Biopesticides are en vogue in the world of agtech. Ever since Bayer acquired Agraquest for nearly half a billion dollars in 2012, start-ups have been raising significant money and jockeying for position as attractive partners and/or acquisition targets. The biopesticide market is still small – in the single-digit billions of dollars worldwide (see the Lux Research webinar “Planting Seeds for Future Success“) – but these products continue to take market share from the conventional pesticide market, which is worth more than $50 billion worldwide. While smaller companies like Marrone Bio Innovations and Stockton Agrimor have made headlines by developing promising biologicals, it’s really the world’s leading agrichemical companies that dominate the patent landscape for biopesticides (see figure below). Of the top 10 patent assigned in the biopesticide space, only five major companies and two smaller companies (Marrone and Qingdao Haolite) are represented. Notably absent from this group is Syngenta, a major player in the conventional agrichemical space.
Following our report in December 2013 analyzing the biopesticide market and potential future growth (client registration required), Lux has continued to monitor the space for promising technologies and developers. Using the Lux Innovation Grid (LIG) to rank companies, we depict those we’ve spoken to in the past year in the figure below. Companies are placed on this graph on the basis of technical value, business execution, overall maturity, and our own LuxTake.
The picture that emerges is a crowded space with 17 smaller developers showing high potential and just five larger players exhibiting dominance. In line with our findings in our earlier report, many of these smaller developers offer a single solution. The cohort of “high potential” companies in this figure are those with technical value scores of three or greater, but low scores for business execution. From the LIG, industry trends emerge:
- This is a high potential industry. The plethora of companies ranked in the upper half of this graph indicates a lot of ideas with high technical value. From new entrants like one-year-old EdenShield to those with new initial public offerings (IPOs) like Marrone BioInnovations, young companies and companies early in their corporate development journeys abound. As we showed here (client registration required), agribusiness heavyweights are pouring dollars into the field to the tune of more than $2.5 billion. For companies wanting to enter the fray, the sooner the better – we anticipate that most of these players will be established or acquired in the next three years.
- Getting to dominance means getting to revenue. The key differentiator between the high potential and dominant companies in this space is getting to $10 million in revenue, regardless of the market segment the money is coming from. Stockton Agrimor is a great example of success here, and Terramera is poised to dominate in similar fashion – Stockton’s revenue of more than $50 million is mainly from biological pest control markets outside of agriculture, including home and institutional pest control. Marrone BioInnovation’s biological product for mussel fouling in water pipes is another example, with Marrone clearing $14 million in revenue last year.
- Strong partnering separates the good from the great. The cluster of three companies in the far right of the graph share one attribute: strong strategic partnering. Grasslanz, TyraTech, and Stockton Agrimor have partnerships with strong R&D teams, Terminix, and Syngenta, respectively, all of which drive growth and distribution.
For clients with an eye on biopesticides, this graphic provides two key takeaways: the space is rich in high-potential ideas that are starting to generate millions in revenue poised for growth of 8.5% a year or more; and partnerships are providing the business support that will shift high potential companies into dominance in the next three years. For both reasons, clients should vet these players now to secure a position, or plan to stay on the sidelines.