Tree seed firm branches out in $113m deal

By GEOFF SENESCAL

A small Auckland-based biotech company's research into trees is the centre of US$60 million ($113 million) investment by leading forestry giants.

Genesis Research and Development, in its biggest commercial deal yet, has signed a letter of intent with a new joint venture company which includes two of the largest paper companies in the United States, International Paper and Westvaco Corporation.

The other two partners in the joint venture - aiming to produce and market tree seedlings to improve forestry health and productivity - are Fletcher Challenge Forests and Monsanto Company, one of the largest agricultural chemical and seed companies in the world.

Using the funds, the new company will purchase Genesis' forestry intellectual
property for an undisclosed sum. It will also give Genesis a research contract to undertake genomic research for the new company over the next five years.

Furthermore, downstream, a royalty will be paid for new trees that are sold using the Genesis technology.

The chief executive of Genesis, Dr James Watson, said this was a huge boost for the company, whose small band of shareholders, including Fletcher Forests, have supported the company's development so far.

Dr Watson said: "It helps us in a number of ways. It ensures that we have cash to keep up with the technology that is being developed and it will help us develop technology in non-forestry plant areas."

Genesis is also undertaking clinical trials on a vaccine it has developed for the skin condition psoriasis.

"The longer we can fund the psoriasis clinical studies then the greater the royalty we will get downstream when we have to go and partner that out for manufacturing, product development and marketing and so on." Dr Watson saw the joint venture arrangement as a real cornerstone deal in the step forward for the company, which aims to list on the stock exchange in New Zealand and in the United States.

The participating companies in the joint venture see the new grouping as a worldwide magnet for developments in forestry biotechnology.

The firms believe "that as international demand for wood fibre increases, significant business opportunities will result from additional breakthroughs in forestry science."

The joint venture will focus on tree species that comprise the bulk of recent commercial plantings.

Targeted genetic improvements include: herbicide-tolerant planting; higher growth rates to allow more wood to be grown on less land at lower costs; and improved fibre quality and uniformity to increase efficiency in paper and wood products manufacturing processes.