Small to Medium Enterprise

A common myth that's used to argue for de-regulation of gene editing is debunked. Report: Claire Robinson

An article for Euractiv, "MEPs slam gene-editing court ruling as damaging for SMEs [small and medium size enterprises]", is typical of the messages put out by the pro-GMO lobby in support of de-regulating gene editing in agriculture.

The article quotes the chair of the European Parliament's agriculture (AGRI) committee Norbert Lins MEP, as saying that it is relatively easy for larger companies to comply with the EU's GMO regulations, but the smaller ones are badly affected by the ruling of the European Court of Justice that gene-edited crops and foods fall under the EU's GMO regulation and thus must be safety checked and labelled.  

The message, as stated by another MEP in the Euractiv article, is that de-regulation of gene editing will enable market access for SMEs that want to develop gene-edited crops and foods to save us all from climate change. Variations on this message elsewhere claim that opening the market to SMEs will democratise GM and help end the monopolistic domination of much-despised big ag companies like Monsanto/Bayer.

Gene editing won't save us from climate change

The climate change argument is not supported by evidence, as there are no gene-edited crops that could help humanity face this challenge. Nor are there likely to be, as such traits are complex, controlled by multiple genes. These are not amenable to manipulation via the crude tools of gene editing. It is a scandal that journalists have become advocates for the GMO lobby and repeat their hyped promises of climate-ready gene-edited crops on the basis of no evidence at all.

DowDupont has a patent cartel on CRISPR

As for the SMEs argument, Testbiotech has strongly challenged it in an analysis that found that the agribiz giant DowDupont controls large parts of the seed market through a patent cartel on the most popular gene-editing technology, CRISPR. Testbiotech says, "The US corporation (with its agribiotech sector renamed Corteva) has allegedly signed contracts with all the important owners of basic patents on CRISPR/Cas technology. Data presented in a meeting with the EU Commission at end of 2018 show that DowDuPont has successfully managed to combine 48 patents on the most basic tools in one patent pool. According to DowDupont, access to such a high number of patents is necessary in order to apply the technology in plant breeding to its full extent."

As well as the patents, there are also the licensing agreements that grant formal permission to use gene-editing technologies. Testbiotech says, "DowDuPont is now in the unprecedented position in plant breeding of being able to allow other companies access to the patent pool and demand licence contracts: what on the one hand is promoted as the ‘democratisation’ of patent law, is on closer scrutiny emerging as nothing less than a way of controlling competitors and securing a dominant market position. DowDuPont is fast becoming the gatekeeper of an international patent cartel."

On their own, SMEs will never be able to afford the patents and commercial licensing agreements that govern gene editing.

Large corporations hold most gene-editing patents

Jan Plagge, president of EU organic farmers (IFOAM EU), told Euractiv that large corporations hold the majority of patents for gene-editing techniques. This, he said, makes it “hard for small and medium enterprises to use this technology” and therefore the argument that “regulation is preventing SMEs from strengthening their innovation and product development is not really valid”.

What, then, do we make of the GMO industry lobby group EuropaBio's claim in the Euractiv article that SMEs hold the “biggest share of genome-edited organisms ready to offer to the market”? If it's so hard for SMEs to use the technology, how is it that they have already accumulated a stockpile of products?

Three levels of licence

The molecular geneticist Dr Michael Antoniou has many years' of experience of developing biotech products (in the area of medical research), with both SMEs and larger companies, and patenting them. He says that both Plagge and EuropaBio's statements are correct thus far. But he takes issue with EuropaBio's subsequent claim in the Euractiv article that the Court of Justice ruling is an “insurmountable hurdle” for smaller companies and public researchers active in agricultural biotechnology.

Dr Antoniou explains that there can be three different types of licence for technologies like CRISPR, which industry-based researchers (including those in SMEs) have to take out at different stages of product development. These are evaluation, research, and commercial licences. Evaluation licenses are granted to researchers by the owners of the technology – typically large companies – to allow the researchers to do preliminary work to see if the technology could be useful to them. If the researchers find that the technology is of interest and want to pursue a particular application, the technology owner can grant them research licenses.

According to Dr Antoniou, evaluation and research licences are often granted quite cheaply, since the (mostly) large companies that own the technology want it to be used in the development of a product that can in due course be commercialised. A typical SME could afford evaluation and research licence fees. So it's perfectly possible that SMEs are indeed sitting on a large share of gene-edited organisms "ready to offer to the market".

But it's at the commercialisation stage that things can quickly get very expensive, with large companies demanding high payments, in the form of commercial licence fees and royalty payments on product sales, for the use of their technology. In addition, patenting fees can easily accumulate to six-figure sums, since patents must be applied for – and patent lawyers engaged – in each territory where intellectual property rights are sought. The patenting process can drag on for years, with lawyers' fees rising all the while.

Regulatory costs relatively low

Compared with these product development costs, regulatory costs to get a GM plant trait approved for marketing are relatively low. For first-generation GM crop traits, regulatory costs have been calculated by the industry consultancy firm Phillips McDougall as around 25% of the total research and development costs for the trait.

Thus regulatory costs are not the limiting factor when it comes to SMEs breaking into the GMO market. Rather, the business model (some might say "greed") of the large companies that own and control the technology could be said to be the factor that sets the bar higher than an SME can reach by itself.

Thus the system in the biotech market is, and will remain, that researchers based in small companies or universities, often with industry funding, “invent” a GMO and partner with investors and/or a large company to patent the product and bring it to market. That process includes the investors or large partner company paying the costs of obtaining regulatory approval. The inventors and their institutions enjoy a profit-sharing arrangement with the investors or large partner company. Often in this process, the SME is bought up by larger companies.

Business model not a cause for lamentation

This business model is not considered a cause for lamentation. On the contrary, it is celebrated as a path to success for all involved, including the individuals and the SME responsible for inventing the product. The world of biotech-dependent SMEs is marked by an extremely fast turnover. Many startups emerge but only 10%, at most, will make it. It is a Darwinian process of the survival of the fittest. But no one who has developed a promising product needs to fear that it will be “orphaned” without resources to bring it to market. If an SME has such a product, it will either attract venture capital investment to develop it by itself (in which case, the SME grows into a large company) or the SME will partner with, or be taken over by, a larger company and the product rolled out on a wide scale.

The prospect of being taken over is not something that SMEs fear. On the contrary, SMEs actively desire to be bought out. Selling up means that the “small” businesspeople who run them can find themselves in the fortunate position of being able to take a well-funded early retirement or use the sale money to set up another startup company that develops a new product. Universities are alert to the profits that can be made from such arrangements, which is why they have entire departments whose sole interest it is to transfer “inventions” generated by their academic staff to industry.

Based on the above, it is evident that whether an SME and its GMO product fails or not has nothing to do with the regulatory burden and everything to do with whether it comes up with a product that the market actually wants.

Why do companies want de-regulation?

These insights beg a further question. If de-regulating gene editing won't allow SMEs to gain a larger share of a market dominated by a few large agribiz corporations, what do companies (large and small) stand to gain by such a move? The answer: An unrestricted permit to release potentially dangerous and unproven GMOs into the market without safety testing or labelling – without even having to prove that the product does what it is claimed to do. They will also save the 25% of the R&D costs of getting their products through the regulatory system. In other words, it would make the lives and careers of agbiotech developers and companies easier (in terms of less accountable on efficacy as well as health and environmental safety) – and relatively less expensive.

What would de-regulation mean for the public?

Some may argue that on this basis alone – greater ease and relatively reduced expense for companies – gene editing should be de-regulated. After all, what's to lose? A good example of what the price of de-regulation would be for the public is provided by the gene-edited cattle of Recombinetics, Inc., whose animals were declared by the Minnesota-based company to be “free of off-target effects”, but which were found by US FDA researchers to contain off-target effects that the company had failed to find. The off-target effects happened to be that they unexpectedly contained antibiotic resistance genes. If these genes transferred to pathogenic bacteria, they could make them antibiotic resistant, adding to an antibiotic resistance problem that threatens human and animal health.

The gene-edited cattle were repeatedly used by pro-GMO lobbyists – including by the CEO of Recombinetics and Alison Van Eenennaam, the scientist who helped develop them – as an example of a product that was so nature-identical and obtained with such a “precise” technology that it required little or no regulation.

The case of the Recombinetics cattle is just the first in what promises to be a long line of gene-editing “surprises”. It is a crystal-clear sign that it’s time for Europe’s politicians to respect the aim of the GMO regulations, which is to protect human health and the environment – not to enable corporations to make a quick and easy profit at our expense.