TIDMANIC
Agronomics Limited
06 April 2020
The Complete Newsletter is provided here. For text version,
please see below:
AGRONOMICS LIMITED
NEWSLETTER 06/04/2020
Dear shareholders and subscribers,
To state the obvious, 2020 will be a year to remember. We will
look back at the near standstill COVID-19 brought to daily life and
of course the many lives lost prematurely, with global deaths
currently exceeding 40,000 and 190 countries confirming cases at
the time of writing. It will also be remembered as the year we
learned the practice of social distancing and the psychology of a
crisis in which people hoarded many items, most notably toilet roll
and hand sanitisers!
Less obvious perhaps, is that in a few years' time, 2020 is
likely to be viewed retrospectively as the year that caused us to
reconsider the structure of food supply chains.
Supermarkets and governments around the world have thus far
insisted, despite the sight of empty shelves due to the panickers
and hoarders, that there is no shortage of perishable items. But,
with an increasing number of countries entering lockdown, borders
threatening to close and workforces out of action, import
capability to countries which are net importers of food is being
tested. Government responses to COVID-19 is of course the driver of
all of this disruption, but what is the primary cause driver of
COVID-19? It would seem likely that the answer is the same as it
was for MERS, SARS, avian and swine influenza, Ebola and even
HIV.
All of these diseases, along with the remaining 75% of newly
identified human pathogens, would appear to have originated at the
human animal interface. This disaster could be avoided, in the
future, if we repair and reinvent our food production system.
Agronomics believes that:
"We are on the cusp of the deepest, fastest, most consequential
disruption in food and agricultural production since the first
domestication of plants and animals ten thousand years ago."
-RethinkX - Rethinking Food and Agriculture 2020
We now have technologies such as cell culture, precision
fermentation and gene editing tools like CRISPR-Cas9, that have the
potential to remove our reliance on animals for food and other
materials. These technologies will also improve the resilience of
supply chains through the decentralisation of production and
significant improvements in traceability.
From the inception of Agronomics, we set out to build a
portfolio of innovative companies with the potential to cause a
step change in the efficiency of supply chains, from primary
sources to final product. With the portfolio now 12 in number,
utilising technology our investments cover the industrial
production of meat, poultry, dairy, seafood, leather, pet food and
commodity crops.
Notwithstanding this period of deep economic uncertainty, we
remain very optimistic about the future prospects of our portfolio
companies, and the secular trends supporting them. Agronomics is a
unique vehicle, encompassing a spread of the best investments in
modern food production, just at the time it is most needed.
PORTFOLIO UPDATE
6 of the 12 companies within our portfolio utilise cell culture
techniques to grow fish, pork, shrimp, beef, leather or cotton
directly from cells, without the need to produce whole animals or
plants for the cultivation:
GALY is one of the most recent additions to the portfolio, in
which Agronomics invested US$ 500,000 into its seed round. GALY is
a Boston, USA based biomaterials technology company focused on
producing cotton grown directly from cells, without the plant and
vast amounts of land. This avoids the extensive pesticide and
herbicide usage for growing cotton crops, as well as massively
decreasing the water requirements for its cultivation. The
worldwide average footprint to produce 1kg of cotton is 10,000L of
water. GALY recently won a EUR300,000 prize at the H&M Global
Change Award out of 5,893 entries - a huge success for them.
As with GALY, VitroLabs is also working to supply materials to
the textile and fashion industry to support its movement towards
sustainable practices. Large fashion houses, such as LVMH and
Kering Group, have ambitious targets for reducing their greenhouse
gas emissions, that can only truly be achieved if they remove their
reliance on cows for leather.
CULTIVATED MEAT
At the beginning of 2020, we witnessed the first Series B
fundraise within the cultivated meat sector. Memphis Meat announced
on 22 January it had completed a USD 161m Series B fundraising
round, led by Softbank Group, Norwest and Temasek. With this influx
of capital in the sector, we anticipate that funds raised in 2020
could exceed USD 300m, even after considering the climate due to
the current COVID-19 global crisis.
We focus on technologies that provide a STEP CHANGE in the
efficiency of producing novel over traditional agriculture
methods
PRECISION FERMENTATION
Precision fermentation, the technology that enables
microorganisms such as yeast to be designed to produce
macromolecules like fats and proteins at scale in an efficient
manner, has been around since the 1980s. This technology is used to
produce human insulin (for type 2 diabetics) at pharmaceutical
grade and the enzyme rennet used in the coagulation process of
cheese production.
Agronomics led the EUR4m Seed round of LegenDairy Foods in
December 2019, alongside M Ventures, the venture arm of Merck KGaA.
LegenDairy is producing the key proteins found in milk, casein and
whey, through recombinant engineering, that will be combined with
plant-based fats to make cheese. The key milk proteins make up just
3.3% of the total volume of cow's milk, highlighting the enormous
inefficiency of raising dairy cows. The dairy industry is already
under enormous pressure, with two of the largest dairy farms,
Borden and Dean Foods, declaring bankruptcy in recent months,
partially due to the success of plant-based alternatives and low
margins the farmers have to operate on. It is predicted that by
2035, the dairy market will have declined by nearly 90%.
Bond Pets, which is aiming to disrupt the USD 100bn global pet
food market with its animal-free technology that produces meat
proteins for pet food is also launching its first commercial
product later this year, in the form of a protein-packed dog treat
bar containing cruelty free, nutritious ingredients. Alongside
Agronomics, Lever VC, KBW Ventures, Plug and Play Ventures and
Andante Asset Management participated in the USD 1.2m Seed
financing.
PLANT-BASED CHICKEN
On 12th February, we announced in "Foods United" which has since
rebranded to The LIVEKINDLY co. (tLKc). Agronomics currently owns
approximately 1.5% in tLKc which has since raised USD 200m to fund
plant-based chicken alternative brands. To date, tLKc has added
three companies to its portfolio, including The Fry Family Food Co,
LikeMeat and LIVEKINDLY Media. We identify tLKc as a global leader
in the sustainable food production sector, as the only company to
own and operate the entire value chain of production. TLKc also has
an equity stake in PURIS holding, a vertically integrated player of
non-GMO plant-based ingredients. Agronomics also recognises the
immense strength of the LIVEKINDLY team which includes key industry
leaders Kees Kruythoff, as Chairman and CEO, formerly President of
Unilever North America and Global Home Care Division, and Roger
Lienhard, as founder, who is known within the sector for his active
investing through the Blue Horizon Corporation.
Both The LIVEKINDLY co, and Rebellyous, are working to bring
plant-based chicken to the masses. The plant-based beef sector has
largely been 'won' by Beyond Meat and Impossible Foods immense
success last year, but it remains evident that plant-based chicken
has not yet achieved the same level of success. As one of the
world's most popular meats, and increasing popularity in western
countries as consumers shift their diets away from red meat, over
50 billion chickens are slaughtered each year worldwide. Antibiotic
usage in poultry is also rife, with this contributing to antibiotic
resistance that is yet another health concern alongside viruses to
human existence.
SYNTHETIC BIOLOGY
We announced last week, our investment in Tropic Biosciences, a
UK based leading agritech company which is utilising powerful
gene-editing techniques including CRISPR-Cas9 and Tropic's own
proprietary GEiGS(TM) platform to improve the traits of tropical
crops. These platform technologies provide Tropic with the
technical capability to modify the traits of crops that could
previously not be enhanced via selective breeding. This new
generation of gene-editing techniques has dramatically increased
the speed of generating new crop strains at a significantly reduced
cost.
Tropic's lead products are coffee with reduced caffeine content
and increased solubility, and banana varieties with reduced
browning, resistance to Panama disease and extended shelf life.
Richard Reed, Chairman commented on the investment:
"We view Tropic as a pioneering seed company that can help
support and stabilise global food systems including the banana and
coffee industries. Next-generation gene-editing techniques are
invaluable tools to combat diseases which are destroying some of
the most valuable global crops. The team at Agronomics has been
highly impressed by Tropic's progress to date and believe it is
well positioned to be a very substantial business."
Agronomics currently holds 2.95% of Tropic, following the
completion of its Series B financing round. We see CRISPR-Cas9 and
other gene editing techniques as fundamental tools for improving
the global food supply chain.
PROVENANCE OF FOOD AND TEXTILES
Oritain is rapidly becoming a global leader in determining the
provenance of food, fibre and pharmaceuticals, using its 'origin
fingerprint' technology to uniquely trace a good at any point of
the supply chain. The immense data libraries Oritain has built for
various products, including cotton, means it can readily
distinguish the product's point of origin and authenticity of
consumer goods.
KEY READINGS
* Liz Specht - "Modernizing meat production will help us to
avoid pandemics"
* George Monbiot - "Covid-19 is nature's wake-up call to
complacent civilisation"
* Paul Shapiro - "One Root Cause of Pandemics Few People Think
About"
* LIVEKINDLY press release - Global Plant-Based Food Company,
the LIVEKINDLY co., launches a $200-Million Investment supporting
the Brand Portfolio of LIVEKINDLY, Fry's Family Food, and
LikeMeat
* Brian Kateman - "Will Cultured Meat Soon Be A Common Sight In
Supermarkets Across The Globe?"
* The Rethinkx Report remains a highly insightful and detailed
prediction of how technological disruption will shift dairy
production. Found here.
* The Good Food Institute's website has some great resources for
a deepening understanding of both the plant-based and cultivated
meat landscapes. Found here.
* Our World in Data recently explained with a very useful chart,
that eating locally would only significantly reduce the impact of a
food's final carbon footprint, what you eat is far more important.
Greenhouse gas emission graph found here.
COMPANY NEWS
* Non-executive director Jim Mellon highlighted clean meat as
one of two mega themes alongside longevity at the MoneyWeek
roundtable in November 2019
* Over the past few months Anthony Chow represented Agronomics
on the Credit Suisse Future of Food investor panel in New York
alongside Roger Lienhard of Blue Horizon Ventures and at the Credit
Suisse Impact Investing Event in Gstaad, Switzerland.
* Most recent thought pieces from analyst Laura Turner available
on Master Investor available:
-- November 2019 update
-- January 2020 update
-- ESG MAGAZINE
We are also excited to reveal that Jim Mellon is releasing a
book later this year which explores the investment opportunities
within the sector.
Kind regards and remain in good health,
The Agronomics Team
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END
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