Episode Transcript
Joanne: Hello and welcome to the London Stock Exchange's Be Inspired Series. In this series, we speak to CEOs, founders and senior leaders of companies listed on London Markets and ask them to share their journey with us. Today, we're joined by Anthony Chow, co-founder of Agronomics, which listed in London in 2011. Anthony, thank you so much for joining us today.
Anthony: Thanks for having me.
Joanne: Can you provide us with a bit of background into what Agronomics does and what cellular agriculture is?
Anthony: Agronomics is a London listed investment company, focussed exclusively in the field of cellular agriculture. So we've built a portfolio of more than 20 companies in this field. Each of these companies has defensible intellectual property and technologies which have the potential to create a step change in the efficiency of production of things which have historically been derived from animals. So there's a very big focus on meat, but it extends well beyond meats into seafood, into dairy, eggs, leather, coffee, cotton and cocoa. And effectively, what we're doing, all our portfolio companies are doing, are applying biotech methodologies to producing food in a much more sustainable fashion than using animals, because animals are inherently very inefficient at converting calories of feeds to calories of flesh. And just, I'll give you an example: a chicken requires 9 calories of feeds to get 1 calorie of flesh: a cow is more like 25 to 1. And the latest research on the field of cellular agriculture indicates that the calorie conversion ratio at scale will be below 2 to 1. So this is just a much more efficient means of producing the proteins, which we're all used to consuming.
Joanne: That's fantastic. Anthony, what's your background and how was the company formed?
Anthony: I'm a chartered financial analyst by training, and I've been working with Jim Mellon, my co-founder, for about 16 years, focussed initially on human therapeutics in the field of biotech and then centring in on the field of longevity, which is a subsector of biotech. So it was quite a natural progression moving into the field of cellular agriculture as opposed to the plant based alternative proteins, because we're comfortable with the deep tech aspects and the relatively long timeframes taking to get these products approved and on the market. But we like these companies because in the long run we think that they've got much better business models, that defensible intellectual property may in some cases give them enforceable monopolies in their respective markets. So Jim has a track record of identifying these emerging investment themes before they become mainstream. He's done that across multiple markets. And this one, I must confess, he's got absolutely spot on.
Joanne: That's brilliant. Why is this such an interesting opportunity now?
Anthony: Cellular agriculture is entering commercialisation as far as we can see. This is the only technology which has the ability to meet our growing demand for animal proteins while reducing the resources required to produce them.
Joanne: Why is cellular agriculture important?
Anthony: We can't feed today's population sustainably with current consumption patterns and production methods. Using animals to produce our protein is very resource intensive and animal agriculture is actually the single largest contributor to greenhouse gas emissions out of any industry. It's more than all forms of transport combined. But then the list goes on; 50% of all freshwater fish which we use, goes into animal husbandry. That includes the water that waters the crops, that then get fed to the animals. And it's the case today that 70% of all crops that we grow, are fed to animals. So the number one cause of deforestation is not to create grazing land for animals, it's to create land that we can then grow soybeans on and other forms of crops that then get fed to animals in a very inefficient cycle.
Joanne: That's really interesting. Are there any other reasons?
Anthony: Yes. There's increasing concern over animal welfare. About 80 billion animals and 2 trillion fish are slaughtered every year. And the perverse thing about the fish is that a large percentage of those are actually ground up and fed back to fish, and fish farms, in a very inefficient cycle that is perpetuated. The other issue with intensively farmed animals and fish is that because they are kept in such close quarters, they need to be prophylactically dosed with antibiotics and 80% of all antibiotics which are produced which are medically important for humans, get fed to animals in intensive animal agriculture because if one gets sick, they all get sick. And this is a major driver of superbugs and anti-microbial resistance. And if we have a bacterial pandemic, unlike the viral pandemic. That we've just all experienced, then things will be much, much worse and you will probably want to adhere to your social distancing rules.
Joanne: That's really interesting. I can see why that's such a huge concern. And do the products taste the same?
Anthony: Yes, I've had first hand experience. I've had pork from 2 different companies, chicken from 2 different companies. I've had bluefin tuna. I've had the dairy proteins, egg proteins. I've had the leather in my hands. And it looks like leather. It feels like leather. It smells like leather, because these are the real thing. This is very distinct from the plant based alternative proteins which are doing their best to mimic the sensory profile of meat, but just aren't getting quite there when it comes to consumers expectation on price for one. But actually the sensory profile is probably the biggest issue.
Joanne: That's great. What makes economics unique and why is it interesting for investors?
Anthony: Agronomics is unique in the literal sense. There is no other way that public or private market investors can get exposure to a concentrated portfolio of companies in the field of cellular agriculture. Quite a bit of money has been raised for food tech over the last few years, but a lot of that has been directed into plant based alternative proteins or other in healthy, less innovative technologies around food. So we are unique. We've got a portfolio of some of the leading companies covering of all the major protein categories from beef, pork, chicken, seafood, dairy and eggs, but also extending into plant cell culture. So the production of coffee, cocoa, even cotton can now be produced in a bioreactor.
Joanne: So Anthony, the first products approvals are coming into the US, which is, which is great news. How are you going to scale the business?
Anthony: We're entering a really exciting period for the field of cellular agriculture. There was a product approval in Singapore back in December of 2020. But what you know, Singapore is only 5 million people. What is really exciting is the product approvals in the US, a very large population and a high value market. So the 2 first, no questions letters have come from the FDA. This is the second last step in the approval of the meat and seafood products. But the USDA will hopefully soon approve the products and then everyone or the consumers will be able to get these products into their mouths and try them for the 1st time. The scaling of these companies is the last remaining challenge for the industry as a whole. There is no doubt that these products can be produced and as I said earlier, I've already tasted these products, but really it does come down to scale. Can these companies compete with conventional agriculture from a price, taste and convenience? Because these are the three key reasons that consumers make their food purchasing decisions. And the price point I cannot emphasise enough is very important. There are surveys out there which indicate that consumers are willing to pay a premium for their products, but this is just not the case for the vast majority of consumers and we need to hit that parity, which is what plant based alternative proteins have failed to do. And then the the demand will come, we believe.
Joanne: What types of investors are participating in the field of cellular agriculture?
Anthony: Well, when we made our first investment back in 2018, only $50 million had gone into the sector globally and there were about 20 companies in the field and across the first 3 years of existence, 2016 to 2018, only $270 million in aggregate went into the fields. That was largely driven by mission driven investors that were really focussed on the animal welfare side of things. Even those investors have actually conceded that the animal welfare message is not strong enough to get broad based change happening at the consumer level and they've shifted their messaging a little bit towards the environmental messaging, which resonates with a broader audience. But what we've seen from there is larger institutional investors, sovereign wealth funds, in many cases in the Middle East, in Singapore participating, and some of the very large pension funds out of Canada as well. But the thing that's really interesting is that the conventional meat producing companies like Tyson, and Cargill, PHW, even JBS out of Brazil just acquired a cultivated meat company for $100 million in cash. And we suspect that in time there will be a lot more M&A activity coming from these meat producing companies as they sort of seek to hedge their bets.
Joanne: And just reflecting on your journey, how's your journey been so far and would you do anything differently?
Anthony: Well, we have the opportunity to set Agronomics up as a private fund or a public vehicle; and we thought the theme of cellular agriculture would play very well in the public markets and we were absolutely spot on in that respect. In the first few years, Agronomic's share price traded very well and we were able to raise £135 million of cash at attractive valuations. But then the broader markets turned and private venture markets in particular have been quite challenging. And as a result, our share price performance has been less good. But that really gives investors an opportunity now to buy an even better established portfolio at a discount to our net asset value.
Joanne: What's next for Agronomics?
Anthony: We've got a number of funding rounds in some of our leading companies, which will provide assurances, I think, to investors that the valuations in this sector are not actually heading backwards like the rest of the the broader venture worlds. I think given the challenging conditions, investors are right to question these numbers at this point, and it's almost upon us to really deliver and verify these numbers. So we're going to see a number of pretty material funding rounds, not just in our portfolio, but the the sector more broadly. The product approvals will then come shortly after these companies raise more money and then hopefully we'll be able to demonstrate a pretty steady march higher in terms of our net asset value per share, which is what a lot of investors will be looking at.
Joanne: Thank you, sounds, that sounds really interesting, really exciting. Anthony, thank you so much for coming in and sharing your really inspiring story with us today.
Anthony: Thanks for having me.
Joanne: To view more episodes of Be Inspired, please visit www.lsegissuerservices.com/spark
