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NRGene Looks to Royalty-Based Partnerships in Wake of IPO


CHICAGO – Last month, Israeli bioinformatics firm NRGene completed an initial public offering on the Tel Aviv Stock Exchange. The NIS 100 million ($30.5 million) IPO valued the company at NIS 370 million.

The cash infusion clearly put Ness Ziona-based NRGene on a growth trajectory, but the developer of artificial intelligence technologies to analyze agricultural and livestock genomic data now is at a precipice.

Chairman Asaf Levi said at the time of the IPO that the firm would apply the new funding to support growth and form long-term collaborations with breeding companies. In an interview this month, Guy Kol, cofounder and vice president of research and development, got more specific.

NRGene has dabbled in human genomics, collaborating with Tel Aviv Sourasky Medical Center in Israel since 2017 to compare genotypic and phenotypic differences in patients with Parkinson's disease in search of new biomarkers.

"It's clear that after the first proof of concept that we did with Sourasky, if we want to move into a full-blown product, it will require significant investment," Kol said, citing the regulatory requirements of human genetic research.

That decision is on the horizon, according to Kol, but the firm already has made some important strategic decisions in the last year or so. NRGene not long ago adopted a new business model that involves joint development of intellectual property in return for royalties from sales of associated products. 

The business now has three parts: software licensing, analytics services, and now, royalty-based partnerships. In a way, the royalty model is going back to the future for NRGene.

Kol and CEO and Cofounder Gil Ronen both worked for plant-focused computational biology firm Evogene in the 2000s, where they learned that the lower regulatory hurdles in agricultural genomics made time-to-market much shorter than for companies working with human genomes. They took that same notion to NRGene, which they started at the end of 2009.

The original model was to help clients develop products, such as seeds or plants with specific traits, in return for royalties from those end products.

One of the first deals NRGene made was a collaboration with Israeli ag-chemical company Makhteshim Agan Industries, now a ChemChina subsidiary called Adama. That deal helped Makhteshim enter the crop breeding business and essentially funded NRGene's R&D for about three years.

"We didn't need any product or marketing or salespeople because we were only working for them," Kol said. "It gave us about three years of peace of mind to focus on technology, on the scientific challenges that face us."

The AI technology that NRGene was able to develop and refine with Makhteshim evolved into NRGene's flagship GenoMagic cloud-based genome analysis platform, which the company now markets to seed companies worldwide.

After the Makhteshim partnership ran its course, NRGene turned to selling software and analytics services. That worked well for several years, but, as Kol said this month, "It's clear that there's kind of a limit to where you can get to by selling analytics."

Now, the company can tell prospective customers that it will invest in R&D and offer software and analytics at no initial cost. "But if [a project] is successful, we want part of the success, in this case, royalties out of the finalized product," Kol said. "They are becoming partners instead of customers, so now we have a vested interest in their specific success in that specific product."

An example of this new-old strategy is the government of the Canadian province of Saskatchewan, which has been an NRGene customer since 2015.

Kol sees particular growth potential in cannabis and canola. On the latter, NRGene entered into a partnership with Saskatchewan and opened an office in Saskatoon last year to support the canola industry that is spread across massive, sparsely populated regions of the province.

In January 2020, researchers from the University of Saskatchewan's Global Institute for Food Security, the federal Agriculture & Agrifood Canada department, and NRGene published 10 complete canola reference genomes, assembled and mapped with the help of GenoMagic.

NRGene will sell services to anyone willing to pay for them, but is being more selective on the partnership side.

"We are looking for places where our added value is high and that we really see a potential in the final product," Kol said.

NRGene also has an office in San Diego, and Kol said that the company is investigating potential outposts in other regions. There used to be a sales team in China, but the firm discontinued it because of the COVID-19 pandemic. "After things go back to normal, we will reconsider that," Kol said.

On the cannabis front, NRGene is working with Israeli company RCK to develop DNA-based biomarkers for medical cannabis breeding and strain identification.

Kol said that NRGene's technology is helping to correlate specific cannabis phenotypes with genotypes that RCK has collected. "The genomics is there, but the genotypic effect of the exact components is not fully understood yet," he said.

Kol said that the services segment can serve as a marketing vehicle for the company to enter into future partnerships with satisfied customers, much as it did with Saskatchewan.

The current customer roster includes some big names, such as Bayer, Illumina, and Syngenta.

Bayer inherited its GenoMagic licensing relationship with NRGene when it acquired Monsanto in 2018 and later expanded the deal to support molecular breeding programs for multiple crops within its crop science division.

Since 2016, Illumina has comarketed NRGene's DeNovoMagic de novo assembly informatics technology with its sequencers.

NRGene has been working with Illumina to sequence and assemble the genomes of different cattle breeds in order to better understand genetic variation across all breeds, and to advance development of new commercial tools that can be used for genomic selection and other genomic technologies in cattle. The firms also completed a high-quality genome assembly of the Nellore cattle in collaboration with researchers at the Universidade Estadual Paulista in Brazil.

For more than three years, Syngenta has licensed GenoMagic for use in crop molecular breeding and genomic selection.

DeNovoMagic is one of several NRGene products that pull out specific functionality from GenoMagic to offer lower-cost alternatives to smaller companies that do not need every feature. PanMagic is for pangenomic analysis, while DeNovoMax is software for assembling reference-level genomes for use in breeding and agriculture.

A 2020 launch, SNPer, helps create single-nucleotide polymorphism sets. In October, NRGene partnered with AgriPlex Genomics to offer mid-density genotyping services for crop and livestock breeding. Under the terms of the nonexclusive alliance, the companies will combine SNPer with AgriPlex's amplicon sequencing-based PlexSeq genotyping platform and Plexcall software, which analyzes sequencing results to generate a report of allele frequencies and SNP calls.

In 2019 NRGene and Macrogen jointly introduced a sequencing-based genotyping service called ArrayMagic, which the firms said provides ultra-high-density SNP genotyping at a low cost per datapoint.

The companies set up a dedicated website to advise customers on how to send samples to Macrogen. They employ a sequencing library prep method, developed by iGenomX, to create an ultra-low-coverage sequencing dataset for each sample. NRGene then applies its database and analytical tools to impute a high-resolution SNP set from the data. 

Over the years, NRGene has been involved in several firsts in plant genomics.

In 2018, the firm built a comprehensive soy genome diversity-haploytpe database, which contains de novo assemblies and an all-to-all comparison of 34 varieties of soybean, a set of breeding germplasm covering the full range of maturity groups. The database is intended to be a "fundamental resource for basic research, genetic resource management, and breeding of elite soy varieties," the company said at the time.

In 2016, working with the Kazusa DNA Research Institute in Japan, NRGene helped sequence for the first time the genome of a commercially grown strawberry.

In 2015, NRGene mapped the complete wild Emmer wheat genome using its DeNovoMagic and GenoMagic tools to reassemble genome sequences and identify genetic components that could be used to breed improved wheat varieties.

NRGene also is a charter member of the CRISPR-IL consortium, an Israel government-funded group of companies and research institutes to develop AI technologies to improve the accuracy and efficiency of gene editing. CRISPR-IL launched in June with 18 months, with an option to extend another 18 months.

"We're significantly invested in actually building an AI platform that will help people do more successful CRISPR-based experiments for different applications, both, in plants and in humans," Kol said. He said that NRGene would apply some of the funds from the IPO to integrate CRISPR-IL work into its own technology to create CRISPR-based products.