MustGrow Biologics Corp. (TSX-V:MGRO, OTCQB:MGROF) shares surged by more than a third on news it has entered a collaboration agreement with Bayer AG (ETR:BAYN, OTC:BAYZF) that focuses on the soil applications of MustGrow's mustard-based biocontrol technologies to provide innovative and eco-friendly solutions for farmers.
The agreement excludes home and garden, turf and ornamental applications, the company said in a statement.
Its share traded 34% higher at C$1.41 by 1pm in Toronto.
MustGrow said it will receive an initial upfront payment as well as additional payments linked to the achievement of certain business milestones. It will also be entitled to fees from royalties and manufacturing sales once commercial sales start.
Bayer takes on the responsibility of regulatory and market development work essential for the commercialization of MustGrow's mustard-based biocontrol technologies, covering everything from formulation development to regulatory submissions and market support.
MustGrow said the value of the upfront, milestone payments and development work is expected to be roughly US$35 million to $40 million over the next several years, excluding additional fees from royalties and manufacturing sales.
"We're the tech company so we want to license this technology out to partners like Bayer to help get this product commercialized," MustGrow CEO Corey Giasson told Proactive in an interview.
"We partnered with Bayer on an R&D area, exclusive field trials, a few years ago and for them to come now and sign a commercial agreement in place shows a lot of confidence in our technology, a lot of confidence of going and getting the technology commercialized, and into these markets.
"This is just a small sliver of the total global fumigation market that we're targeting. We're excited to be working with Bayer and we're excited to do more and more of these commercial agreements in the future."
Under the agreement, Bayer has also been granted a right-of-first-negotiation for a license to use MustGrow's mustard-based biocontrol technologies for use in bananas in particular applications, excluding postharvest applications.
The company said it expects to continue collaborating with Bayer to consider other potential applications for its mustard-based biocontrol technologies, including potentially testing in regions not currently covered by the agreement.
"Biologicals are part of an exciting frontier that offers new solutions for the challenges that growers face across the world," Bayer’s head of Biologics Benoit Hartmann commented in a statement.
"We're committed to working with leading innovators like MustGrow to accelerate the development of innovative biological solutions that provide safe, sustainable options for farmers and are looking forward to continuing our work together.”
MustGrow Biologics is an agriculture biotech company developing organic biocontrol, soil amendment and biofertility products by harnessing the natural defense mechanism and organic materials of the mustard plant to sustainably protect the global food supply and help farmers feed the world.
Contact the author at stephen.gunnion@proactiveinvestors.com