No Copy-Pasting: How New Plant Breeding Techniques Differ from GMO, Prompting New Value Creation Models

As the regulatory frameworks for new plant breeding techniques become clearer, it is time to take a closer look at their value creation models, which differ from the GMO market, where traits are mostly licensed out to third parties. Value creation for NBTs will revolve much more around granting access to technology instead, widening the potential pool of licensees.

Regulatory framework NBTs becomes clearer

The recent USDA statement regarding the regulatory framework for new breeding techniques (NBTs)  may set the bar for regulators globally. The US has chosen not to regulate plant-breeding that could also have been developed through traditional breeding techniques, so NBTs do not fall under the GMO regulation.

In January, the advisor to the European Court of Justice (ECJ) proposed that mutagenesis should not fall under the strict GMO regime, creating expectations that the EU would take a similar stance as the US. The ECJ is expected to duplicate the advisor’s view soon, exempting NBTs from EU GMO regulation. As a consequence, individual EU countries may draft their own legislation, creating further fragmentation of plant-breeding policy.

Value creation: Ample upside, although different than for GMO

To quantify future gains from NBTs, we need to look at the value creation of GMO compared to conventional crops. The GMO seed market accounts for more than USD 20bn per year, outclassing the conventional seed market by almost USD 4bn. On a hectare basis, GM soybean seeds generate two and a half times more value than their conventional peers, and in the case of GM corn, it’s five and a half times more. 

For farmers, the added value of NBTs lies in having the means to add traits to plants more rapidly, sheltering them from certain pests and climatic conditions. Assuming that the use of NBTs in major arable crops would lead to a seed-value-by-hectare duplication, a 50% utilisation rate would amount to USD 5.7bn per year. When including vegetable seeds, this rises to USD 8.3bn. The value created by biotech seeds is related to the investments in R&D, as well as the licensing of traits to third parties. As discussed in our article A Licence to Bill: Changing Dynamics in the Seed Traits Earnings Model, the trait earnings model that major seeds players have been using for years is changing.

Patents will determine division of roles

Patents on NBTs are already accumulating, which may be an indication as to where the future value creation lies. A recent study  showed that DowDuPont holds 12% of global patents on CRISPR technology, outpacing other seeds companies as well as universities and research institutes. 

The future uptake of NBTs will depend on the patents and how patent holders will be able to generate earnings from other players in the seeds and breeding space. Seeing as the pool of licensees will be bigger when licensing traits compared to licensing technology, and considering that the technology can be applied to a much broader range of crops and markets, the stakes are high.

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