Seeds in their slingshot

Athenix of Durham plans to challenge Monsanto in biotech crop seeds

The soy milk you're drinking and the cotton fabric you're wearing are probably made from biotech crops.

Crops from genetically modified seeds are quickly gaining popularity among farmers. Right now, one company, Monsanto, sells more genetically modified crop seeds to those farmers than any other company worldwide. It is expected to see $3.4 billion in sales this year alone.

But a Durham company with only 38 employees is getting ready to challenge the St. Louis-based giant. And some moneymen think they have a good shot.

Venture capital investors just pumped another $13 million into Athenix. That money will allow scientists to continue to work on what the company hopes will be its first product: seeds that are genetically modified so that their plants will remain healthy even when sprayed with glyphosate, the weed killer better known as Roundup. If they're successful, the seeds will come to market in 2009.

"Monsanto now has competition," said Jerry Caulder, a former senior executive with Monsanto who is chairman of Athenix's board of directors.

Monsanto developed Roundup in the early 1970s, and until now has had a lock on how to make crops resistant to the herbicide.

Competitors in the crop seed business have developed genetically modified seeds that can survive other herbicides. But none has worked against Roundup.

Farmers love Roundup, Caulder said, because it's the most efficient weed killer on the market. Caulder helped develop Roundup, and calls it the single-best herbicide in the world. It's not toxic to animals. It degrades in the soil within two weeks. And it's cheap, because it's no longer protected by patents.

Athenix researchers discovered their antidote to glyphosate -- or Roundup -- in microbes. Microbes are microorganism, such as bacteria, that can be found in the soil.

The researchers mined pieces of microbial genetic information and inserted them into cells of corn, soybean and rice plants. During the past 18 months, seeds resulting from that work were planted along with seeds that weren't genetically modified, said Nadine Carozzi, Athenix's vice president of product development. When the resulting plants were sprayed with glyphosate, the plants containing the microbial gene remained healthy and green. The others turned brown and dried up.

Athenix's microbe collection has led researchers to other genetic traits valuable in crop protection, including one that repels nematodes, said Nicholas Duck, Athenix's vice president of research.

Nematodes are microscopic parasites that feed on the roots of soybean plants, causing about $1 billion in crop damage every year.

Several companies are working on soybean seeds that repel nematodes, said Mike Koziel, Athenix's chief executive. "We believe we have the largest collection of insect resistance and nematode resistance genes in the industry."

To advance additional products in the development pipeline, the company plans to hire as many as 15 scientists and nearly double its office and lab space to about 20,000 square feet this year.

When Athenix was founded in 2001, it wasn't popular among agricultural biotech companies to mine microbes for crop protection traits, Koziel said. But the four Athenix founders, who had all worked at large agriculture companies, pursued the idea anyway.

Intersouth Partners, a Durham venture capital firm, was the first investor to support Athenix's idea.

"We're turned on by a rising technology nobody else is doing," said Dennis Dougherty, Intersouth's founder. "We like different."

In the past four years, other investors joined Intersouth. They include Hunt Ventures, which is part of the oil, real estate and investment conglomerate of Dallas billionaire Ray Hunt. Athenix has raised a total of $43.5 million in venture capital, and the latest fund-raiser was completed in 60 days.

Athenix can thank not only its research but farmers for the investments. As more and more farmers have accepted biotech crops, the market for genetically modified seeds has grown.

Ten years after the first genetically modified seeds were sown, more than half the soybeans and more than a quarter of the cotton grown worldwide are considered biotech crops, according to International Service for the Acquisition of Agri-biotech Applications, a nonprofit organization that was founded by British agricultural scientist Clive James 15 years ago. Most of the biotech crops are genetically modified to withstand pests and weed killers.

ISAAA reported that annual revenue from genetically modified crops reached about $5 billion in 2004, and is projected to increase to $19 billion by 2010.

As Athenix is getting closer to compete in that market, it's reasonable to suspect the company is gaining prominence as an acquisition target, Caulder said.

Any of the six large crop production companies, including Bayer, Syngenta and BASF, could be interested, he said. Of course, "Monsanto could conclude, 'Let's buy them first.' "