Commercial Challenges for Bringing Biopesticides to Market: What Does it Take to Get There?

Biopesticides represent approximately $2-3 billion of the $56 billion pesticide market. Growth of biopesticides is projected to outpace that of chemical pesticides, with compounded annual growth rates of more than 15%. With global population expected to increase to 9 million by 2050, there is an increasing need to produce more food more sustainably. When incorporated into crop production and pest management programs, biopesticides offer the potential for higher crop yields and quality than chemical-only programs. Added benefits include chemical pesticide residue and resistance management, shorter field re-entry, biodegradability, and low risk to beneficials, including honeybees. For these reasons, large agrichemical companies have become involved in biopesticides largely through acquisitions and licensing deals. Several established and startup companies have started microbial biopesticide discovery programs, hoping to harness the microbiome of plants, looking for biopesticides and biostimulants. Despite all the activity, most startups and product entrants are biostimulants, not biopesticides for crop protection. This is because biopesticides have greater barriers to entry, including a stricter regulatory process and greater technical difficulty finding and developing effective biopesticides that can compete in chemically dominated pest management programs. Challenges to the adoption of biopesticides include lack of education in how and when to use them and inappropriate testing regimes without considering biopesticides’ unique modes of action.

This is an exciting time to be in agriculture.
There is an explosion of innovation at all points in the food chain. These include mining the plant genome and microbiome to develop improved seeds and microbial seed treatments and other biostimulants that increase yields and reduce crop stress, novel and more effective biopesticides, precision farming and farm automation “big data,” remote sensing, and robotics, urban and indoor ag, plant and insect-based proteins. Agfunder (Agtech Investing report, Year in Review, 2017) reports that more than $10.1 billion was invested into agrifood tech companies in 2017. $4.2 billion of this was invested into agbiotech, farm management software, farm robotics & equipment, bioenergy & materials, novel farming, agribiz marketplaces, and innovative food. Investors have made significant investments into many biostimulant companies such as Indigo, Inocucor, Asilomar Bio because of the lower barriers to entry compared to the more regulated biopesticides. There have been fewer investments into biopesticide companies, such as AgBiome, Provivi and Terramera.

The discovery of new synthetic pesticides has become increasingly difficult and costly. It is estimated that companies must screen at least 140,000 chemicals to find one new, commercially acceptable, synthetic pesticide. The discovery of new chemical leads has decreased since 2005 and it is increasingly more difficult to convert a new lead into a new product launch, as indicated by the trending decline in new product launches from 2002 to 2010 (Agranova 2010. Ag Chem New Compound Review, Vol. 28). Since it now requires nearly $300 million to develop one new synthetic pesticide and takes on average twelve years, fewer and fewer new chemical active ingredients will be launched over the next 10-20 years (Phillips McDougall. March 2016. The Cost of New Agrochemical Product Discovery, Development and Registration in 1995, 2000, 2005-8 and 2010 to 2014. R&D expenditure in 2014 and expectations for 2019)

In contrast, the cost to develop a biopesticide is in the order of $3-7 million and takes approximately 3-4 years to get to market in the U.S. (Marrone Bio Innovations internal figures and Lehr, P. 2010. Biopesticides: the Global Market, Report code CHM029B, BCC Research).
Pesticides are in the news constantly as they come under increasing scrutiny from regulatory and government officials and consumers. Some of the issues facing pesticides include endangered species, maximum residue levels (MRLs), Clean Water Act and Clean Air Act (USA), Worker Protection Standards, Sustainable Use Directive (Europe), volatile organic compounds reduction, spray drift, resistance, pollinators, climate change, invasive species, lawsuits, food channel demands and sustainability metrics.

Why Biological Pesticides?
Demand for effective and environmentally responsible bio-based products for crop protection continues to increase. Biopesticides include microorganisms that are pathogens of or competitors to pests and plant pathogens and also include microorganisms that produce natural compounds that kill pests, as well as low-risk biochemicals, such as pheromones, fatty acids and some plant extracts with a non-toxic mode of action. The global market for biopesticides was valued at $2-3 billion and is expected to grow by 10-20% depending on the source (BCC Research, marketsandmarkets, Agropages). This compares to projected chemical pesticide growth of 2-3% (Phillips McDougall).
Before the large agrichemical companies merged together, they became involved in biostimulants and biopesticides through in-licensing of technology and products, joint ventures and acquisitions. These large companies have paid significant dollars to acquire biological companies (e.g., Pasteuria, Devgen, Divergence, AgraQuest). In addition, several companies have started microbial biopesticide discovery programs such as Monsanto and Novozymes and FMC and Chr. Hansen. AgBiome, one of the few new biopesticide startups has several large companies as investors and R&D partners. Syngenta, Bayer, Valent and Albaugh are successfully selling biological+chemical stacked seed treatments. MBI provides Albaugh with a unique insecticide/nematicide bacteria.

Why have these larger companies become interested in biologicals? Biologicals are one of the fastest growing input segments, e.g., 10-16% CAGR, as referenced above. In times of depressed row crop commodity prices, biopesticides and biostimulants are a bright spot in terms of growth. Biopesticides are increasingly required in pest management programs to meet customer needs. For example, produce exporters and importers monitor the levels of chemical pesticide residues as their customers such as supermarket retailers demand no or few residues. Biopesticides can be sprayed right up until harvest. Biopesticides provide added benefits or fit where few chemicals exist due to government restrictions or phase-outs (e.g. nematicides, organophosphates and carbamates).

Today, agrichemical companies are faced with the development of resistance to important chemical pesticides such as the strobilurin fungicides and neonicitinoid insecticides and several herbicides, including glyphosate. Most of these modern chemical pesticides are single site mode of action and hence pests develop resistance to these chemical classes relatively quickly. Rotation or tank mixtures with other chemicals, but also with biopesticides is an effective way to manage resistance. Most biopesticides have complex modes of action – living microorganisms that infect and kill a pest, or microorganisms and plant extracts that contain mixtures of multiple classes of chemical compounds, providing longer durability.

Biological pesticides, while certainly not new, have improved over each decade, offering novel modes of action, longer shelf life, broader spectrum. As mentioned earlier, some have been combined with chemicals on the seed, generating hundreds of million of dollars in sales (e.g. Bayer’s Poncho-Votivo® and Syngenta’s Clariva Complete®). Both of the biopesticide microorganisms in these seed treatments were acquired from small companies.

The following figure is an adaptation of the Gartner Hype Cycle that typically happens when new technologies are introduced.
The Gartner Hype Cycle as Applied to Ag and Food Technologies

There is initial hype and over investment or investment at unrealistic valuations, then reality sets in on what it takes to get the technology adopted into the mainstream. Expectations fall and those technologies and companies that survive continue to build the infrastructure required on the ground for the technologies to be successful. This was certainly true of biopesticides (and now biostimulants, which appear to be heading up the peak of inflated expectations). I remember when leading AgraQuest, I wanted to introduce Serenade® Biofungicide in the late 1990s and the only paradigm at that time was to use products stand alone rather than in integrated programs. As such, we got “pigeon-holed” into just organic production, which was a very small niche at the time. We conducted many research trials and demos in integrated programs with chemicals, demonstrating that a biopesticide could increase yields and quality often better than the chemical-only programs. However, university researchers and extension specialists continued to (and many still do today) test biopesticides only stand-alone against the best chemical cocktail. With the formation of the Biopesticide Industry Alliance in 2000, the biopesticide industry recognized the problem and worked in collaboration with the U.S. Department of Agriculture’s IR-4 program and EPA’s Biopesticide Pollution Prevention Division to get a biopesticide demonstration competitive grant program funded that provided grants to university and government researchers to test biopesticides alone, but mandatorily also in programs. While this funding disappeared over time, it helped to change the paradigm of how biopesticides are used.

Existing Barriers to Biopesticides

While considerable progress has been made with biopesticide adoption into the market, biopesticides are less than 5% of the agrichemical market and barriers remain.

Perceptions persist about efficacy & cost, but more importantly, there is a lack of awareness and understanding of biopesticides by agronomists, growers, crop consultants and key influencers such as university and government researchers. Therefore, biopesticides are often not tested or used properly based on their modes of action. An example of a product with a novel mode of action this is our company’s microbial insecticide, Grandevo®, based on the novel bacterial species, Chromobacterium subtsugae. The bacteria produce several compounds of different chemical classes in fermentation and when applied onto a crop as a wettable powder or granule (dead cells and compounds), repel pest insects, stop feeding in seconds and reduce adult insect fecundity. The insects do not start dying until about four days, with peak mortality at 10 days. Using this product like a knockdown insecticide, of course may lead to disappointment. Therefore we are educating our own sales force, users and key influencers to use the product early before pest populations increase. Or if pest populations are already high, start with another insecticide that has contact activity (such as our other bioinsecticide Venerate®) or with more knockdown effects, followed by Grandevo. Incorporated into a program, Grandevo (and Venerate) can be used in conventional programs for resistance and residue management and to increase efficacy of chemicals. And of course, these products can be used with other organically listed biopesticides for the fast growing organic segment.

Other things to watch for when integrating biopesticides is water pH, mixing order in the tank and the choice of adjuvant, which can increase or decrease efficacy. In addition, it is quite common to hear a grower of consultant say they used a biopesticide for the first time when nothing else would work, including chemical pesticides. “I tried everything but the kitchen sink, so I think I’ll try a biopesticide.” This is exactly the wrong time to try biopesticides. One bad experience can linger for many years. While there is an increasing number of sales and field development specialists trained in biopesticides, an individual coming solely from a chemical background may or may not understand the best use of biopesticides.

A formulation can make or break a biopesticide. Formulation innovation can transform biopesticides with new inerts and formulations to extend field residual life & improve consistency. To take advantage of the synergies of biologicals and chemicals, companies are developing premixes of chemicals and biopesticides (e.g., Poncho/Votivo) for better efficacy and functionality. We are also seeing premixes of multiple biopesticide Active Ingredients (e.g. Becker Underwood’s Biostacked® seed treatments of Rhizobium + Bacillus). Marrone Bio Innovations and Groundwork Bioag are developing an all-biological stacked seed treatment that contains a Mycorrhizae-based biostimulant and nutrient uptake enhancer along with nematicidal, insecticidal, and fungicidal microorganisms.

Getting through the distribution channel. Small startup biopesticide companies typically focus on getting their first product through the regulatory process. This is important but then what? The go-to-market strategy is fraught with challenges. The agrichemical market is very crowded and hyper-competitive. For a small one-product company to get the attention of a distributor who is the gatekeeper for the relationship with the grower in the U.S. is not easy. For Marrone Bio Innovations, we have a strategy to be a leading innovator and to develop a full portfolio of products across the full range of customer needs (insect, nematode, plant disease and weed control). A distributor then expects that we will continue to have something new for their customers, meeting multiple needs. Companies bringing products to market, whether chemical or biological, see faster adoption when filling an unmet need. For example, faster adoption may occur when entering with a new bionematicide, an effective bioherbicide (especially for organic production), or an effective and safer fumigant. This compares to coming to market with another similar biofungicide for powdery mildew and leaf spots, which is a crowded segment.

Another possibility is to partner with a large agrichemical company to do the sales and marketing of your biopesticide product. This takes careful consideration since you will sacrifice profit margin by having another entity along the chain to the farmer. In theory, higher volumes should make up for lost margin, but experience by many small companies has found that this is not always the case. For large acre row crops, partnering may be the best model as it takes a large sales force to access hundreds of millions of hectares of corn and soybeans.

Some new venture capital-backed biostimulant companies are testing a new model, which bypasses the distributor by going direct to the grower. Time will tell whether status quo will continue, or disruptive, innovative new entrants with roots outside of ag will change the difficulty of accessing the grower via distribution.

To summarize:
• There is increasing customer receptivity to biologicals, but they are unsure how to use them.
• The use drivers are resistance, residues (export), regulatory restrictions, worker/environmental safety, food channel requirements.
• More education and training on how the products work and how to integrate them into IPM programs are necessary. Understand their unique modes of action.
• Support from University Extension – field trials include BOTH: a) stand alone and b) integrated into tank-mix and alternation programs.
• On-farm demonstrations are critical to increase adoption – block of the biopesticide in the program compared to chemical-only program.
• Don’t try a biopesticide for the first time in an emergency when nothing else works.
• Filling an unmet need in the market will drive faster adoption.
• Formulation innovation and pre-mixes can transform biologicals.

Confusion about Different business models. One of the misunderstandings about biopesticides is the different business model compared to the business model for developing and launching a synthetic chemical pesticide. Because of the long time (12 years) and up front capital cost (close to $300 million USD) for developing a chemical, by the time a chemical pesticide reaches the market, there are thousands of field trials and demos, the manufacturing process and formulations are perfected and global regulatory approvals are pending. Therefore, when a chemical is launched, it is launched big. Peak sales are expected in three years.

For a biopesticide, often developed by smaller companies without the deep pockets of multi-billion dollar companies, there is a different model applied, called the ‘Innovate at Speed’ or ‘Agile Innovation Model,’ which is capital efficient and “fund as you go” model. Because of the 70-year history of safety and low risk of biopesticides and short development time and favorable regulatory process in the U.S., a small company can enter the market with Version 1.0 biopesticide and place the product with a few early adopter customers. This provides valuable early insight from customers and feeds back into R&D for the next generation product, Version 2.0, allowing rapid and continued innovation. Because an early version may have only a U.S. label with a few crops and uses, peak sales do not occur in three years, but will take longer (5+), as more uses and crops and international approvals are achieved over time. Neither the capital intensive model nor the “Agile Innovation Model” are “right” or “correct”. They are simply different and understanding this will lead to better expecations for biopesticides when they enter the market. The “Agile Innovation Model” is used widely in places like Silicon Valley and consumers are accustomed to having continued new versions released of their iPhone hardware and software. Imagine if a biopesticide had $280 million in R&D (instead of $3-7 million) behind it before being launched? It would be a very different product!

Regulatory as a key barrier. Another key biopesticide barrier to entry is that regulations are increasing in complexity and cost in some region and there is no global regulatory harmonization. The United States leads the way with the most streamlined biopesticide regulations. Harmonization with Canada has had limited success. Submission of a product concurrently to both the EPA and the PMRA (Pest Management Regulatory Authority) of Canada for joint review has not reduced the time for approval, and often increased the time (Personal experience and Personal Communication with Biopesticide Industry Alliance members). Although Europe would like to accelerate more biological tools to the market due to the restriction and elimination of so many chemical active ingredients, complex European case by case rules cost several millions of dollars more than a U.S. registration and may take several years for approval. Brazil and China see the need for more biopesticides and have programs to accelerate biologicals but they still take more time than the U.S.

The Biopesticide Future
“Big data” is being applied on the farm to increase yields by understanding soil types, soil and crop water, crop varietal effects, weather and microclimates, and the microbiome, among others. What has lagged, however, is the application of “big data” to pest management. While there are certainly some pest and disease-specific degree-day models developed at universities and government institutes, “big data” and precision farming have not been as extensively used in local and regional prediction of pest and pathogen populations for more accurate spraying in time and space. Fungicides are still largely applied on a calendar basis. Because timing of a biopesticide application is so critical based on their unique modes of action and need to spray early, better scouting and pest/disease population prediction tools will make biopesticide application timing more efficient and effective. Vision/video and drone-based systems to record pest populations in the field real-time can reduce or eliminate manual scouting. Infrared sensors can assess how well a pesticide application has reduced pest populations. How about crowd scouting apps – farmers/PCAs/consultants enter pest population data and these apps show locations of the hot spots? Sensor-triggered spraying with variable rates depending on pest population is already here with companies like Semios, where pheromones are released via a sensor-controlled system based on moth populations detected by a vision-based trap. The future is technology and we are truly just beginning to marry “the connected farm” with pest management. Biopesticide adoption will increase substantially as technology, data and pest management are married.

Resources and Trade Associations
The Bioproducts Industry Alliance (BPIA), created in 2000, is dedicated to fostering adoption of biopesticide technology through increased awareness about their effectiveness and full range of benefits to a progressive pest management program. The BPIA members typically meet twice per year, rotating locations in Washington, DC, Sacramento, CA and Ottawa Canada. Committees. The BPIA Regulatory and Government Affairs Committees are active in insuring that regulations remain transparent and meet statutory timelines for approvals.

The International Biocontrol Manufacturers’ Association (IBMA) is the worldwide association of biocontrol industries producing microorganisms, macroorganisms, semiochemicals and natural pesticides for plant protection and public health. IBMA was created in 1995 to represent the views of these biological control producers, which are mainly small companies with limited resources: Manufacturers, research organisations, extension services, consultants, distributors, all contribute to the development of biocontrol and participating in IBMA activities. IBMA actively seeks to form a global federation of likeminded regional associations and has already formed a working link with BPIA in North America. IBMA holds an annual member meeting in October in Basel, Switzerland.

IR-4 (USDA program housed at Rutgers University)
The primary objective of the IR-4 Biopesticide and Organic Support Program is to further the development and registration of biopesticides for use in pest management systems for specialty crops or for minor uses on major crops. IR-4 has an efficacy grant program that researchers can apply to get funds to do early field trials with biopesticides and also to demonstrate their performance in IPM programs. IR-4 has a searchable biopesticide label database. Through its many years of registering biopesticides and supporting biopesticides through its efficacy and other educational initiatives, IR-4 has been instrumental helping educate users and researchers about the best use of biopesticides and their benefits in IPM programs. IR-4 has a close collaboration with BPIA. See Braverman, Michael, Why Use Biopesticides in an IPM Program.