British animal genetics firm Genus is diving deeper into the hot area of gene editing, in a move Chief Executive Karim Bitar says will bring long-term gains at the cost of a hefty hike in research spending.
The company, which sells pig and bull semen to farmers worldwide, has signed an exclusive global deal with privately owned Caribou Biosciences to use the U.S. firm's CRISPR/Cas9 technology to develop pig and cattle breeds.
"The increase in investment will be substantial," Bitar said in an interview on Wednesday, after announcing the collaboration. "We've been spending about 7 percent of sales on R&D ... that's definitely going up."
Genus has invested $5 million in Caribou and will make an unspecified upfront payment to access its technology, as well as funding a four-year research program.
The latest tie-up builds on Genus's existing work with the University of Missouri using gene editing, which led to the breeding of the world's first pigs resistant to a common viral disease in December.
Bitar said the investment in gene editing at Genus would run into "millions of pounds" and the company's current overall annual research and development budget of around 30 million pounds ($44 million) would increase at a double-digit rate in the year from July 1.
"In the next financial year, the R&D spending will clearly be increasing by over 10 percent. It's going to be meaningful for us."
In the long term Genus expects a commensurate return on its investment by producing new animal breeds that are resistant to diseases and offer improved protein yields.
Gene editing allows targeted cuts to DNA using biological "scissors" that operate a bit like a word-processing program that can find and replace selected stretches of genetic code.
The technology holds out great promise for treating human diseases, and improving agricultural crops and animal species.
The challenge for Genus in the coming years will be to balance higher investment against the need to maintain investor returns.
"I think the reality is that we are going to continue to grow our earnings because the business is performing strongly at the moment," Bitar said. "It's going to be a balancing act in terms of the degree of earnings growth - that's something we are evaluating."
($1 = 0.6872 pounds)