Insecticide development company Bio-Gene Technology (BGT: $0.096) has signed a development and product access deal with Israeli group STK Bio-Ag Technologies.

Bio-Gene is developing two novel insecticides based on a new chemistry class. One is a 100% naturally-derived product, called Qcide, from a eucalyptus tree (Gympie Messmate) which is grown by Bio-Gene in Queensland. Its oil is extracted and contains high levels of a novel insecticide (diketone tasmanone).

The second insecticide, Flavocide, is based on a naturally-derived insecticide, however needs to be manufactured synthetically due to the low concentrations found in the natural plant. Bio-Gene has developed a proprietary manufacturing process with the CSIRO.

The deal with STK gives STK non-exclusive access to the natural compound, Qcide, which STK can commercialise in specific markets. These applications are in crop protection, aquaculture (fish production), professional turf applications (such as for use on golf courses), and in the ornamentals market (flower growing).

Under the terms of the deal, STK will register the active ingredient Qcide with regulators which Bio-Gene will be able to access for its own uses. STK will also build a second production site outside of Australia. Bio-Gene will be able to purchase product from STK and similarly STK will be able to purchase product from Bio-Gene's Australian facility, reducing any supply risk.

It's an unusual deal whereby Bio-Gene does not receive any direct payments or royalties from sales. However, Bio-Gene CEO Richard Jagger says it's probably the most important deal the company has signed to date. The reason for that is STK will likely invest around $10 million in the development of Qcide and the second manufacturing facility, both of which will directly benefit Bio-Gene. The applications STK has selected are also ones that Bio-Gene was not intending to pursue with Qcide, although the deal is non-exclusive so does not prevent Bio-Gene from entering those markets in the future.

Jagger said that in selecting a purely natural insecticide (Qcide) or a naturally identical insecticide (Flavocide) that is produced synthetically depends on the perceptions around safety from the end user. Completely natural products are considered safer than synthetic products by the consumer, however that perception is not always accurate.

First Product Launch in 2026 through Clarke
Bio-Gene expects its first insecticide to be commercially launched in 2026. This will likely be Flavocide for the control of mosquitos in the US.

In April last year Bio-Gene signed a commercial deal with Clarke Mosquito Control Products to commercialise Flavocide for the control of mosquitos in the public health segment in the US.

Clarke is the leading mosquito control business in the US, a market estimated at US$100 million a year. The global market for mosquito control is estimated at US$650 million a year.

Bio-Gene has been working with Clarke since 2020, when Clarke first began assessing Bio-Gene's novel insecticide. Its business is to control outbreaks of insect-spread infections (including the Zika virus in 2016) as well as domestic and commercial mosquito control.

Clarke currently uses a range of insecticides in public health applications including Pyrethroids/Pyrethrins (developed in 1949), Sumithrin (first registered in 1976), organophosphates (developed in the 1960s although can be detrimental to bees) and neonicotinoids (developed in the 1980s with concerns of effects on birds and bees).

However, there are concerns around resistance to existing insecticides, as well as the harmful, cascading effects of some of those products in use. Having an additional, effective insecticide with a strong safety profile against non-target species (birds, bees and soil-based microorganisms) represents an attractive option that can be rotated in insect control throughout the world preventing or delaying insecticide resistance.

Under the Clarke agreement, Bio-Gene will receive a royalty from product sales as well as milestones and technical transfer fees. Bio-Gene's cash receipts in FY2022 were $0.5 million.

Other Commercial Agreements
In 2021 Bio-Gene signed a commercial development agreement with Evergreen Garden Care. Evergreen has exclusive rights to evaluate and develop Qcide and Flavocide for the control of flies, mosquitos and ants in the consumer pest control market in Europe, the UK, Australia and New Zealand. These markets are estimated at US$600 million a year.

Summary
Bio-Gene’s novel insecticides have been evaluated over several years by multiple companies with three commercial agreements in place. Bio-Gene is also working on other deals for its two insecticides. Jagger believes somewhere between 5-20 commercial deals in various regions can be secured for the company's technology.

Bio-Gene is capitalised at just $17 million with $4.3 million in cash at the end of last year.

Bioshares recommendation: Speculative Buy Class B

 

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