SUMMARY OF OUR CROP YIELD TRAITS IN DEVELOPMENT
|
|
|
R&D Area
|
|
Crops Under Evaluation
|
Seed Yield Traits-Likely Regulated(1)
|
|
|
C3003
|
|
Canola, soybean, sorghum and corn
|
C3011
|
|
Corn, Camelina and canola
|
Seed Yield Traits-Likely Non-Regulated(2)
|
|
|
C3004
|
|
Camelina and canola
|
Oil Enhancing Traits-Likely Non-Regulated(2)
|
|
|
C3007
|
|
Camelina and canola
|
C3008a
|
|
Camelina (non-regulated status granted to Yield10(4)
|
Oil trait combinationsC3008a, C3008b and C3009
|
|
Camelina (non-regulated status granted to Yield10(4)
|
Additional oil trait combinations
|
|
Research in progress (target crops to be determined)
|
Yield Improvement Trait Discovery Platform (Traits Potentially Non-Regulated)(3)
|
C4001
|
|
Wheat, rice, sorghum and corn
|
C4002
|
|
Sorghum and corn
|
C4003
|
|
Wheat, rice, sorghum and corn
|
C4004
|
|
Wheat and rice
|
C4029
|
|
Sorghum
|
-
(1)
-
C3003
and C3011 consist of microbial genes and are likely to be subject to regulation by USDA-APHIS.
S-35
Table of Contents
-
(2)
-
These
traits are accessible using genome editing or other methods that do not result in the insertion of non-plant DNA. These approaches may be deemed non-regulated
by USDA-APHIS based on recent filings by us and other groups.
-
(3)
-
Traits
in this area were developed in our T3 platform and all are potentially deployable through approaches which may be non-regulated by USDA-APHIS.
-
(4)
-
Non-regulated
status granted by USDA-APHIS. Commercial plant or plant products may be regulated by FDA or EPA.
As
we continue to develop the GRAIN platform, key elements of the system have proven effective and have enabled Yield10 to produce several promising crop yield traits in our development
pipeline. Yield10 has achieved and published in peer reviewed journals scientific data from growth chamber and greenhouse studies showing that significant improvements to crop yield are possible. We
have achieved these results by improving fundamental crop yield through enhanced photosynthetic carbon capture and increased carbon utilization efficiency to increase seed yield. Examples of these
traits and their impact on crop yield are shown below. The C3005 trait results required a complex combination of microbial genes to enhance carbon fixation during seed development and serves to
highlight the power of our advanced metabolic engineering/systems biology approach. Results we have obtained based on preliminary testing of our C3003 and C3004 traits as well as our C4000 series
traits support our plans to test and develop these traits in major row crops.
Examples of our traits and their impact on crop yield in growth chamber and greenhouse studies
C3003/C3004 traits:
23% - 65% increase in seed yield in oilseed crops (Camelina)
C3005 advanced synthetic biology trait:
128% increase in oilseed yield (Camelina)
C4001, C4003 traits:
70% increase in photosynthesis, 150% increase in biomass (switchgrass)
Yield10
has a pipeline of more than 10 novel yield traits in research and development and we expect to generate several proof points for our traits in various crops over the next two
years. We are developing our lead yield trait C3003 in canola and recently completed its second year of field tests in Canada. We anticipate that field tests will continue in 2019 as we advance the
trait towards commercial development by developing additional commercial canola lines with the trait and expanding field testing. We plan to undertake our first field testing of C3004 in our Camelina
platform in 2019 and are working to deploy and test this promising trait in canola, soybean and corn in the future. We have proven capabilities with genome editing using the CRISPR/Cas9 system and
have been granted "non-regulated" status from USDA-APHIS for single and multiple genome edited lines of Camelina designed to increase oil
content. We plan to field test these plant lines and use the data to optimize the deployment of these traits to boost oil content in canola and potentially soybean. We recently successfully edited
C3007, a novel target gene for increasing oil content, in canola and these plants are now progressing through our development pipeline. We plan to continue to progress initial development and testing
of multiple traits in wheat and rice. Our approach is to engineer rice and wheat plants with our gene regulator traits to increase photosynthesis and grain yield and use those plants as a source of
data to generate new gene targets for genome editing. Yield10 has no plans to field test or develop wheat or rice using traditional genetic engineering technologies. We anticipate that data generated
on our traits will enable us to establish revenue generating collaborations in the future for the development and commercialization of our novel yield traits in commercial crops.
We
are building a portfolio of intellectual property around our crop yield technology and traits. As of February 28, 2019, we owned or held exclusive rights to 17 pending patent
applications worldwide related to advanced technologies for increasing yield in crops. Our portfolio of patent applications includes plant science technologies we have in-licensed globally and
exclusively from the University of Massachusetts and North Carolina State University related to the yield trait gene C3003 and other
S-36
Table of Contents
advanced
technologies based on advanced metabolic engineering methods to improve carbon capture and selectively control carbon partitioning in plants. Our portfolio of patent applications also
includes advanced technologies for increasing oil content in oilseed crops that we in-licensed globally and exclusively from the University of Missouri in 2018 related to the yield trait genes C3007
and C3010.
The Unmet Need: Global Population Growth Outpacing Anticipated Global Food Supply
Yield10 is targeting a critical unmet need in agriculture based on the future disconnect between agricultural supply and the growing global
population. According to a United Nations study, the global population is expected to exceed 9.6 billion people by 2050 and therefore there is a need to increase global food production
including in grains, protein, dairy and edible oils to meet this demand. This will need to be achieved in the face of increased pressure on land and water resources in addition to increasingly
variable weather patterns. Solving this problem is a major global challenge requiring new crop innovation and technologies to fundamentally enhance crop productivity.
The Yield Gap
According to several studies described in an article published in the Public Library of Science in 2013, crop yields may no longer be increasing
in different regions of the globe, and current rates of crop yield increase based on traditional plant breeding approaches are expected to fall significantly behind the levels needed to meet the
demand for global food production. The researchers found that the top four global cropsmaize (corn), rice, wheat and soybeanare currently witnessing average yield
improvements of only between 0.9 to 1.6 percent per year, far slower than the required rates to double their production by 2050 solely from incremental yield gains. At these rates, global
production of maize, rice, wheat and soybean crops may be required to increase by about 67 percent, 42 percent, 38 percent and 55 percent, respectively, by 2050, in order
to meet the anticipated increase in demand for food production caused by population growth. For corn and soybean, the benefits of currently available biotechnology traits were already factored into
the data cited in the studies referenced above. The yield increases needed to meet the demands of the growing global population show that a significant "yield gap" exists for each of the crops
evaluated in the study.
Yield10
is focused on addressing the yield gap for major crops by utilizing modern biotechnology strategies, including metabolic engineering (synthetic biology approaches) to "build
better plants," by using our Trait Factory to optimize photosynthesis and carbon efficiency in crops to increase grain or biomass yield. Enhancement of the photosynthetic capacity of major crops is
fundamentally important to crop science and an essential first step to increase the seed and/or biomass yield of plants and, therefore, food production. We have been working in the area of increasing
photosynthetic carbon capture and crop yield technologies since 2012 and we have identified several potentially promising genes for increasing yield or improving crop performance.
Health and Wellness, Food Safety and Sustainability
At the same time, with the increasing focus on health and wellness, food safety and sustainability in developed countries, we anticipate a rise
in demand for new varieties of food and food ingredients with improved nutritional properties. Further, concerns about food safety have led to the concept of "seed to plate," with a focus on stringent
quality control along the entire value chain. If this concept takes hold with consumers, it is likely to require identity preservation from seed to harvest and involve contract farming. This concept
is currently being implemented in agricultural biotechnology, in both canola and soybean which have been modified to alter the composition of the oil produced. High oleic canola and soybean oils are
being marketed as "healthier" where the value driver is the ability to make marketing claims directly to the consumer. Consumer demand to preserve the identity of specialty ingredients is expected to
rise, and we believe that Yield10's crop yield technologies and crop gene editing targets could be useful in this emerging field. Yield10 believes that these types of small acreage
S-37
Table of Contents
specialty
crops have the potential for a broader range of future partnering opportunities along the entire value chain.
Business Strategy
Our goal is to build a successful agricultural biotechnology company centered on demonstrating and capturing the value of our yield traits in
major food and feed crops. We have identified and are evaluating novel yield trait genes in our Trait Factory to help address the growing global yield gap in food and feed crops. As the primary driver
of financial returns each season, crop yield is the key decision variable for farmers in making seed buying decisions, and as a result is critical to the seed industry. Improvements in yield to the
levels targeted by Yield10, for example 10-20 percent increases, would be expected to generate significant value to the seed and crop industry. For example, Yield10 is targeting an
approximately 10-20 percent increase in canola and soybean yields, which, if successfully deployed across North American acreage, could result in annual incremental crop value of up to
$10 billion. By ultimately increasing the output of major food and feed crops and potentially reducing strains on scarce natural resources, we believe that Yield10's technologies will also
contribute to addressing global food security.
Recognizing
the highly concentrated nature of the seed business, the prevalence of cross-licensing of traits, and the need to stack multiple crop traits in elite seed germplasm to
provide the best options for farmers for large acreage commodity crops, Yield10 does not expect to become an integrated seed company. The current major seed companies dominate the biotech crop space
based largely on the early technology innovations that resulted in herbicide and pest resistance traits and have a very successful operating track record in the sector. Yield10 plans to develop yield
traits that enable farmers to increase their revenue and secure a share of that added value. To do this Yield10 plans to license our trait innovations to the major agricultural companies so that they
can be deployed in elite seed varieties. The incremental value sharing model is well established in the seed sector. Therefore, rather than replicating the downstream elements of these operations and
developing our own regulatory, crop breeding or seed production capabilities, we intend to seek industry collaborations and partnerships to leverage these existing core competencies of the current
seed industry. Yield10 will focus on its core competency, which is breakthrough science and technology innovation applied to the seed sector.
The
type of collaborations and partnerships we seek will depend on the specific anticipated path to market for the crop. For large acreage biotech crops including canola, soybean and
corn, we plan to develop proof points for our yield traits as a basis for licensing to major agricultural companies with a
focus on capturing downstream value. By developing gene traits that enable the farmer to increase revenue. Yield10 believes that it can secure a share of that increased revenue in much the same way
Uber generates revenue by enabling private car owners to operate in the taxi business. According to industry estimates, the timeline from discovery to full commercialization of a biotech trait in a
commodity crop can be up to 13 years at a cost of up to $130 million. Our C3003 yield trait is an algal gene, and we believe that it will be regulated as a biotech trait. As we are in
the construct optimization/event selection stage, we believe that we are approximately half way along the anticipated development timeline for C3003. Our strategy is to make it attractive for major
agricultural companies to invest financial and technical resources to introduce our traits into their elite germplasm for event selection and evaluation. In 2017, we signed a non-exclusive research
license with the Monsanto division of Bayer Crop Science (formerly Monsanto Company), a division of Bayer AG ("Bayer"), to test C3003 and C3004 in soybean. Similarly, in 2018 we signed a non-exclusive
research license with Forage Genetics International LLC, a division of Land O'Lakes, Inc. ("Forage Genetics"), to test a series of traits in forage sorghum. We may sign additional
non-exclusive research licenses on a crop by crop basis in the future, allowing the licensees to invest their resources in progressing the trait. Our focus is on securing a share of the upside value
of our traits when we finalize the economic terms of license agreements at the point where the value of the trait is well understood.
S-38
Table of Contents
For
small acreage specialty oil crops, we believe we can leverage our unique skill set to add value to the development of specialty oils focused on nutrition and aquaculture feed. These
crops can cost more to produce because of the unique supply chain needed when identity preservation from seed planting to final product is desired. In this area, there may be opportunities for
establishing partnerships and license agreements with consumer facing companies in the food and feed sector. Our high oil content traits developed through genome editing may have shorter timelines to
commercialization (3-6 years) if deployed in specialty oil crops. We are at an early stage of developing our strategy in this area but believe it may have considerable potential for Yield10.
Yield10
plans to build on its core strengths bringing new technology approaches to exploit an innovation gap in the agricultural biotechnology space that exists due to reduced investment
in basic research and development resulting from the ongoing consolidation and restructuring in the agricultural sector. Yield10's mission is to translate and optimize our step-change yield trait
innovations in six major food and feed crops and demonstrate their economic value to farmers and seed companies. We intend to create high-value assets in the form of proprietary yield trait gene
technologies and to de-risk these assets by progressing them along the path to commercial development with increasingly larger scale field tests and multi-site field trials in major crops. We are
currently deploying our yield trait genes into canola, soybean, rice, wheat and corn, by designing and progressing genetically engineered events that we believe to be suitable for the applicable
regulatory approval processes and which can be readily bred into the industry's elite crop lines by plant breeding. We expect the customers for Yield10's innovations to be the large and mid-size
agricultural companies that would either license or acquire rights to Yield10's yield trait genes and incorporate them into their proprietary commercial crop lines for subsequent commercialization.
We are focused on identifying and developing technologies that will enable us to produce step-change
improvements to crop yield.
Yield10 is targeting a critical unmet need in agriculture based on the anticipated disconnect between agricultural supply and the growing global
population. Food production must be increased by over 70 percent in the next 35 years to feed the growing global population, which is expected to increase from 7 billion to more
than 9.6 billion by 2050. Global climate change is also resulting in regional shifts to historical growing conditions. Given the projection for population growth, recent studies show a "yield
gap" for major food and feed crops that cannot be addressed by incremental improvements to yield brought about by traditional plant breeding and existing biotech traits. Current biotech traits
deployed in crops by the seed industry are based primarily on using microbial-sourced genes to impart yield protection through herbicide, pest, disease and even drought resistance, whereas Yield10 is
focused on increasing fundamental crop yield through enhanced carbon capture and utilization.
Yield10
is focused on "building better plants" using the Trait Factory to optimize photosynthesis and carbon efficiency in crops to increase grain or biomass yield targeting step-change
increases in the range of 10-20 percent in crop yield.
Our History
We have a significant track record and expertise in the metabolic engineering of microbes and have made
significant progress translating this capability to plants.
As part of the legacy biopolymers and biobased chemicals business of our predecessor company Metabolix, our research team developed an advanced
metabolic engineering capability to alter key biochemical pathways and redirect the flow of carbon metabolic intermediates in microbes resulting in the production of the biomaterial
polyhydroxyalkanoate, or PHA, at a level of more than 80 to 90 percent by weight of microbial cells that normally did not produce any PHA. In 1997, Metabolix
S-39
Table of Contents
initiated
a crop science research program to produce renewable bioplastics and chemicals from agricultural crops. Historically, these efforts were focused on producing PHB, a microbial carbon storage
biopolymer, in high concentration in the seeds of oilseed crops or in the leaves of biomass crops such as switchgrass.
As
we made progress on producing PHB in plants, we learned that basic carbon supply from photosynthesis was a bottleneck. To address this carbon shortfall, in 2012 we began developing
new metabolic engineering and bioinformatics approaches to enhancing basic crop photosynthetic carbon capture. Discoveries from these two approaches became the foundation of our GRAIN crop trait
discovery platform. We also began building intellectual property on novel yield trait gene technologies discovered in these programs and realized that our experience in re-engineering the flow of
carbon in microorganisms could be applied to building better plants. Photosynthesis is the most important biological process responsible for global food production. Improving the photosynthetic
capacity of plants is an essential first step to increase seed and/or biomass yield and, therefore, food production. We must develop plants which on a per acre basis during the growing season fix more
carbon and ultimately target that additional fixed carbon to seed or biomass.
Our Approach
We have assembled a pipeline of crop yield traits for development that are applicable to major
commercial crops.
Our unique approach to crop yield trait discovery utilizing our GRAIN platform, which integrates advanced metabolic engineering concepts to
address critical bottlenecks in carbon metabolism, has enabled us to discover a series of yield genes with potential use for producing step-change improvements in crop yield. Through our research and
early development efforts we have identified and begun characterizing our C3000 and C4000 series of traits. To initially characterize the potential yield trait genes, we test many of our yield trait
candidates using our Camelina or switchgrass platforms. As a yield trait innovator, our objective is to identify novel yield traits that act at a fundamental level in crop metabolism to provide the
potential for broad deployment of our traits across multiple crop types. Following our early work with these trait genes, we focus on deploying the
traits for evaluation across a range of crops including canola, soybean, corn, rice, wheat, each of which are crops of high commercial interest in North America. For crops where Yield10 is not
directly conducting research and development activities, we are open to licensing arrangements like the agreement we have in place with Forage Genetics for evaluation of five of our traits in forage
sorghum. Our goal is to generate greenhouse and field test data that will support commercial development of the trait and enable us to form collaborations or enter into license agreements with major
agricultural companies in order to incorporate our novel yield traits into their seed products. We believe that successfully launching new, high yielding seed to the market would result in higher
economic benefit to growers, seed companies, and Yield10.
We believe our business model will allow us to capture value for our discoveries and provide a path to
commercialization for important new yield traits for major crops.
Yield10 is working to advance our own developments as well as form business alliances to progress our traits through development, launch and
commercialization. Our goal is to capture an attractive share of the added economic value resulting from the deployment of our trait genes and technologies in key crops. We are currently working on
the development and deployment of our trait genes into several crops, an approach facilitated by the expiration of much of the early foundation patents in the agricultural biotechnology sector, and
one of our key objectives in that regard is to demonstrate commercial proof points through field tests and multi-site field trials. Yield10 opportunities and business models for value capture
including partnering or licensing with established agricultural industry companies. Key to our strategy is to retain, where practical, control of timelines and maximize, where possible, the
opportunity for value creation and optionality around future value realization strategies. In 2019, we are focused on identifying and signing additional research and development collaborations to
accelerate commercial development of our promising yield traits.
S-40
Table of Contents
We have signed non-exclusive research licenses for our novel yield traits with agriculture industry
leaders.
In 2017 we granted a non-exclusive global research license to the Monsanto division of Bayer Crop Science to evaluate our novel yield traits
C3003 and C3004 in soybean. Monsanto is a leader in the development and commercialization of biotech-derived soybean seed. In 2018, we granted a research license with a similar structure to Forage
Genetics, a leader in forage crops used for animal feed, to evaluate five traits in forage sorghum.
These
licenses are intended to provide market leaders in their respective crops with an attractive opportunity to test our traits and develop data at their own expense. At any time
during the term, they have the option to negotiate a broader agreement with us. At the same time, we have the right to sign licenses with other companies for these traits. This structure allows us the
flexibility to expand the testing of our traits with investment by other companies and to potentially enter negotiations for development and commercial licenses when the value of our traits is better
understood. In 2019, we
plan to explore additional opportunities to expand the testing of our traits through similar arrangements with other companies.
We are focused on developing yield traits for use in canola, soybean and corn, major North American
commercial crops.
Canola, soybean and corn represent the largest North American commercial crops with approximately 195 million combined acres. The
majority of the crop acreage incorporates biotechnology traits for herbicide or pesticide resistance that are deployed in elite germplasm controlled by seed companies. Recent advances in crop yield
have been based primarily on the use of biotechnology traits to protect yield by managing and/or allowing the plants to outcompete weeds. We are developing our traits to complement the biotechnology
traits currently utilized in these major crops by focusing on our traits to increase the inherent seed yield of the plant. In 2018, we obtained promising field test results for second generation C3003
in canola and advanced work with the trait into the early commercial development phase where we will make and test additional elite events of the C3003 trait. Our development work with C3003 and other
traits in the C3000 and C4000 series, some of which may be accessible using genome editing, is progressing in canola, soybean and corn. Canola is important as an edible oil for human consumption,
while soybean and corn are grown in North America mainly as animal feed.
We are testing our yield traits in wheat and rice, important staple crops for human consumption.
Wheat and rice are important staple crops used primarily for human consumption. It is estimated that more than 900 million acres of rice
and wheat are grown annually worldwide. Advances in seed yield for rice and wheat have occurred primarily through plant breeding for rice and hybridization and breeding for wheat. Genetically
modified, or GM, traits based on biotechnology have not been broadly introduced into these crops. Seed sales to growers for these crops typically rely on regional, local organizations to distribute
and sell seed and the market is extremely fragmented. To enable production of wheat and rice to meet future global demand, increases in yields will be required. The application of genome editing to
precisely incorporate yield traits into these crops may represent a way to increase yield and establish consumer acceptance of the technology and seed product. We recently published promising results
with members of our C4000 series of traits showing that deployment of these traits in switchgrass as a model crop resulted in significant increases in photosynthesis and biomass yield. We are testing
C4000 series traits that may be accessible through genome editing as a strategy to produce increases in seed yield in wheat and rice.
S-41
Table of Contents
Our GRAIN platform provides us with a unique approach for discovering novel yield trait genes.
We have integrated advanced metabolic flux modeling capabilities with transcriptome network analysis to form the foundation of our "GRAIN"
(
G
ene
R
anking
A
rtificial
I
ntelligence
N
etwork)
bioinformatics gene discovery platform. This discovery platform is the core of our Trait Factory. GRAIN takes both a bottom up approach based on the flow of electrons and carbon through essential
metabolic processes and a top down approach based on transcriptome network analysis. In the case of crops, the levers to increase seed yield are the metabolic infrastructure through which carbon flows
from photosynthesis to seed production and the gene regulators or transcription factors which control the various pathways. Over the last 20 years, the agricultural sector has generated vast
numbers of data points. During this same period, there have been very few new crop traits produced. The purpose of GRAIN is to develop a system which can convert data sets into actionable gene targets
to improve crop productivity. We have employed this approach to discover a range of potential yield trait genes.
We have identified promising potential yield targets which can be modified using genome editing. We
believe that such targets may be subject to less regulatory complexity in the U.S. during development and along the path to commercialization and may provide opportunities for licensing.
Genome editing techniques, including CRISPR, which involve making small targeted changes to the DNA of a target organism, have been of interest
to the agricultural biotechnology industry because this approach is believed to have the potential to significantly reduce development costs and regulatory timelines for crop trait development and
market introduction. In 2018, we signed a non-exclusive research license for CRISPR/Cas-9 technology with the Broad Institute of MIT and Harvard and Pioneer, part of the Corteva Agriscience
Agriculture Division of DowDuPont Inc.
Announcements
from USDA-APHIS, including those made in 2018, indicate that the regulatory path for genome edited plants lines that do not contain any remaining foreign DNA
(i.e. DNA sequences not from the plant being engineered) from the procedure used to edit the plant may not be subject to certain USDA-APHIS crop regulations in the U.S. See "Regulatory
Requirements" section below. One of the potential implications of this regulatory approach in which edited plants are subject to fewer
regulatory controls than traditional genetically modified plants may be to significantly decrease the timeline and cost of developing and bringing new traits to commercialization in the U.S. The
challenge now for the agricultural biotechnology sector will be to identify gene targets for genome editing that can generate economic value. This has opened the potential for Yield10 to exploit a
second tier of novel traits addressable with genome editing.
Yield10
has identified, from its internal discovery platforms and in-licensed through academic collaborations, gene targets suitable for deployment in crops through genome editing. In
the course of our work, we have introduced genes coding for new metabolic pathway enzymes or global transcription factors producing high yield lines with higher rates of photosynthetic carbon
fixation. Analysis of these high yielding plants has allowed identification of novel genome editing targets.
We
have deployed genome editing technology based on our C3008a trait in Camelina as well as our triple edited-line based on our C3008a, C3008b and C3009 traits in Camelina, which were
deemed non-regulated by USDA-APHIS in 2017 and 2018, respectively. Plants that are not regulated by USDA-APHIS may still be subject to regulation by the U.S. Food and Drug Administration (FDA) or the
U.S. Environmental Protection Agency (EPA) depending on certain characteristics and the plant's intended uses. We expect to increase our level of effort in this area in other crops, particularly
canola, over the course of 2019 and are implementing a plan to deploy our genome edited traits into soybean, rice and corn. We have successfully edited the C4004 gene in rice and are currently
developing performance data on the edited rice lines. We believe our genome editing targets as well as the improved crops we could develop using this approach may enable us to form collaborations or
enter
S-42
Table of Contents
into
license arrangements with a broader set of potential commercial partners in order to bring these genome edited traits forward into development in the near-term.
We
plan to use any revenues we generate from license agreements around our genome editing targets to support our ongoing research and development efforts to enable step-changes in crop
yield.
We developed the Camelina Fast Field Test model system to characterize, evaluate and de-risk novel
yield trait genes.
One of the challenges the agricultural industry has faced over the years is translating early crop science discovery into value generating
traits. In part this is because results from greenhouse studies in model plants have not translated well into field results in major crops. This is also in part because the plants used for discovery
research have not been suitable for studies in the field and are not representative of the advanced seed or crop varieties (germplasm) used in commercial production, which have been subject to decades
of intensive breeding to improve yield. Translating success when introducing non-plant genes into major crops has been very successful and the current biotechnology seed sector, which accounted for
457 million acres of crops worldwide in 2016, is based on using microbial genes in plants. The long timelines to progress early discoveries successfully into major crops and generate field data
adds to the challenge.
For
these reasons, Yield10 has put in place a process we call "Fast Field Testing" based on our Camelina oilseed platform. We believe that over time this will become a valuable tool in
the trait discovery to translation effort. Camelina is an industrial oilseed well-suited to field trials, and we believe it is a good model for identifying promising new yield traits for canola and
soybean. It is also very fast to modify and develop genetically stable seed for field planting. Ideally, we hope to be able to progress from trait identification to field planting in about
12 months. Our process is to identify trait genes of interest in Camelina and immediately begin putting them into canola and soybean, where the timelines to transform plants and generate field
data are much longer. We can then progress the Fast Field Testing in Camelina and generate field data and a complete molecular analysis of plant material from the field. These results and data can
then be used to inform how we progress the previously transformed canola and soybean.
We
believe that this will provide the opportunity for go-no-go decisions in some cases and in other cases allow us to update our approach based on the results of our Fast Field Testing
in Camelina. For example, with the longer development timelines needed to get canola and soybean ready for field testing, we expect to initiate additional modifications earlier in these crops, having
identified the potential to further improve the outcome based on the results of our Fast Field Testing in Camelina.
In
our 2017 and 2018 field test programs, we tested both first and second generation versions of C3003 in Camelina and in canola, an important North American oilseed crop. Overall, our
findings in canola for first generation and second generation C3003 mirror closely our observations of the effect of the trait in Camelina, underscoring the value of Camelina as a predictive system
for understanding the performance of our novel yield traits in development.
We
are using our Camelina Field Test model system to de-risk and accelerate the demonstration of the trait gene value in major crops. As a particular trait is de-risked there is the
potential for inflection points in value. If we can establish a strong correlation between the results from the Camelina system
with future field data first from canola and then with soybean, then we may be able to leverage this to enter partnership and licensing discussions earlier while preserving the opportunity to capture
a meaningful share of the upside value.
S-43
Table of Contents
Our Oilseed Operation based in Canada provides us with unique capabilities in the development of
oilseed crops.
We established our oilseeds subsidiary in Canada in 2010 to produce robust oilseed germplasm with engineered value-added traits for commercial
crop production in western North America. Our oilseeds team is based in Saskatoon, Saskatchewan, with laboratories in the National Research Council (NRC)Saskatoon facility and commercial
greenhouse and laboratory facilities at nearby Innovation Place. Our team has developed and implemented technology to improve and accelerate engineering and trait evaluation of Camelina and canola.
The team also plays a key role in designing and conducting greenhouse and field tests required to effectively evaluate novel yield traits.
We are establishing a network of commercial and science advisors to provide us with insight and
opportunities to advance our industry alliances, crop research and development, and key intellectual property.
Yield10 named Sherri Brown, Ph.D., a former Monsanto Company executive, as a special commercial and technical advisor to the Company in 2018.
Dr. Brown, who is currently a Managing Director at The Yield Lab, served from 1999-2017 in leadership positions at Monsanto, most involving the development and commercialization of new traits
for corn and oilseed crops including soybean and canola.
Yield10
has pursued academic collaborations that have led to the discovery of novel yield trait genes. Researcher Danny Schnell, Ph.D. discovered the C3003 trait in an ARPA-e (a division
of the DOE) funded collaborative project at the University of Massachusetts in which Yield10 was a partner. In 2015, Prof. Schnell moved to Michigan State University where he is Chairperson,
Department of Plant Biology and remains a collaborator on C3003. Heike Sederoff, Ph.D., Professor, Department of Plant and Microbial Biology at North Carolina State University, developed the C3004 and
C3005 traits with ARPA-e funding which Yield10 is now progressing under a license agreement. In 2018, Yield10
announced signing a global license agreement with the University of Missouri for advanced technology to boost oil content in oilseed crops, including C3007 and C3010, which are based on the discovery
of a key regulatory mechanism controlling oil production in oilseed crops which can be used to increase oil content. Jay J. Thelen, Ph.D., Professor of Biochemistry at the University of Missouri, who
discovered this mechanism, joined Dr. Schnell and Dr. Sederoff as a member of our Scientific Advisory Board in 2018.
We plan to seek U.S. and Canadian government grants to support our research and development goals.
Yield10 has been awarded grants over the last several years supporting research on strategies to improve the efficiency of photosynthesis,
increase seed oil content, identify novel yield traits and test these novel traits in Camelina. This work is valuable because traits developed in Camelina have the potential to be developed and
deployed in other oilseed crops. For example, in 2017, we were selected as a sub-awardee on a new U.S. Department of Energy (DOE) grant led by Michigan State University that commenced during the first
quarter of 2018 to conduct research aimed at boosting oilseed yield in Camelina. We plan to continue to pursue government grants to defray research costs associated with our research and development
activities.
We are operating with a lean organizational footprint which is evaluating our novel yield traits in
greenhouse and field tests while maintaining efficient use of cash resources.
As of February 28, 2019, we had 22 full-time employees, with the majority directly involved with our research and development activities.
We believe that our organizational capabilities are aligned with our research priorities and are complemented by our use of third-party infrastructure and certain service providers. With this approach
we can leverage third-party infrastructure and capability without having to spend the time and capital needed to recreate them in-house. This is allowing us to focus our
S-44
Table of Contents
limited
resources on deploying our core strengths against our key development goals. We expect to grow our research and development operations over time commensurate with building value in our
business and advancing our traits through development while at the same time tightly managing overhead costs.
Our "GRAIN" Technology Platform
In the last decade there has been a dramatic expansion of new genetic engineering and systems biology tools: genomics data, metabolic
engineering, high-throughput analytical tools, including whole organism gene expression analysis and metabolomics, and powerful genome editing technologies. At Yield10 we plan to build value by
leveraging genome editing targets for revenue generation in the near-term while we independently work to demonstrate the economic value of our transformative genetic engineering-based yield
breakthroughs in the longer term. The recent expiration of blocking patents on early inventions in the plant genetic engineering space means that we can now be more effective in research and
development, leverage third-party service providers and independently drive key proof points in major commercial crops such as canola, soybean and corn while focusing our resources on our core
strengths. Yield10 is focused on increasing the inherent yield of major food and feed crops. Our goal is to "build better plants" which requires new approaches and innovation and, in our view, will
most likely involve gene combinations and/or multi-gene systems.
At
a fundamental level, increasing crop yield is a complex two-step carbon optimization problem. Harvested seed is mostly carbon fixed from carbon dioxide in the air by photosynthesis
with oxygen coming from water in the soil and smaller amounts of nitrogen and phosphate both of which are applied as fertilizer. To achieve increased yield, the rate at which crops can fix carbon has
to be increased. Based on our experience optimizing carbon flow in living systems, we know that increasing seed yield will likely require multiple trait genes to increase carbon fixation by
photosynthesis at the front-end and direct the increased fixed carbon to the seed.
We
have integrated advanced metabolic flux modeling capabilities with transcriptome network analysis to form the foundation of the "GRAIN" (
G
ene
R
anking
A
rtificial
I
ntelligence
N
etwork) bioinformatics gene discovery platform.
This discovery platform is the core of our Trait Factory. GRAIN takes a bottom up approach based on the flow of electrons and carbon through essential metabolic processes and a top down approach based
on transcriptome network analysis. Plant growth at its core is a series of chemical reactions and these can be modeled to determine the best ways to optimize the yield of the targeted product.
Advanced metabolic modeling based on flux-balance analysis and enzyme reaction thermodynamics and kinetics enables us to make predictions about which reaction modifications are most likely to achieve
targeted performance improvements. However, as with all modeling approaches, the tool is only useful alongside the means and the data to test it in real plants. Here, Yield10 makes use of metabolic
and transcriptome data generated from its high-photosynthesis, high-yield engineered plants as well as from academic publications and other public data to project optimal gene targets for
modifications. By integrating the transcriptome network capabilities of our technology platform, we expect to be able to identify transcription factor genes whose activity profiles can be altered to
optimize multiple steps in metabolic pathways or the flow of carbon in plant tissues of interest. In a crop like modern hybrid corn, which already produces vastly more seed than it needs to reproduce,
our initial objective is to reduce or even eliminate the activity of the transcription factors that restrict further seed production.
We
are excited about the prospects of C3003 in reducing the well-known yield losses that occur through photorespiration in C3 crops. C3 photosynthesis, the simplest type of plant
photosynthetic system, exists in most agricultural crops used for human consumption, including canola, soybean, rice wheat and potato. We know C3003 has increased the rate of photosynthetic carbon
fixation in our Camelina plants and we have been able to study these plants at the molecular level. Consistent with our initial hypothesis that downstream bottlenecks can be identified, we have found
that in high
S-45
Table of Contents
yielding
plants expressing C3003, the expression of other genes, including our C3004 trait gene is changed. We have carried out experiments to increase the activity of the C3004 trait gene in Camelina
and have shown in growth chamber studies that this results in increased plant vigor, branching and up to a 65% increase in seed yield. We believe the C3004 gene, which may be engineered into crops
using genome editing, has the potential to be used alone or be combined with the C3003 trait gene to further increase yield beyond what can be achieved with C3003 alone. We have work ongoing to
evaluate the Camelina C3004 gene in canola, soybean and corn.
In
crops having the evolutionarily advanced, more efficient C4 photosynthetic system, including corn, sugarcane and sorghum, the yield is already several-fold higher than in C3 crops. In
this case, the hurdle to accomplish step-change increases in seed yield is higher as these crops are already more metabolically efficient. We validated our approach by verifying with experimental
results the positive yield impact of three gene targets we identified computationally, which we believe to be an exceptional hit rate. These three yield genes, C4001, C4002 and C4003, significantly
increased photosynthetic carbon capture and biomass production in switchgrass, an already high biomass yielding C4 crop. In this case our early experiments have been successful in demonstrating the
potential to increase the rate of carbon fixation even in a high yielding C4 crop.
Plant
scientists now have powerful genome editing tools, such as the CRISPR/Cas9 system, that enable single and multi-gene changes to be made in major crops; the challenge is knowing
what combinations of genes to edit. We believe Yield10 is in a unique position to expand our learning and discover additional gene targets, or genes that need to be modulated, to optimize the flow of
carbon to seed in these plants, and we have made considerable progress on this front.
Molecular
analysis of high yielding plants expressing the global transcription factors has allowed the identification of 71 downstream transcription factors that are differentially
expressed in the high yielding lines and are themselves targets for genetic manipulation. The expression of some of these genes is down regulated in the high yielding plants making them potentially
promising targets for genome editing through well-known approaches such as CRISPR. We began by validating the predictive impact of three of these trait gene targets in switchgrass and confirmed their
function and recently completed the genome editing of the first of these, C4004 in rice. We know the industry has struggled to deploy transcription factors using traditional biotech approaches to
improve crops particularly in
hybrid corn. However, we are optimistic that we will be more successful introducing our global regulator genes using genome editing and believe that simple gene deletions to eliminate their function,
will be significantly easier to implement and translate across crop varieties.
We
believe our integrated GRAIN platform can be used to successfully identify new targets for improving crop yield and are working to leverage the platform in the near-term to secure
research and development funding from industry partners.
Fast Field Testing System in Camelina
One of the challenges the agricultural industry has faced over the years is translating early crop science discoveries into value generating
traits. This is in part because most of the plants used for discovery research have not been suitable for studies in the field. In addition, the plant systems used for discovery are not representative
of the advanced seed or germplasm used in commercial production which have been subject to decades of intensive breeding to improve yield. The long timelines to progress early discoveries successfully
into major crops and generate field data adds to the challenge.
In
2010, we established a research and development operation in Saskatoon, Canada staffed with leading oilseed researchers. Our team established a model for testing novel trait genes
called the "Fast Field Testing" system based on our Camelina oilseed platform. We believe that this system has become a valuable tool for our yield trait discovery and translation effort. Camelina is
an industrial oilseed with reasonable field performance providing a robust model for canola and soybean and it is well suited to
S-46
Table of Contents
multi-site
field tests and larger scale trials. Camelina is a plant that can be readily genetically modified and bred through the efforts of our skilled staff to deliver genetically stable seed
sufficient for planting in field tests. We have shown that we can go from the identification of a potential yield trait gene or combinations of genes to field planting in about 12 months. In
our Fast Field Tests, we typically collect and analyze a broad set of data on our transgenic or genome edited plants including parameters such as stand establishment, flowering, maturity, seed weight,
seed size, oil content and oil composition. We also perform molecular analysis on plants of interest. We are using our Camelina Fast Field Test system to identify and screen trait genes of interest
while deploying them in parallel into crops of commercial interest including canola, soybean, rice, corn and wheat where the timelines to obtain stable plant lines and field data are longer.
Traits in Development
Yield10 Bioscience has ownership or licensed rights to several crop trait genes and our lead yield trait gene C3003 is currently well-positioned
in terms of translation and demonstration in key crops. Yield10 has exclusive rights through ownership or licensing of patent applications, or is preparing patent applications, covering the trait
genes listed in the accompanying table.
We
identified the C3000 series of novel yield traits based on establishing new metabolic pathways in crops. We have tested our lead yield trait gene C3003 in Camelina in both greenhouse
and field tests and have previously reported results from these studies. We are moving this promising trait forward in additional crops including canola, soybean, corn, sorghum and rice. Our other
C3000 series traits may be accessible through genome editing and are being tested in various target crops as well.
We
have also identified the C4000 series of novel yield traits and gene editing targets addressing increases in seed yield and biomass. We have shown that our C4000 series traits, which
comprise global regulatory genes discovered through our GRAIN technology platform, may have the potential to significantly enhance photosynthesis and carbon capture in key crops. We are moving members
of the C4000 series of traits forward in several crops including wheat, rice, corn and forage sorghum. We are also progressing the C4001 trait gene in rice using our internal resources and we expect
to report initial rice data once greenhouse tests have been completed and analyzed.
Novel Yield Trait Gene C3003
C3003 represents the lead novel yield trait gene in our trait pipeline. C3003 is a scientific discovery made in one of our academic
collaborations funded by ARPA-e, a division of the Department of Energy. Our academic collaborator is continuing work to characterize C3003 and some of this work is funded by a DOE grant under which
Yield10 is a sub-awardee conducting research supported by the grant.
C3003
appears to be a unique gene that impacts photorespiration, a biochemical pathway in C3 plants that is responsible for significant losses in yield. Yield10 is progressing the
introduction of the C3003 trait gene as well as improvements to the C3003 trait in Camelina, canola, soybean, corn and rice. During 2019 we plan to conduct additional greenhouse and field testing to
continue generating yield and agronomic data on C3003 in a variety of important crops.
We have extensively utilized our Camelina Fast Field Testing Platform to evaluate the mechanism and effect of C3003 in crops. Over the past
three growing seasons, 2016-2018, we have produced field-grown seed and field tested numerous stable Camelina seed lines containing first generation C3003, second generation C3003 and certain
prototypes of traits related to C3003. Through this work, we have collected important molecular, agronomic and seed yield data that has enabled us to characterize these traits as well as understand
important differences in the effects they produce in field-grown plants.
S-47
Table of Contents
Our
greenhouse and field work with C3003 in Camelina have allowed us to capture data on the performance of the trait. The results from our field tests show that first generation C3003
produces significant improvements in seed yield although the individual seed weight in these lines is decreased as compared to controls, likely due to a change in carbon partitioning in the plant.
Field test results for second generation C3003 (seed specific expression of the trait), show improvements in seed yield, harvest index and overall agronomic performance, while also maintaining typical
seed size as compared to control plants. There were no significant changes to oil content or oil composition with either version of the trait as compared to control plants. In our 2019 field tests, we
saw some indications of drought resistance with C3003, an observation we plan to follow up on in subsequent field tests of this trait.
Underscoring
the value of our Camelina Platform in the evaluation of C3003, our observations around the increases in seed yield along with differences in seed weight have been observed
in some of our recent studies with canola and soybean lines. Based on encouraging data obtained in Camelina with first and second generation C3003, we are continuing to progress the evaluation of the
C3003 yield trait gene in parallel in various commercial crops including canola, soybean, corn and rice, where we believe step-change increases in seed yield could improve the prospects for global
food security and create considerable economic value.
Canola is an important North American oilseed crop harvested for its oil. We are targeting step-changes of 10-20% in the evaluation and
development of novel traits to increase seed yield in canola. In our field tests of canola in 2018, we achieved seed yield improvements in some events at the low end of this range (11%), and based on
these results, we will progress C3003 into the preliminary commercial development phase in canola in 2019. The key activities to be completed during this phase include development of commercial
quality events in elite canola germplasm, execution of multi-site, multi-year field studies and development of regulatory data as appropriate.
In
2018, we evaluated our second generation C3003 yield trait in canola. In these field tests, we monitored key agronomic and growth parameters of the plants throughout the field test
and collected yield data including total weight of harvested seed, individual seed weight and oil content in our transformed plants as compared to control plants. The best second generation C3003
canola lines showed an increase in seed yield of 11 percent as compared to control plants, a statistically significant outcome. In second generation C3003 canola plants, the weight of an
individual seed (measured using 1,000 seeds) was similar to control plants, an expected outcome using the second generation version of the C3003 trait.
In
2019, we plan to conduct additional field tests in Canada with second generation C3003 in canola, pending permitting and other related logistical activities.
The
results we obtained in canola were similar to results obtained in prior studies with Camelina, illustrating that our Fast Field Testing system in Camelina is a valuable tool for
effectively screening novel yield trait genes and dynamically adapting our approach to trait development as we work to translate these improvements into commercially important crops.
Yield10 has limited capabilities related to engineering soybean. However, because soybean is the leading North American oilseed crop, we
initiated deployment of both first and second generation C3003 into soybean in 2016 through an academic collaborator. We recognize that the scale of this program is limited and that it will serve
mainly to generate research data. Yield10 is currently exploring additional third-party options for conducting soybean transformations to increase the scope of our internal program. In 2017 we
generated early greenhouse data and in 2018 we grew C3003 soybean
S-48
Table of Contents
plants
at sites in Canada to produce field-grown seed. We expect that additional development work including the generation of more C3003 lines will continue in soybean with our academic collaborator
in 2019.
Preliminary
observations based on a small number of events from our greenhouse studies suggest that results for C3003 obtained in Camelina and canola are translating into soybean. First
generation C3003 produced seeds with lower individual seed weight while typical individual seed weight was observed with second generation C3003 in soybean. Further, our greenhouse results show that
there is an increase in branching in the plants for some of the events tested. This is significant because more branching provides more sites on the soybean plant for seed pods to develop which can be
associated with obtaining higher yielding plants.
In
December 2017, we granted a non-exclusive research license to the Monsanto division of Bayer Crop Science to evaluate our novel C3003 and C3004 yield traits in soybean. Under the
license, Monsanto is working with C3003 in its soybean program as a strategy to improve seed yield. We anticipate that Monsanto will generate field test data with C3003 pursuant to the research
license.
Corn is the highest value commercial row crop grown in the United States. We initiated an early development program in corn in late 2018 with
the objective of evaluating novel seed yield and drought tolerance traits in this crop. Under this program, novel traits discovered by Yield10 are being deployed in corn by a third-party agriculture
company with proven expertise introducing new traits into corn. The yield traits included in the corn development program are C3003, C3004, and C3011, as well as the transcription factors C4001,
C4002, and C4003. This aspect of the development activity is expected to be completed in early 2020. We plan to engage an additional third party to conduct field testing of the novel traits in corn to
evaluate the impact on seed yield.
Novel Yield Trait Gene C3004
We studied the expression of C3003 using information from our Camelina and GRAIN Platforms and, among the discoveries we made, we found that the
plant gene C3004 is
overexpressed in Camelina plants engineered to express C3003. While the role of C3004 is currently not well understood and we continue to investigate the role of the gene in plant metabolism, we
believe that it may have an effect on carbon partitioning in plants. We also believe that, under certain conditions, this effect may potentially be additive with the activity of C3003. Our ongoing
research will continue to investigate the activity of C3004 alone and in combination with C3003 to produce increases in seed yield in crops.
We
began our investigation of C3004 in Camelina. We constructed C3004 to increase expression of the gene in Camelina. Stable plant lines were developed and we performed yield studies in
a controlled environment growth chamber. In these studies, increased expression of C3004 in Camelina results in a significant increase in plant growth and vigor, increased seed yield, and in some
cases increased individual seed weight. In six Camelina plant lines containing C3004, average seed yield (grams/plant) increased by 26 to 65 percent over control plants. We also measured
tertiary branching in a subset of plants and found that the increase in seed yield seen in the plants was also accompanied by an increase in tertiary branching. While early stage and based on a small
sample of events, the data suggest that C3004 may hold significant promise as a novel yield trait.
During
2019 we plan to conduct greenhouse and field tests to continue to generate additional seed yield and agronomic data on C3004 in important crops. Based on the initial results
obtained using our Camelina platform we plan to expand testing of C3004 in 2019. We also plan to test C3004 in combination with C3003 in Camelina to investigate whether the traits could be additive or
synergistic. We have also fast-tracked the deployment of C3004 into canola and corn where we will engineer lines and begin testing to determine if this trait produces improvements in seed yield in
other crops. The
S-49
Table of Contents
version
of the C3004 trait we tested in our Camelina studies was genetically engineered using recombinant DNA; however, we believe that it may be possible to develop versions of the trait that are
genome edited, potentially enabling a path to non-regulated status for C3004 plants under current USDA-APHIS rules.
Oil Enhancing Traits
With increasing focus on health and wellness, food safety and sustainability in developed countries, we anticipate a rise in demand for new
varieties of food and food ingredients with improved nutritional properties. This concept is currently being implemented in agricultural biotechnology, in both canola and soybean that have been
modified to alter the composition of the oil
produced. High oleic canola and soybean oils are being marketed as "healthier" than other oils; we believe the ability to make similar marketing claims directly to the consumer will be a feature of
newly developed products in this space. We expect consumer demand for identity preserved specialty ingredients will rise, and we believe that Yield10's crop yield technologies and crop gene editing
targets could be useful in this emerging field.
Based
on our study of metabolic pathways in oilseed crops, we believe there is an opportunity to apply genome editing to significantly increase oil content in oilseed crops including
canola, soybean, sunflower and safflower. In cases where the edible oil is the primary economic value driver for the crop or in cases such as high oleic soybean where the crop has been modified to
improve the fatty acid profile, increasing oil content is a valuable trait. This potential also extends to Camelina where recent clinical studies have shown that Camelina sativa oil, but not fatty
fish or lean fish, improved serum lipid profile in subjects with impaired glucose metabolism. This randomized, controlled study was recently published in the journal Molecular Nutrition and Food
Research, U. Schwab, et. al. (2018). Improving the oil content and yield of Camelina seed could make this an attractive crop for producing nutritional oils. In 2017 and 2018, we received confirmation
from USDA-APHIS's Biotechnology Regulatory Services (BRS) that two types of our genome-edited Camelina plant lines developed using CRISPR/Cas-9 genome editing technology for increased oil content
would be exempt from 7 CFR Part 340 regulations, clearing the way for field testing in the U.S. We developed these genome edited Camelina lines together with our wholly owned Canadian
subsidiary, Metabolix Oilseeds, Inc. The first type is based on the inactivation of an enzyme expected to increase seed oil content in Camelina, a trait we have designated as C3008a. The other
type is based on the inactivation of three enzymes to enhance the production of oil and is designated as our triple edit, or C3008a, C3008b and C3009 trait containing line. We are currently evaluating
combinations of the genome editing targets to optimize oil content in Camelina and canola, and plan to do so in soybean with the objective of having our plant lines designated as non-regulated by
USDA-APHIS.
In
2018 we signed an exclusive global license agreement with the University of Missouri for advanced oilseed technology including C3007 and C3010, which are promising targets involved in
oil biosynthesis. We are working to deploy C3007 in oilseed crops with the objective of increasing oil content through methods that could result in a plant line with non-regulated status with
USDA-APHIS. We have produced a genome edited version of C3007 in canola and further development and evaluation of the trait is underway.
C4000 Series Traits
We have used our GRAIN platform to study global transcription factors and identify novel yield traits in the C4000 series. These traits may be
powerful regulators of plant growth and represent a potentially valuable resource for identifying genome editing traits for crops. We have recently shown that traits from the C4000 series can
significantly increase photosynthetic efficiency as well as aboveground and below ground biomass production in our switchgrass plants.
S-50
Table of Contents
In 2018 in the journal
Plant Science
, we reported that our novel C4001 and C4003 traits have been shown to
significantly increase plant biomass yield in switchgrass. Switchgrass plants expressing C4001 resulted in a total increase in biomass of 75-100 percent in leaves and stems as compared to
controls. Expression of C4003 in switchgrass resulted in a total increase in biomass of 100-160 percent in leaves and stems as compared to control plants. Increasing biomass yield is important
for forage crops such as sorghum, silage corn, and alfalfa.
We
are testing certain of our C4000 series of traits to increase seed yield in wheat, rice, and corn, as well as to increase biomass in forage sorghum. Using internal resources, we have
been able to progress the C4001 trait gene in rice and we expect to evaluate initial rice data as soon as it is available. In a collaboration with the National Research Council of Canada we have
introduced the C4001 and C4003 traits into wheat and expect to generate performance data from wheat lines in the coming year. With rice and wheat, we do not plan to evaluate traditional biotechnology
traits in the field or develop them as products but to use them as a source of new genome editing trait leads. We have completed the editing of the first of the C4004 trait in rice and are currently
growing these plants in the greenhouse. Forage Genetics began work with certain of our C4000 series traits through a research license signed in 2018 to assess the potential of our traits to increase
biomass in forage sorghum. We also began early development work in late 2018 to assess certain C3000 and C4000 series traits in corn through a third-party agricultural company. We expect the first
phase of this work to be completed by early 2020.
We
expect evaluation of C4000 series traits in these target crops will continue to advance in 2019. Traits in this series and the proof points we expect to generate may provide us with
an opportunity to selectively partner with others for the development of these traits in major commercial food, feed, and forage crops.
Target Crops
Our research and early development work in our C3000 and C4000 series traits suggests that our technology may be applicable to a wide range of
crops harvested for food and animal feed uses. We believe that if novel yield traits could be successfully developed and commercialized in any of these crops, farmers would be able to improve the
productivity of their land to meet rising demand for food and feed, thereby creating significant economic value.
In
considering our strategy to develop our technologies we segregate our trait genes into two classes: trait genes based on using non-plant genes to add new functionality to crops which
are by definition GM due to the insertion of foreign recombinant DNA; and trait genes that we may be able to deploy under non-regulated status from USDA-APHIS, which encompass our trait genes that are
based exclusively on plant genes. We see the opportunity to deploy our trait technology in a broader set of food and feed crops many of which are not currently GM. We plan to pursue our GM trait genes
in crops which are currently GM and where the economics can sustain the cost and timelines for deregulation. We are aware of the current USDA-APHIS GM crop regulation review and the reality that GM
likely will remain an issue for some NGO groups regardless of the science. For our GM yield trait genes, we are targeting seed yield increases on the order of 10 to 20 percent over the current
elite seed lines, increases which reflect the order of magnitude step-changes necessary to address global food security.
The
crops we are targeting for development are described below.
Camelina
or
Camelina sativa
is an oilseed crop in limited cultivation in North America and Europe. Camelina has received recent attention
as an industrial oilseed for the production of biofuels, novel industrial lipids, and oleochemicals. In addition, its meal has been identified for development as an animal feed supplement and its oil
as a fish feed supplement. Recent clinical studies have shown that Camelina sativa oil, but not fatty fish or lean fish improved serum lipid profile in subjects with
S-51
Table of Contents
impaired
glucose metabolism-a randomized controlled study published in the journal Molecular Nutrition and Food Research, U. Schwab, et. al. (2018). Improving the oil content and yield of Camelina
seed could make this an attractive crop for producing nutritional oils. While it is not currently a commercially significant crop, research suggests that efforts to improve seed yield, oil content and
fatty acid composition, and tolerance to heat stress may expand the commercial adoption and cultivation of Camelina.
Canola
or
Brassica napus
is a cultivar of rapeseed which produces a higher value edible oil favored by consumers because it has a
healthier fatty acid profile than corn or soybean oil. The canola crop was developed in Canada where it is primarily grown today with additional acreage grown in the U.S. Currently the vast majority
of the canola grown in North America contains two seed enhancement technologies, herbicide tolerance and hybrid seed. Both Roundup Ready (Monsanto, now Bayer) and Liberty-Link (Bayer) varieties of
canola are grown and were introduced to the market in 1990s. Approximately 24.7 million acres were planted in Canada and the U.S. in the 2018 growing season. The Canola Council of Canada has
set yield goals of 52 bushels/acre for 26 million metric tons of production to meet global market demand for canola by 2025. Yield10 is targeting a 10-20 percent or greater increase in
canola seed yield. With a 2017 harvest of 939 million bushels of canola (Statistics Canada) and assuming an average farm gate price of $10.00 per bushel, a 20 percent yield increase in
canola represents a total potential added annual value of $1.9 billion that could be shared among the companies in the canola value chain.
Soybean
or
Glycine max
is an oilseed crop used for food, food ingredients, food additives and animal feed. The soybean can be harvested
for oil used in food and industrial applications, and soybean meal is a significant source of protein for use mostly in animal feed but also for direct human consumption. Fermented soy foods include
soy sauce and tempeh, and non-fermented food uses include soy milk and tofu. Soybeans are widely cultivated in North and South America, where a majority of the seed planted is genetically modified. An
estimated 94.4 million acres of soybean will be planted in the U.S. and Canada in the 2018/2019 growing season. According to the USDA, the U.S., Brazil and Argentina together represent
approximately 80 percent of global soybean production. Yield10 is targeting a 20 percent or greater increase in soybean seed yield. Assuming a 2018/2019 U.S. harvest of
4.5 billion bushels (USDA) and an average farm gate price of $10.00 per bushel, a 20 percent yield increase in soybean represents a total potential added annual value of
$8.8 billion that could be shared among the companies in the soybean value chain.
Corn
is a crop grown globally and used for animal feed and for producing starch which can be used as a raw material for producing food ingredients and food additives, as well as for use
in the production of paper, packaging materials and other items. GM maize was grown for the first time in the U.S. and Canada in 1997. Currently, about 80 percent of maize/corn production in
the U.S. is genetically modified. It was estimated that more than 83 million acres of corn were planted in North America in the 2018 growing season. The traits commonly used in today's corn
cultivars provide insect resistance and herbicide tolerance. In many GM seeds sold today, these traits are stacked ( "stacked" refers to the practice of adding multiple traits to an elite plant line).
Europe has limited production of GM corn, where Spain is a leading producer. In this case, the most widely used GM trait (Bt) protects against the
corn borer insect. Special protocols must be followed in Europe to avoid mixing of GM corn with conventional corn. Corn has the more efficient C4 photosynthesis system and Yield10 is targeting a
10 percent yield increase in corn. With a projected 2018/2019 U.S. harvest of 14.4 billion bushels and an average per bushel price of $3.50, a 10 percent yield increase in corn
represents a total potential added annual value of $5.1 billion that could be shared among the companies in the corn value chain.
Rice
is the staple food for over 50 percent of the global population. World crop production of rice for 2018/2019 is estimated at approximately 495 million metric tons.
Rice is grown in tropical and subtropical regions around the world. Rice cultivation takes place primarily in China, India and
S-52
Table of Contents
Southeast
Asia. Typically, improvements to rice yield have been achieved through traditional plant breeding approaches. Genetic engineering approaches are being investigated to develop rice hybrids
and to protect rice from weeds and insect pests. Additional biotechnology approaches are being taken to improve the nutritional value of rice. While Yield10 has not established a target for yield
improvement in rice, early work is underway to evaluate the potential of our technologies in this globally important food crop.
Wheat
is a species of grass cultivated broadly worldwide as a staple cereal crop. Wheat requires processing to be used as food, mainly in the form of flour for bread, baked goods and
pasta. Wheat may also be used as an industrial starch, as a food additive or as a production component in the textile and paper industries. Improvements to wheat yield have typically been achieved
through plant breeding approaches. Wheat production ranks third among U.S. field crops in planted acreage, production and gross farm receipts behind corn and soybeans. The planted area for wheat in
the U.S. and Canada combined for 2018/2019 is projected at 64 million acres.
Forage
crops are grown expressly for biomass used for feeding livestock. Typical forage crops include both annual and perennial crops such as various grasses, silage corn, alfalfa and
sorghum. Biotechnology traits have been previously introduced into silage corn and alfalfa. Other forage crops could be amenable to gene editing strategies to increase biomass yield per acre. We
believe that our technology and traits that increase biomass may have application to forage crops.
Regulatory Requirements
Since the first successful commercialization of a biotechnology-derived agricultural crop in the 1990s, many new crop varieties have been
developed and made available to farmers in the U.S. and worldwide. U.S. farmers have rapidly adopted many of these new biotechnology-derived varieties, so that in 2016, 92 percent of the corn,
93 percent of the cotton and 94 percent of the soybeans planted in the U.S. were varieties produced through traditional forms of genetic engineering. A significant percentage of the
production of other crops planted and harvested in the U.S., such as alfalfa, papaya and sugar beet, are also biotechnology-derived.
Biotechnology-derived
or genetically engineered crops are subject to a significant amount of regulation in the U.S. and around the world. Field tests and field trials of such crops need
to ensure that traits in development do not escape or mix with native plants, and crops that may be used as human food or animal feed must meet certain safety standards, but government regulations,
regulatory systems and the politics that influence them vary significantly among jurisdictions.
For
purposes of this discussion, the term "GE" includes both biotechnology-derived or genetically engineered plants that are modified by the insertion of recombinant DNA ("Traditional
Genome Modification") and biotechnology-derived or genetically engineered plants that are modified through the application of more modern techniques of genome editing. We have seed traits that fall
within each of these two generalized categories of GE plants, as summarized above under the subheading "
Traits in Development
."
United States Regulation
The U.S. Government agencies primarily responsible for overseeing the products of modern agricultural biotechnology are the U.S. Department of
Agriculture (USDA), the U.S. Food and Drug Administration (FDA) and the U.S. Environmental Protection Agency (EPA). Depending on its characteristics, a product may be subject to the jurisdiction of
one or more of these agencies under the federal government's 1986 Coordinated Framework for the Regulation of Biotechnology, as updated. Regulatory officials from the three agencies regularly
communicate and exchange information to ensure that any safety or regulatory issues that may arise are appropriately resolved within the scope of authority afforded to each agency under their
respective statutes. Other environmental laws or
S-53
Table of Contents
regulations
also may be implicated, depending on the specific product and its potential applications or intended uses. EPA's principal oversight role is for biotechnology-derived products that are
intended for use as pesticides or herbicides, under the authorities granted to the agency under the Federal Insecticide, Fungicide, and Rodenticide Act and the Toxic Substances Control Act. Our
business strategy is focused on crop yield traits and we have no current plans for the development of pesticide or herbicide GE traits that would be subject to the procedures and requirements of the
EPA under these statutes.
Our
seed traits and any future products that are successfully developed containing our seed traits, however, are or will be subject to USDA and FDA regulatory requirements. Those
requirements will vary depending on the particular seed trait and the intended use of any product that will be commercialized.
First,
within USDA, the Animal and Plant Health Inspection Service (APHIS) is responsible for protecting agricultural plants from pests, diseases and noxious weeds. Under the Plant
Protection Act (PPA), USDA-APHIS has regulatory oversight over products of modern biotechnology that could pose such a risk to domestic agriculture and native plants. Accordingly, USDA-APHIS regulates
organisms and products that are known or are suspected to be plant pests or to pose a plant pest risk, including those that have been altered or produced through various genetic engineering
techniques. These GE plants are called "regulated articles" in the relevant USDA-APHIS regulations, which are codified at 7 C.F.R. Part 340 ("Part 340"). The PPA and the
implementing regulations in Part 340 empower USDA-APHIS to regulate the import, handling, interstate movement and release into the environment of regulated articles, including certain GE
organisms undergoing confined experimental use or field trials. Regulated articles are reviewed to ensure that, under the proposed conditions of use, they do not present a plant pest risk by ensuring
appropriate handling, confinement and disposal.
Seed
traits developed using Traditional Genome Modification, such as our C3003 yield trait that leverages the biological functions of an algal gene, are regulated under Part 340.
Regulated articles are subject to extensive USDA-APHIS oversight, including but not limited to permitting requirements for import, handling, interstate movement and release into the environment.
If,
however, USDA-APHIS determines that a GE plant is unlikely to present a greater plant pest risk than its unmodified counterpart, the newly developed crop will no longer be subject to
the permitting and other regulatory processes that are overseen by the agency (
i.e.
, it will no longer be treated as a potential plant pest). Such a
determination by the USDA-APHIS is called "non-regulated status" under the Part 340 regulatory framework. The regulations establish detailed procedures for how a developer of a new GE plant may
petition USDA-APHIS for a determination of non-regulated status, which is an official agency finding that the particular article is unlikely to pose a plant pest risk and therefore no longer needs to
be regulated under Part 340 and the PPA.
USDA-APHIS
conducts a comprehensive science-based review of the petition to assess, among other things, plant pest risk, environmental considerations pursuant to the National
Environmental Policy Act, and any potential impacts on endangered species. The duration of the petition process varies based on a number of factors, including the agency's familiarity with similar GE
products, the type and scope of the environmental review conducted, and the number and types of public comments received. If, upon the completion of the review, USDA-APHIS approves the petition and
the product is no longer deemed a "regulated article," the developer may commercialize the product, subject to any conditions set forth in the USDA-APHIS written decision issued in response to the
petition for determination of non-regulated status.
As
previously described, our seed traits developed using Traditional Genome Modification are regulated under Part 340 and are subject to USDA-APHIS permitting requirements. In
recent years, however, we and others have submitted various petitions to USDA-APHIS to determine whether particular GE plants developed through the use of different genome editing techniques may be
granted
S-54
Table of Contents
non-regulated
status under the regulated/non-regulated framework administered by the agency. In general, genome editing approaches to GE trait development have been deemed non-regulated by USDA-APHIS.
The USDA also announced in March 2018 that it would not require an assessment on products that used modern forms of mutagenesis if it was clear these outcomes could occur in nature. The USDA stated at
that time that it did not "have any plans to regulate plants that could otherwise have been developed through traditional breeding techniques as long as they are developed without the use of a plant
pest as the donor or vector and they are not themselves plant pests." This USDA policy statement applies to genetic deletions of any size, which would include genome editing through CRISPR-Cas9 and
other emerging technologies, although it remains to be seen how this policy announcement will be implemented by USDA-APHIS and what practical effect that may have on seed trait developers like us and
our competitors.
Historically,
changes to the U.S. regulatory paradigm for agricultural biotechnology have been infrequent, are typically preceded by notice, and are most often subject to public comment,
but there can be no guarantee that the USDA-APHIS governing regulations and policies will not change.
We
have submitted two petitions under Part 340 for a determination of non-regulated status (also known as the "Am I Regulated?" letter) to USDA-APHIS's Biotechnology Regulatory
Services (BRS) in order to confirm that the following two traits designed to increase oil content are not going to be regulated by the agency: (i) the single trait C3008 Camelina plant line,
developed using CRISPR genome editing technology for increased oil content; and (ii) the triple-edited Camelina line that combines three gene traits, C3008a, C3008b and C3009, to increase oil
production. In both cases, BRS approved our petitions and confirmed that each of these novel plant lines would not be treated as a regulated article.
To
our knowledge, our triple-edited Camelina line, which received non-regulated status from BRS in September 2018, is the first CRISPR-edited triple-trait plant determined by the agency
to be non-regulated. Given our business strategy to develop certain multi-trait genome edited plant lines, this achievement should facilitate our ability to put more of our novel yield traits through
the petitioning process and the agency's scientifically driven decision-making process, with the expected end result of having more of our traits treated as non-regulated articles under
Part 340 (as compared to our seed traits developed using Traditional Genome Modification, which are regulated articles). We expect to continue to make appropriate use of the "Am I Regulated"
letter procedures to clarify the regulatory status of our new GE seed traits as they are developed.
Also,
during 2018, we tested the C3008 single-trait Camelina line in a field evaluation that took place in the United States following our receipt of a non-regulated determination for
C3008 from BRS the preceding year.
Separate
from the plant breeding and planting issues and USDA-APHIS regulation under Part 340, a GE plant also will be regulated by FDA if it is intended to be used as human food
or animal feed. FDA regulates the safety of food for humans and animals, and foods derived from GE plants must meet the same food safety requirements as foods derived from traditionally bred plants
(also called conventional foods).
Since
1992, FDA has had in place a voluntary consultation process for developers of bioengineered food ("Biotechnology Consultations"). Final agency decisions and other information from
these Biotechnology Consultations are made publicly available by FDA. Biotechnology Consultations are data-intensive and examine the new food product's safety and nutritional profile, among other
issues. Generally, FDA has found that such food products do not pose unique health risks to humans or animals, but if a novel allergen or other distinction from the conventional food is present in the
new plant variety, the agency may require specific label statements on the product to ensure that consumers are made aware of material differences between GE and conventional versions. FDA primarily
derives its regulatory power from the Federal Food, Drug, and Cosmetic Act, which has been amended over
S-55
Table of Contents
time
by several subsequent laws. Among other oversight and inspection responsibilities, FDA regulates ingredients, packaging, and labeling of foods, including nutrition and health claims and the
nutrition facts panel. Foods are typically not subject to premarket review and approval requirements, with limited exceptions.
As
part of a broader effort to modernize its regulatory approach to all biotechnology-derived products, FDA is currently re-evaluating its regulatory approach in light of the increasing
prevalence of certain genome edited plants. In January 2017, FDA asked for public input to help inform its thinking about human and animal foods derived from new plant varieties produced using genome
editing techniques. Among other things, the FDA's request for comments asked for data and information in response to questions about the safety of foods from genome edited plants, such as whether
certain categories of genome edited plants present food safety risks different from other plants produced through traditional plant breeding.
In
October 2018, FDA leadership issued a document entitled the "Plant and Animal Biotechnology Innovation Action Plan" ("Action Plan") that identified three key priorities for the agency
in this area: 1) advancing human and animal health by promoting product innovation and applying modern, efficient and risk-based regulatory pathways; 2) strengthening public outreach and
communication regarding the FDA's approach to innovative plant and animal biotechnology; and 3) increasing engagement with domestic and international partners on biotechnology issues. The
Action Plan also stated that FDA has reviewed the comments and other information it received in response to the January 2017 request for comments, and that it intends to develop guidance for the
industry explaining how the FDA's existing regulatory policy for foods derived from new plant varieties applies to foods produced using genome editing. The forthcoming draft guidance is expected to be
released for public comment in early 2019. FDA also stated in the Action Plan that it intends to begin updating the existing procedures for voluntary Biotechnology Consultations to reflect the
agency's 25 years of experience with foods derived from biotechnology plants and to incorporate any additional issues related to genome editing of food crops. Such procedural updates are
expected to be developed and implemented over the next two years.
Canadian Regulation
In Canada, GE crops and the food products into which they are incorporated are regulated by multiple government agencies under a federal
framework for the regulation of biotechnology products that is similar to the U.S. system. First, the Canadian Food Inspection Agency (CFIA) is the lead agency for ensuring that a new agricultural
biotechnology crop will not pose new risks to Canadian plants, animals and other agricultural commodities. The CFIA's Plant Biosafety Office (PBO) is responsible for conducting environmental
assessments of biotechnology-derived plants, referred to as "plants with novel traits" or PNTs. Authority for the PBO includes both approving confined field trials with the PNT through permits and
authorizing their "unconfined release" as a first step towards commercialization. PNTs are defined in the Canadian Seeds Regulations as (i) plants into which a trait or traits have been
intentionally introduced, and (ii) where the trait is new in Canada and has the potential to impact the environment. The CFIA also has in place a remutation policy, whereby plants containing
the same mutation as a previously authorized plant of the same species are included in the authorization of the original PNT and are therefore subject to the same conditions.
Second,
under the Food and Drugs Act and related regulations, Health Canada is responsible for reviewing a pre-market safety assessment that must be submitted by the manufacturer or
importer of a "novel food," a term of art that includes any PNT or other or biotechnology-derived foods. The safety
assessment should provide assurances that the novel food is safe when prepared or consumed according to its intended use before it enters the Canadian market and food system. A multi-disciplinary team
of experts from Health Canada will evaluate the data and information about the novel food and make a determination regarding whether it is safe and nutritious before it can be sold in Canada, as well
as whether any restrictions are warranted under applicable law or the product's safety profile. Health
S-56
Table of Contents
Canada's
final decision documents regarding the safety of these novel foods are made available to the public by the government. As in the United States, approval of a PNT or a novel food product does
not take into account the method with which such product was produced. Rather, Health Canada employs a product-based (as opposed to a process-based) approach to its regulatory oversight of such
emerging foods and food ingredients.
As
the lead agency for public health and safety, Health Canada also works in conjunction with the CFIA on food labeling oversight when it has identified a potential health or safety
issues with a food that could be mitigated through labeling or other disclosures. For example, if the biotechnology-derived food contains a new allergen that is otherwise not present in the
conventional version of the food, then specific label statements will be required to alert consumers to that important health information. However, the CFIA has primary oversight over non-health
issues related to food labeling, packaging, and advertising. Accordingly, the CFIA is the lead agency for ensuring that food labeling, and advertising meet the legal requirements of the Food and Drugs
Act, and that labeling representations do not create a potential risk of fraud or consumer confusion and are compliant with Canada's voluntary disclosure standard for GE food ingredients.
Environment
Canada is also available to serve as a regulatory "safety net" if a novel product does not naturally fall within the jurisdiction of the CFIA, Health Canada, or the Pest
Management Regulatory Agency that oversees pesticide products.
Our
work involving the development, greenhouse testing and field testing of novel yield trait genes in crop plants requires certain government and municipal permits and we must ensure
compliance with all applicable regulations including regulations relating to GE crops. With laboratories and greenhouses in both the U.S. and Canada, we are also subject to regulations governing the
shipment of seeds and other plant material (including GE seeds and GE plant material) between our facilities in the U.S. and Canada, including USDA-APHIS permits for the import and export of plant
materials that could pose a risk to domestic agriculture.
Having
deployed our own research and development operations in Saskatoon, Canada in 2010, we have been conducting field studies of various yield traits in that country since 2016 under
PNT permits
issued by Canadian regulators. During 2018, we conducted field studies of C3003 in canola, Camelina and soybean at field sites in Canada.
Finally,
as one of Canada's major field crops, canola in particular is subject to variety registration, which is a regulatory requirement of the Seeds Act and is also administered by the
CFIA. Any future sales of our seed traits or products in Canada would be done by a third-party collaborator or other partner, and that third party would be responsible for complying with registration
requirements for the canola varieties, if applicable.
Regulation in Other Jurisdictions
Other jurisdictions and governmental authorities, including in South America and Asia, are increasingly taking an interest in regulating
agricultural products of biotechnology. Regulatory approaches vary by jurisdiction, the existing public health framework and phytosanitary laws in the country, and other less tangible factors such as
cultural and religious norms that may have an impact on individual country risk assessments and decision-making. We cannot predict future changes in the global regulatory landscape regarding GE plants
subjected to Traditional Genome Modification or GE plants subjected to genome editing.
Further,
although U.S. and Canadian regulatory authorities have taken similar approaches to overseeing both traditional biotechnology-derived plants and genome edited plants under their
national plant health and biosafety laws, regulation of all GE plants in the European Union (EU) is significantly more stringent than in North America. U.S. and Canadian regulators have also
determined that
S-57
Table of Contents
genome
edited GE plants pose fewer risks that those subjected to Traditional Genome Modification, while a recent EU legal ruling indicates that the existing European regulations for GE plants modified
by the insertion of recombinant DNA should be strictly applied to genome edited plants at well. There is thus a sharp distinction between how European and North American regulatory agencies oversee
novel seed traits, including those that are generated using the more modern techniques of genome editing. It is possible that emerging oversight regimes for GE products in other jurisdictions could
follow the EU approach and impose similar strict requirements for the release of such products into the environment and their incorporation into human food or other consumer products.
Regulation
of biotechnology-derived products in the EU is primarily based on Directive 2001/18/EC (the "2001 EC Directive"). The 2001 EC Directive defines "genetically modified
organisms" (GMOs) broadly as "organism[s], with the exception of human beings, in which the genetic material has been altered in a way that does not occur naturally by mating
and/or natural recombination." In July 2018, the Court of Justice of the European Union (CJEU) issued an important ruling clarifying that the 2001 EC Directive and its pre-market authorization and
associated risk assessment requirements required for such "GMOs" should also apply in full to organisms developed using more modern "directed" mutagenesis techniques.
This
July 2018 CJEU decision is being interpreted to cover all modern genome editing tools such as CRISPR-Cas9, TALEN and oligonucleotide-directed mutagenesis. This recent clarification
by the CJEU regarding the scope of EU regulations suggests that novel seed trait developers who are seeking to bring genome edited seed traits to commercial markets in the EU will face hurdles
comparable to what has historically been required in Europe for introducing and commercializing Traditional Genome Modification traits.
Although
we are not currently targeting European markets for the development or commercialization of our products, the EU approach to regulating GE plants without regard to the
scientific distinctions between Traditional Genome Modification and directed genome editing could be adopted by emerging oversight regimes for GE products in other jurisdictions. There is no guarantee
that countries for which we may have or may develop future marketing plans would not take a stricter legal and regulatory approach to controlling GE plants similar to that of the EU.
License Agreement with the University of Massachusetts
Pursuant to a license agreement with the University of Massachusetts ("UMASS") dated as of June 30, 2015, we have an exclusive, worldwide
license under certain patents and patent applications, including issued patents covering our yield trait gene C3003, relating to the manufacture of plants with enhanced photosynthesis. The agreement
provides an exclusive, worldwide license to make, have made, use, offer for sale, sell, have sold and import any transgenic plant seed or plant grown therefrom or transgenic plant material developed
for sale to a farmer or grower for planting in the field, which transgenic plant seed or plant grown therefrom or transgenic plant material is covered by, embodies or is derived from (in whole or in
part) one or more issued or pending claims of the licensed patents or patent applications.
We
are required to use diligent efforts to develop licensed products throughout the field of use and to introduce licensed products into the commercial market. In that regard, we are
obligated to fulfill certain development and regulatory milestones relating to C3003, including completion of multi-site field demonstrations of a crop species in which C3003 has been introduced, and
filing for regulatory approval of a crop species in which C3003 has been introduced within a specified period. Our failure to achieve any milestone provided for under the agreement would, if we are
unable to reach agreement
with UMASS as to a potential adjustment of the applicable milestone, give UMASS the right to terminate the agreement, following a notice period.
S-58
Table of Contents
We
are obligated to pay UMASS milestone payments relating to any regulatory filings and approvals covered by the agreement, royalties on any sales of licensed products following
regulatory approval, as well as a percentage of any sublicense income related to the licensed products.
We
may terminate the agreement at any time upon 90 days prior written notice to UMASS. Either party may terminate for material breach immediately upon written notice for a breach
that is not cured within 60 days after receiving written notice of the breach. In addition, UMASS may terminate this agreement with respect to certain patent rights immediately upon written
notice in the event we contest the validity or enforceability of such patent rights.
License Agreement with the University of Missouri
Pursuant to a license agreement with the University of Missouri ("UM") dated as of May 17, 2018, we have an exclusive, worldwide license
to two novel gene technologies to boost oil content in crops. Both technologies are based on significant new discoveries around the function and regulation of Acetyl-CoA carboxylase ("ACCase"), a key
rate-limiting enzyme involved in oil production. The first technology, named C3007, is a gene for a negative controller that inhibits the enzyme activity of ACCase. The second technology, named C3010,
is a gene which, if over-expressed, results in increased activity of ACCase.
We
are required to use reasonable efforts to develop licensed products throughout the licensed field and to introduce licensed products into the commercial market. In that regard, we are
obligated to fulfill certain research, development and regulatory milestones relating to C3007 and C3010, including completion of multi-site field demonstrations of a crop species in which C3007 and
C3010 have been introduced, and filing for regulatory approval of a crop species in which C3007 and C3010 have been introduced within a specified period. Our failure to achieve any milestone provided
for under the license agreement would, if we are unable to reach agreement with UM as to a potential adjustment of the applicable milestone, give UM the right to terminate the license agreement or
render it nonexclusive.
We
are obligated to pay UM a license execution payment, milestone payments relating to any regulatory filings and approvals covered by the license agreement, royalties on any sales of
licensed products following regulatory approval, as well as a percentage of any sublicense royalties related to the licensed products.
We
may terminate the license agreement at any time upon 90 days' prior written notice to UM. Either party may terminate the license agreement upon written notice for a breach that
is not cured within 30 days after receiving written notice of the breach. In addition, UM may terminate the license agreement with respect to certain patent rights immediately upon written
notice in the event we contest the validity or enforceability of such patent rights.
Agricultural Industry Landscape
Following advances in biotechnology in the 1970s through early 1990s, the first genetically modified ("GM") crops were commercially introduced
in the U.S. in the years 1994 and 1995. Today, the U.S. leads the world in the adoption of GM crops in terms of crop value and acreage planted. GM crops have had both their supporters and their
detractors over the years. Consumer sentiment including concerns about the safety of GM crops have limited the introduction and adoption of GM crops in Europe. However, recent studies by the National
Academy of Science continue to support the 20 year history of safe use of GM crops.
The
International Service for the Acquisition of Agri-Biotech Applications (ISAAA), an industry research group, reported that 457 million acres worldwide were planted with GM
crops in 2016, the most recent year where data is available. The planting of GM crops is centered in the Americas with
S-59
Table of Contents
North
America at approximately 45 percent of the acres and South America at approximately 43 percent. China and India follow with approximately 8 percent and the balance of the
total worldwide GM crop acreage in 2016 was planted in European Union and the rest of world. The primary GM crops in the U.S. are corn, soybean, cotton and sugar beet. In Canada, the oilseed crop
canola is the primary GM crop. Cotton is the primary GM crop grown in India and China.
In
contrast to the Americas, the European Union has been resistant to the adoption of GM crops and has relied heavily on plant breeding programs for capturing crop yield improvements
over the last 20 years. In 2016, Spain was the largest producer of GM crops in Europe, based on cultivation of GM corn representing approximately 20 percent of the country's crop that
year. Certain GM crops have been approved for cultivation in some European countries, while other countries have imposed outright bans on cultivation of GM crops.
According
to the market research firm, Research and Markets, the total global seed business was estimated at $68 billion in 2017 and is projected to grow to more than
$100 billion by 2022. According to an ISAAA report, the global GM seed business represented a $17.2 billion market in 2017 and biotech crops were grown on approximately
469 million acres that year. The traits being commercialized today by the agricultural industry mainly address crop protection, which involves preventing crop damage by weeds, insects and other
pests that lower expected crop yield. As technology has advanced, "trait stacking," or the practice of adding multiple traits to an elite plant line, has become commonplace as a strategy to protect
yield. As the industry has developed, the practice of inter-licensing traits between research and development driven seed companies has led to a proliferation of branded seed products on the market
today.
The
GM seed business is dominated by large multinational companies and their subsidiaries including BASF, Bayer Crop Science, DowDuPont, Syngenta and AgReliant. These companies have
significant resources, experience and track records of successfully developing, testing and commercializing high performing seed lines as well as new traits for GM crops. They offer farmers
conventional and biotechnology seeds as well as crop protection chemicals, biologicals, fertilizers and other products and technologies aimed at supporting the on-farm efficiency of managing crops in
the field as well as managing the overall cost of crop production to successful harvest. Many of these companies were recently involved in consolidation of the sector with the DowDuPont merger, the
acquisition of Syngenta by ChemChina, and the acquisition of Monsanto by Bayer in 2018.
Privately
owned, U.S. retail seed companies play a key role in the industry by developing, marketing and selling high performing seed to U.S. farmers. These companies include Beck's
Hybrids and Stine Seed. These companies have capabilities in both biotechnology and plant breeding. They source traits from the multinational companies and input these traits into elite plant
germplasm to produce seeds optimized for a variety of soil, climate and field conditions. Both companies offer a broad arrange of GM corn and soybean products to their customers.
Recent
advances in biotechnology including gene editing have led to the formation of companies focusing on yield trait discovery, biologicals for pest control, agbiome strategies and
precision agriculture. There are startups, privately held and publicly traded companies involved in this space. Such companies include AgBiome, Arcadia Biosciences, Benson Hill Biosystems, BioCeres,
Calyxt, Cibus, Evogene, Inari, Indigo, Kaiima, and Marrone Bio Innovation, many of which have greater resources and experience than we have.
Intellectual Property
Our continued success depends in large part on our proprietary technology. As of February 28, 2019, we owned or held exclusive rights to
17 pending patent applications worldwide related to advanced technologies for increasing yield in crops. Our portfolio of patent applications includes plant science technologies we have in-licensed
globally and exclusively from the University of Massachusetts
S-60
Table of Contents
and
North Carolina State University related to the yield trait gene C3003 and other advanced technologies based on advanced metabolic engineering methods to improve carbon capture and selectively
control carbon partitioning in plants. Our portfolio of patent applications also includes advanced technologies for oilseed crops we in-licensed globally and exclusively from the University of
Missouri in 2018 related to the yield trait genes C3007 and C3010.
We
continue to seek, develop and evaluate new technologies and related intellectual property that might enhance our Company's business strategy, industry position or deployment options.
Employees
As of February 28, 2019, we had 22 full-time employees. Of those employees, 18 were in research and development. Among our staff, 9 hold
Ph.D.'s and 10 hold masters' or bachelors' degrees in their respective disciplines. Our technical staff has expertise in the following areas: plant genetics, plant biology, microbial genetics,
bioinformatics, metabolic engineering and systems biology. Our headquarters are located in Massachusetts, and we maintain a research and development facility, including greenhouse facilities, in
Saskatoon, Canada. None of our employees are subject to a collective bargaining agreement. We consider our relationship with our employees to be good.
S-61
Table of Contents