Firm to sign deal with Chinese

The Whig Standard

A local biotechnology company will officially make its first foray today into doing business in China, the first of what it hopes will be many.

Firm to sign deal with Chinese

By PETER HENDRA, THE WHIG-STANDARD

A local biotechnology company will officially make its first foray today into doing business in China, the first of what it hopes will be many.

At a ceremony today at City Hall, Performance Plants Inc. is expected to enter into a licensing contract with Beijing Dabeinong Technology Group Co. Ltd. (DBN), one of the leading feed and seed companies in China.

In the deal, DBN will get the exclusive rights to Performance Plants' drought tolerance and yield protection, heat and drought tolerance, water efficiency and yield enhancement technologies in regard to corn production.

DBN also gets non-exclusive research and development rights, for four years, to the same technologies for rice and soybean.

"Any time during the four years, they can convert it into an exclusive licence," said Yafan Huang, president and chief scientific officer of Performance Plants.

In return, Performance Plants will get some money up front, along with what are called milestone payments and, eventually, royalties.

It was DBN, Huang said, that first approached his company after seeing Performance Plants' offerings at a research conference in California in 2007.

"We had never heard of this company," Huang said of that first conversation with DBN.

"They were pretty aggressive the first time. They just came to the (conference) to see us. They told us they had done a lot of study, and they wanted leading technology. So they found us, because our drought technology is pretty famous."

Performance Plants' technology is so well known that it has been included in a permanent exhibit at the Museum of Science and Industry in Chicago.

Huang flew to Beijing shortly after to meet with DBN, but was reluctant to strike a deal because of "our lack of understanding of the Chinese market, and how they're going to take your technology to the market and how they're going to deal with all of the technical and regulatory hurdles."

Performance Plants then did some research on how to do business there courtesy of International Science and Technology Partnerships Canada Inc., a not-for- profit organization that had been funded by the federal government to strengthen trade relationships with a host of countries, including China.

After failing to strike a deal in that first round of talks, the two companies didn't really speak much from 2008 until last summer, Huang said.

"In the last year, through our new business interactions and scientific discussions, we realized this is a really good partner," Huang said.

The deal is good news for Performance Plants. Since it isn't a publicly traded company, financing can be an issue, particularly when a recession rolls around. That was the case in February 2010, when the company had to downsize its staff.

"The more of these kind of deals are signed, people will be able to come back to work," Huang said.

Securing funding is always a concern, he added.

"The good thing about us is we have a lot of good technologies," Huang said.

"The bad thing about us is we always have to look for financing to keep the company going, as (it is with) any technology company."

With this deal, the company will start to see those royalties start to roll in in about five years, Huang figures, as the seeds using Performance Plants' technology are harvested.

"This is one source of income, but it's not going to be enough," he said.

China is in need of genetically modified crops, Huang said.

Whereas both China and the United States have similar amounts of cornfields, China's yield from those fields is only about 50% to 60% of what the U.S. reaps, Huang said. The country is faced with poor soil, dry conditions and greater heat stress, he added.

"They have lots of room to improve," Huang explained.

The Chinese market is shifting towards one dominated by multi nationals, he said, much like what happened in North American 50 or so years ago.

"In the next few years, (the Chinese market) will become a few dominant companies just like North America," Huang said.

The time is ripe for biotechnology companies such as Performance Plants to do business in China, Huang said, because it has targeted that area as one it must focus on in the next five years.

The country is lagging behind in research, he said, and that's where a company like Performance Plants comes in. It fills the void between the initial scientific discovery and bringing a product to market, Huang said.

The DBN deal being signed today at City Hall isn't the only one Performance Plants is pursuing in China.

The company is also in the midst of negotiating a deal that would see its patented yield-protection technology used in the production of rapeseed, of which China is the world's largest producer.

phendra@thewhig.com

 

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