Advances in the understanding of the human genome have led to some big opportunities for businesses. Genomics, or the study of the function and structure of genomes, represents a novel approach to examining human development and provides new methods with which to research and develop drugs. This isn't news to anyone who has been paying attention to biotechnology over the last few years. Research in animal genomics, however, is a relatively recent undertaking with a lot of promise.

"It's the last frontier in genomics," says Roger Wyse a managing director at Burrill & Company, a life sciences VC firm that specializes in animal biotech.

The market for human drug applications is enormous, even if genomics-related research leads to only a few blockbuster treatments. Though often overlooked, the animal industry--which includes feeding, retail, and raising--is no small matter, either. According to the U.S. Department of Agriculture, the market is worth roughly $100 billion in the United States, and about $240 billion worldwide--a potentially huge opportunity for biotech firms engaged in animal genomics research. If their efforts succeed in making animal production more efficient, then there'll be a tremendous payoff--both for the biotech firms themselves and for the food producers.

Where major food producers like Tyson Foods, Perdue, and IBP have in the past used fairly inaccurate statistical models to determine better breeds, genomics has turned the field into a game of precision gene analysis, which has resulted in marked gains in production efficiency. What's more, with the development of the first transgenic animal--a mouse--in the early '80s and recent advances in cloning, companies are not only genetically modifying animals for better production, they are determining whether those modified genes can be used for human therapeutic applications as well. "We are at a point of profound breakthroughs in animal science that will lead to some tremendous [business] opportunities," says Clifton Baile, an animal science professor at the University of Georgia and CEO of the genomics startup ProLinia.

Take, for example, AniGenics, a Chicago-based startup focusing on mapping and marking the genomes of various livestock animals so that meat producers can get more product from their animals. This company can identify the particular gene in a chicken, for example, that determines how many eggs it will lay. It can also find the gene that produces fat so that breeders can reduce fat in the animals that they sell for meat. This kind of information would be unobtainable without genome sequencing.

Meating Expectations

The mapping of genomes should have as much impact on the livestock industry as it will with humans, says Steve Niemi, CEO of AniGenics. "It will clearly revolutionize the production of meats."

"We think that we can create a 5 to 10 percent efficiency improvement in the food business," says Mr. Niemi. In a $100 billion market, he argues, his company is staring at a $5 billion to $10 billion opportunity over next few years. And according to figures from the Food and Agriculture Organization of the United Nations, by 2020 worldwide meat consumption will rise 64 percent 0ver 1993 levels, so he expects this opportunity to increase significantly over time. What's more, Mr. Niemi speculates that animal genome data is likely to make meat less of a commodity, thus creating more revenue. "Right now we all assume meat is the same. But if we do very selective breeding, you can start to produce different grades of meat--real tender, medium tender, and so on," Mr. Niemi says.

MetaMorphix, a startup in Savage, Maryland, is also aggressively courting this opportunity. To provide similar services to the major meat producers, it recently bought the livestock genomics database from Celera Genomics, which was one of the first companies to make available a map of the entire human genome.

MetaMorphix is already developing a growth hormone to get more meat out of chickens, cattle, and pigs. By inserting a protein inhibitor into an egg or an adolescent animal, skeletal muscle growth gets stunted, thereby fostering more actual muscle growth. "It will increase the amount of meat by 20 to 30 percent," says Ed Quattlebaum, the CEO of MetaMorphix. "It will also shorten the time it takes to raise these animals, saving on food supplies and [reducing] waste."

Startups like Infogen and ProLinia are using cloning to achieve similar ends. ProLinia, in Athens, Georgia, is using nuclear transfer to clone livestock. It isn't doing the work so producers can change the genetic makeup of existing animals but so companies like Smithfield Foods, the largest hog producer in the world (and not coincidentally ProLinia's largest investor), can reproduce the best hogs in a breed. "We've estimated that cloning in this area alone represents about a $1 billion market," says ProLinia's Mr. Baile.

For those who aren't familiar with the underbelly of agriculture and meat production, these estimates may come as a surprise. In fact, even many seasoned investors don't understand this business opportunity. "Wall Street doesn't understand agriculture," says Burrill's Mr. Wyse. "That's why it's important to show a human application to all this."

Animal Pharm

As such, many of these businesses are hoping for a genetic breakthrough in animals that can translate directly to humans. While many companies say this type of transfer isn't a huge component of their business plan, they nonetheless hope that it might lead to other sources of revenue. The gene that causes your dog's cataracts, for example, could shed light on what gives your grandmother the same illness. "There are 350 genetic defects in dogs, 250 of which are in humans," says John Studabaker, vice president of the American Kennel Club Canine Health Foundation, an organization that invests over $1 million a year in genomics research. "Mining the genome of dogs, more than any other animal, could lead to cures for humans."

Adopting this strategy, many agriculturally focused biotech companies have begun looking to animals for new solutions to the human condition. PPL Therapeutics, in Edinburgh, Scotland, is planning to clone animals with modified genes so that eventually it will be able to transplant the cloned tissue from the animals into human beings. Many pharmaceutical companies are using animal blood serums for harvesting proteins that help treat various problems in humans. Some of these proteins, for example, prevent blood clotting; others stimulate hair-follicle growth.

Companies like Virionyx, a startup in Auckland, New Zealand, are looking to "Barney the goat" for the cure to AIDS. Because of a plentiful supply of livestock, and longstanding research experience with them, New Zealand has become a leader in agricultural biotechnology--and not just to provide products for animals themselves. Since goats produce an antibody for AIDS, they don't get the virus. Virionyx has actually given goats HIV and then conducted experiments with the resulting antibody to gain insights into combating the virus in humans. "The goat, in the end, might just give us the solution to one of our most deadly diseases," says Paul Pickering, the chief operating officer at Virionyx.

Whether used to help solve human problems or simply to create more efficient food producers, animal genomics is becoming an increasingly valuable biotech field. Some might think that biotech companies are tampering with nature--that creating "frankenfoods" is inhumane. But these companies stand by their research. "When it comes to animal genomics it's no worse or no better than what we do today--it's just a more efficient way to gather information and use it," says Mr. Niemi. "Already animals are very far from nature and their ancestors. They are used for food. And if [genomics] can provide a better product it's something worth pursuing."

David Lipschultz is a contributing editor.

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