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Thursday 7 November 2019
Beccar Varela, Buenos Aires
Mercedes Rodriguez Giavarini Mitrani Caballero & Ruiz Moreno, Buenos Aires
Luciana Tornovsky, Demarest Advogados São Paulo; Special Projects Officer, IBA Closely Held and Growing Business Enterprises Committee
Rodrigo Precolli Indigo
Francesca Odell M&A Partner, Clearly Gotlieb Steen & Hamilton, New York
Juan Carlos Castilla-Rubio Chairman, SpaceTime Ventures, São Paulo
Bernardo Silva CEO, Brazilian Association of Fertilizer Raw Materials (Sinprifert), São Paulo
Mercedes Rodriguez Giavarini introduced the subject matter to the audience with a precise explanation on how innovation in biotechnology affects agriculture and agribusiness, especially in Latin America where economies are highly based on agriculture and the exploitation of natural resources. Global trends in production are changing from a fossil-fuels based production to one based on renewable energy. In this sense, agriculture has a new role not only as a food provider but also as a supplier of renewable raw materials.
Rodriguez Giavarini began the discussion by asking the panel for a definition of biotechnology.
Rodrigo Precolli explained that in agribusiness, biotechnology is any living organism used to make a product and which can be applied to agriculture. Until now, the most revolutionary biotechnology for agriculture was the genetic modification of organisms. Genetically modified (GM) food production has expanded due to its capacity to increase production by up to a 30 per cent and to cut the use of natural resources. Looking to the future, many companies are now developing new products using genetically modified organisms (GMOs), because it is considered the way of avoiding the Malthusian Trap where a growing population exceeds the supply of food.
The speaker considered two facilitators necessary for the new agricultural revolution to occur: the probiotics in plants, which has also proved to reduce the need for water; and a type of natural mutation which uses components of an organism to create a new product. This technology is similar to GMOs and called CRISPR. CRISPR is a unique technology that enables geneticists to edit parts of the genome through the removal, alteration or addition of DNA. Unfortunately, there are many regulatory debates in the United States and Brazil that result in obstacles in bringing new products to market and making use of this sort of technology.
Luciana Tornovsky asked Juan Carlos Castilla-Rubio about his experience as a biotech entrepreneur. He mentioned that in his opinion, biology will be the most significant industry of this century because of the need to find solutions to the climate crisis. These biological assets are invisible but investing in genomics is the best public investment a country can make because it has been proven to yield revenues. He added that his friends in Silicon Valley say that ‘software is eating every single industry’ but biology will do the same and this revolution is only just beginning. He explained this by stating that biologists have mapped only 0.28 per cent of the ‘book of life’, only a very small fraction of species has been fully genome-sequenced. This is about to change because of a global project called ‘The global Genome Project’ that intends to genome sequence all the life on the planet for the same cost of genome sequencing one species 50 years ago.
It is expected that all the generated data of this process will be 400 times greater than all current social media data and will require artificial intelligence (AI) to make sense of it all. However, once it’s finalised, if 0.28 per cent of the ‘book of life’ can create trillions in revenue for different enterprises, the entire ‘book of life’ could massively duplicate gross domestic product. The question now is how and where are the startups going to be? Countries in the tropics own 80 per cent of biological assets, so there is a huge opportunity to redesign agriculture by using genome sequences, probiotics and AI. But first, we must bypass many regulatory and legal challenges.
Rodriguez Giavarini posed some difficult questions to Bernardo Silva, including:
Silva considered that the main challenge faced by Latin America is that, unlike North America and Europe, the region has an aversion to risk that prevents innovation from flourishing. Nevertheless, in the last decade there has been much innovation in Brazil’s digital sector, and the profile of innovators were mostly entrepreneurs, very much in line with innovation and risk taking. On the contrary, in biotech or agriculture, the profile of company founders is more of a risk averse culture, making development more difficult. In Brazil the bioeconomy is mostly represented by biofuel ethanol which is not particularly innovative, and from sectors that can be more innovative there is nothing new because of the lack of biotech startup investors prepared to take risks. Furthermore, regulation and consumers in Latin America are also rather conservative so when someone attempts to explore biodiversity or present an innovative product, they find it difficult to make progress. In Brazil investors need to see a Unicorn (database of startup companies) biotech company which serves as a model to follow, and this will lead to investors funding these types of companies.
Luciana Tornovsky brought the discussion to transaction and M&A trends in biotech. Francesca Odell mentioned that startups need is financing and to make this happen they need to present their businesses in a compelling way. They must be able to manage the risk and convince potential investors of the actual possible returns. There are several opportunities for startups in Latin America because of the number of foreign investors who fund this type of startup in agriculture and biotech. Both offer massive potential returns and from that perspective it is a huge advantage for the region to have an abundance of natural resources.
The principal challenge holding back investors as already mentioned, is the risk averse tendency of entrepreneurs but there are also other factors which need to be tackled before more transactions can be obtained. These include changes to the regulatory environment, producing greater clarity and adapting old regulations to the new technology. It is also important to get accustomed with metrics that show the results, and finally it will be necessary to change intellectual property (IP) regulation in general. IP rights need to be adjusted to biotechnology as it is currently impossible to register designs, ideas and processes - things that are crucial for the protection investors seek.
There is a very real challenge arising from the need to increase the food production in this time of climate change. Simulations have been carried out and their results show that in the changing environment we are going to endure:
All this creates an opportunity to entrepreneurs because new technology and science are needed to create future carbon negative agriculture, with a hyper resource productivity which is resilient to climate extremes.
Finally, the group concluded that is relevant to invest significant resources in understanding biology and to create new legislation and regulations. For that purpose, legal expertise is needed to reach the regulation that will be the catalyst to the implementation of new technology in Latin America and reduce risks and costs. It is important to be creative to exploit these opportunities and produce solutions to fund and expand these new enterprises.
Juan Carlos Castilla-Rubio: ‘Lawyers need to spend resources in understanding the biology to be better and leading professionals.’
Bernardo Silva: ‘Legal expertise is needed and a new mind-set of lawyers to create better regulation.’
Francesca Odell: ‘Latin America has a real opportunity because of the resources available and the potential. Be creative in devising new solutions with current regulation and financing.’
Rodrigo Precolli: ‘Be creative!’
Luciana Tornovsky: ‘We need more food and create new technologies so everybody needs to work hard!’
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