A deal signed yesterday between the Israeli company Evogene and Monsanto, the largest seed company in the world, is set to place the tiny company in the forefront of the seeds and fertilizer industry.
Investor response was enthusiastic: Evogene shares gained 12 percent on the Tel Aviv Stock Exchange yesterday, on turnover of NIS 894,000 - 35 times greater than its average daily trade.
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On Monday, Evogene stock had jumped 28 percent in response to news of an agreement to cooperate with green-energy company Ormat Industries on the development of oil-rich plants, in order to reduce the cost of raw material for the biofuel industry.
Evogene, a biotechnology company that uses predictive computational biology to develop breeding technologies, has developed technologies to identify DNA sequences that are likely to improve various traits of agricultural crops.
The company's deal with Monsanto is for cooperation in developing corn, soybean, canola and cotton seeds that will yield crops with more efficient nitrogen absorption capabilities. Nitrogen is one of the three major plant nutrients, and also one of the biggest expenses in crop cultivation. In addition, nitrogen fertilizers are one of the biggest agricultural pollutants, because nitrogen is highly soluble in water, and thus leaches into the groundwater.
Evogene CEO Ofer Haviv said that the target is to reduce plant nitrogen requirements by 20 to 30 percent.
Monsanto will receive an exclusive development license from Evogene to test the effect of particular genes; it will also receive an option to commercialize the use of the genes. Evogene will receive an undisclosed one-time payment upon signing the deal, and additional payments subject to meeting milestones, in the event that Monsanto finds the genes to have commercial potential for improving nitrogen absorption. It will also receive royalties on any sales generated as a result. Typical royalties in the industry can reach 12 to 18 percent of improved seed sales.
Monsanto, traded at a market cap of $43 billion, earned $570 million on turnover of $2.84 billion in the second quarter of 2007. Its revenues from the sale of seeds and seed improvement technologies totaled $4 billion in 2006.
Genetically engineered crops will constitute an estimated 70 percent of all corn crops and 40 percent of all cotton crops in the United States in 2007. The market for genetically engineered seeds is growing by an estimated 10 percent annually.
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