a field test in a third crop. With multiple opportunities showing up, the company has to decide which ones to license to big players, and which ones to develop further itself.
“We’ve carved out small grains as an opportunity we plan to realize for Targeted Growth and its investors,” Panter says.
The investors are certainly a big piece of this equation. Targeted Growth has raised $32 million in venture capital since May 2006, from investors that include Capricorn Management, AllianceBernstein, and Seattle-based investors Integra Ventures and WRF Capital. The company is currently trying to raise much more. It wants to use the cash to double in size, from 50 employees to about 100 in two years, McElroy says. The plan is to add more expertise in product development, build out new facilities to make seeds and package them, run more field trials, and add two new R&D facilities in Seattle and Tennessee.
Targeted Growth, founded in 1998, got started to build on work at the University of Washington and Fred Hutchinson Cancer Research Center, where scientists (including Xconomist Jim Roberts) studied the REV and KRP genes. If you delete them in mice, the mice grow bigger, McElroy says. The same principles are at work in plants, he says, and can be broadly applied to most any crop where the seed is the product, he says.
McElroy knows a bit about how to deal with the big seed companies, too, being a veteran of DeKalb Genetics and Pioneer Hi-Bred International, a pair of big-name agribusiness companies in the Midwest. Panter joined the company after a six-year run as chief technology officer of Emergent Genetics, a Boulder, CO-company that was acquired by Monsanto in 2005.
I got the sense that a few of the companies at the BIO event have had the air let out of their bubbles recently, with quite a few half-hearted references to “hockey stick” projections on future revenues. These guys sounded more confident, yet then again, they didn’t promise that the financing was coming imminently. “We’re not a one-trick company,” Panter says. “We’ve got several shots on goal.”