Bayer joins in $100 million investment bet on ag-biotech startup

CHICAGO (Reuters) - Germany’s Bayer AG, one of the world’s biggest agricultural chemical companies, is joining a $100 million bet that the next big breakthrough in crop fertilizers will be found inside a biological Petri dish.

FILE PHOTO: The logo of Bayer AG is pictured at the Bayer Healthcare subgroup production plant in Wuppertal, Germany February 24, 2014. REUTERS/Ina Fassbender/File Photo

Its Bayer LifeScience Center division, along with biotech firm Ginkgo Bioworks, is forming a startup to focus on developing biological solutions to reduce the use of nitrogen-based fertilizer, or make farmers’ use more efficient, company officials said this week.

The venture will be backed via a Series A investment from the two companies and hedge fund Viking Global Investors LP. The funding round closed on Wednesday. Bayer and Ginkgo Bioworks officials declined to discuss financial details or individual investment amounts.

The still-unnamed business will focus on plant-based microbes, particularly finding ways for microorganisms to help plants and the soil assimilate nitrogen molecules from the air or other sources, Gingko Bioworks Chief Executive Jason Kelly said in an interview.

The effort is part of a broader push in agricultural research to harness the microorganisms in plants and soil and, among other things, use them to improve crop yields or allow plants to thrive on lower amounts of fertilizer.

Reducing the amount of nitrogen fertilizer needed to feed plants could ease environmental concerns over water contamination from nitrogen fertilizer run-off and related greenhouse gas emissions, company officials said.

The Bayer-Gingko startup plans to hire 50 people and have offices at Ginkgo’s Boston facilities and in West Sacramento, California, home to Bayer’s plant biologics test facilities.

Viking Global Investors could not be reached for comment.

Investor interest in the microbiome and the broader life science sector has boomed in recent years.

Gingko Bioworks developed a technology to make a variety of products ranging from perfumes and sweeteners to animal feed supplements - all thanks to microorganisms. Last summer, Gingko pulled in $100 million in Series C funding to obtain 600 million base pairs of manufactured DNA.

Michael Miille, a vice president at Bayer Crop Science’s biologics group, said launching this venture as a startup was intended to keep it more nimble.

“Everything is designed for speed,” said Miille, who will serve as interim CEO.

Bayer’s latest investment is its fifth in the life science sector since December 2015, for a total of $650 million, company officials said.

Bayer is working to close its $66 billion acquisition of Monsanto Co - which also is ramping up its biologicals portfolio.

Editing by Matthew Lewis