NZ's Genesis spins out plant branch

Auckland-based biotech Genesis Research and Development Corporation (NZX/ASX:GEN) has lopped its plant sciences branch and planted it in the market as a fully-owned but independently managed scion, AgriGenesis BioSciences.

Founded in 1994, Genesis developed its business on a broad platform of human/animal and plant genomics, but has been unable to convince the market that a bio-diverse business is a good business.

"For around two years we've been concerned that the only thing that analysts and investors seem to value in the company are products that are fairly well advanced in the health pipeline," said Genesis CEO Dr Jim Watson.

"Around 50 per cent of our business has been in plants. We've developed a strong portfolio in new plant-derived biologics and forestry, in partnership with [US-based forestry company] Arbogen, and databases and software tools for analysing plant DNA."

Strategically, developing plant products has been very difficult because investors see health products providing a faster path to market, and an earlier payoff than plant bioscience products.

Said Watson, "Our share price hasn't been performing well, so we formally decided as a board a year ago to separate out our plant bioscience operations as a stand-alone business, to force investors to look at the two companies separately."

Genesis has developed an extensive and diverse patent portolio by 'mining' its extensive expressed-sequence tag (EST) databases for genes with commercial potential. It develops novel products around these discoveries in partnership with major bioscience companies.

Dr Peter Lee has been appointed CEO of Agrigenesis Biosciences, with a mandate to develop and commercialise the company's portfolio of plant bioscience products.

Lee has recently returned to New Zealand from the US, where he has been commercialising new technologies for the global forest products sector.

Watson will continue as CEO of Genesis, with responsibility for its human health programs, but the two companies will share a corporate services team.

David Irving, chairman of Genesis Research, said Genesis was considering raising capital for AgriGenesis from trade investors, who have already expressed interest in the new company. Genesis has appointed ABN AMRO Craigs as an adviser.

Watson said AgriGenesis would inherit its forestry projects the strongest area of its plant bioscience activity over the past nine years.

Genesis is a small equity partner in Arbogen, headquartered in South Carolina, which is focused on the development of transgenic tree species for forestry -- a transgenic eucalypt with low lignin, for the pulp and paper industry, is already well down the commercial pipeline.

The low-lignin eucalypt is expected to find a huge market in South America, which already has vast eucalypt plantations.

AgriGenesis will also take over development of a new biological control agent for Botrytis cinerea -- the 'noble rot' fungus that is the bane of the global wine industry.

Watson said Genesis was already in the second year of trialling an enfeebled, non-damaging strain of B. cinerea that suppresses pathogenic strains through competitive displacement.

"We've also built up our own extensive, proprietary plant databases from public-domain genome data on Arabidopsis, rice and poplar, and software tools to explore them," he said.

With fossil-fuel reserves dwindling and prices rising, Watson said AgriGenesis would also invest more effort in developing plant biomass crops for liquid-fuel production. Genesis established a research team to investigate biomass production and engineering processes for ethanol fermentation.

"We see a huge opportunity for biomass crops with easily extractable cellulose that can be fermented to produce ethanol," he said.

"We're interested in annual crops, but we're also very interested in woody shrubs that can be grown and repeatedly coppiced without replanting."

Among the potential biomass crops the company has been studying is a North American Salix hybrid -- a shrubby willow similar to those traditionally used as a source of basket-weaving cane.

"It's an interesting plant, because it is found in a range of environments from the cooler regions to the sub-tropics. It has a high cellulose content, and a very good energy input-output ratio in processing," Watson said.