Total Developmental Costs

The most wanted information for decision-makers in companies who contemplate the development of a new microbial pest control products is what are the total costs? There is no simple straightforward answer to this question, but an indication must be provided for a sound business decision. Each case is unique, but it is possible to provide a general figure for a certain type of entomopathogen and its foreseen purpose. For each company, the investment will be different since expertise, facilities and equipment, R & D, and presence in the market will be unique too. Many authors have attempted to come up with an indication of the total costs for various kinds of microbial pest control products. The difficulty with many of these estimates is the failure to clearly describe which expenses are included in the amount reported. Are registration expenses counted, and if so, to what extent are in-house expenses, contract research expenses, and registration costs in various countries included? I have provided more detailed estimates for registration costs in Chapter 5. The estimates in the literature range from developmental costs, usually R & D and registration costs, up to total investment costs for setting up a biopesticide company. A general estimate has been made by Lisansky (CPL 2006c): "A company that wants to go into biopesticides needs to be able to allocate $30 million". He analysed that on average, R&D costs will be around $6 million, not including registration and marketing costs. An economic analysis for the commercial production of Btk has been presented by Rowe and Margaritis (2004). This is one of the few studies that investigated in depth the economic feasibility of manufacturing Bt based insecticides by a state-of-the-art bioprocess design on a large scale. The investment needed to produce 8-15% of the world demand for Bt's was approximately CA$18 million for a stand-alone plant, including equipment costs of about CA$12 million. They calculated the rate of return on the total capital investment versus co-varying the product selling price and the annual production scale for two different fermentation processes. The outcome strongly relies on the correct market and selling price assumptions. This approach could be used for obtaining capital and operating cost estimates for a preliminary budget approval as in a business plan. Figures were reported concerning the Lubilosa project: "Green Muscle was commercially available after 12 years of research involving at least 40 scientists and costing £15 million" (Moore 2008). Calculations for a small biopesticide plant in developing countries such as Nicaragua (Grimm 2001) and Madagascar (Swanson 1997) demonstrated that an investment of less than one million Euros could be sufficient.

The above-mentioned amounts include the establishment of a new company, and to make an estimate of those costs is very difficult. Amounts for product development are considerably lower. Woodhead et al. (1990) estimated the costs for a microbial biopesticide to be under $5 million, but it is not clear whether the registration costs of $2.5-3.5 million are included in this figure. Tormala (1995) assumed that "overall development cost may be anything between $1-10 million" based on R & D budgets of some biocontrol companies. According to Cross and Polonenko (1996) total development costs of a bioherbicide and registration in Canada are in the range of $5-8 million. Marrone (1999) mentioned costs to be between $2-4 million (in the USA) in 2-4 years of development. The developmental costs of a Bt insecticide are estimated to be $3-5 million (Navon 2000). Jarvis (2001) estimated development costs for a microbial around $3 million, and when registration costs of at least $0.5 million are added, total costs are about $4 million. More recent figures have been provided by a few authors involved in commercial activities. Krause et al. (2006) estimated the registration and commercialization of a new biopesticide to cost €6-8 million over the course of 6-8 years. The development and registration of a baculovirus product will need an investment of several million Euros according to Kessler et al. (2008) and it will take 4-8 years before any revenues will return to the company. Furthermore, the restricted host range allows for small markets and this makes it "extremely difficult" and "a financial risk and a tightrope walk" for small and medium size companies to become successful (Kessler et al. 2008). Lucarotti et al. (2007) estimated that the development from isolation to registration has cost around CA $6 million for the balsam fir sawfly NPV product Abietiv. The costs of developing a new microbial control agent typically exceed $25 million according to Gelernter (2007). A current estimate from Agraquest claims that developing and registering a biopesticide globally costs about $15-20 million (CPM 2009b). In a company survey in the REBECA project among 52 biocontrol companies, registration expenses amounted to an average of almost C2 million. R&D expenditure has been C15 million in one case (Hokkanen 2007).

Figures provided in the literature and consultant reports range from $2 million to $30 million. Clearly, this is useless as an estimate for those considering the initiation of the development of a new microbial control agent. If an established biocontrol company with experience and available production facilities, researchers, and marketing and sales people, starts with a new product, costs will be substantially lower than when a new company needs to be founded, built, equipped and staffed. In the first case I estimate that full developmental costs range between C2 and C5 million, in the second case an investment of C10-15 million will be needed until sales reach the break-even point. In both situations total research and registration costs could be considerably lower, in the order of a few million Euros, when much information has been generated by public research. I will discuss the role of public research below. In case a new company starts with the labour-intensive production system versus the capital-intensive model (see Chapter 3), for example with in-vitro production of baculoviruses or production of fungi in bags, starting up costs can be reduced by several millions. By comparison, developmental costs for a chemical pesticide range between $180 and $200 million for an established R & D agrochem-ical multinational and it takes about 9-10 years before it can be launched (see e.g. www.agro.basf.com;www.ecpa.be).

Obviously, each situation is different depending on the company, the pathogen, the target pest(s) and the sector(s) and countries in which the product will be

Developmental phase

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