Biotech firm finds fortune in prawn farming

Bionovar diversified its business to prove the worth of its product; its revenue last year was $1m - more than its original biotech sales
Chua Hian Hou, Straits Times 30 Jul 08;

BIONOVAR started out as a biotechnology firm four years ago, but customers for its microscopic organisms, which aid in chemical-free prawn farming, were hard to come by.

So the local start-up took a daring step: It diversified its business to become a major customer of its own product - by going into the prawn-farming business itself. And it has not looked back since.

The initial problem in attracting customers? The market was saturated with competitors touting similar products to jaded and sceptical customers.

To counter this, the firm reasoned that getting into prawn farming would allow it to demonstrate the worth of these microscopic organisms - and thereby attract customers.

The microbes that Bionovar has developed help prawn farmers keep their facilities clean and disease-free in an environmentally friendly manner.

The 2004 foray worked out so well that Bionovar has made prawn farming a business mainstay.

It now runs a 50ha prawn farm in Malaysia producing 600 tonnes of tiger and Pacific white prawns every year. It has more prawn farms in India and will be expanding into China soon. It has also started a farm for tilapia fish in Vietnam.

Earlier this year, it set up a distribution arm to sell its prawns to gourmet restaurants and households in Singapore.

Getting to this point, though, has been challenging.

For one thing, raising money to get off the ground was incredibly difficult.

While many Singapore investors were 'curious' about Bionovar, few plonked down their cash, said chief executive officer Chia Boon Tat.

This was probably because Singapore investors have little experience with agriculture, he added. Even the company's biotech billing cut no ice.

'Investors wanted to hear 'biohealth', not 'bioagriculture',' he said wryly.

In the end, though, the company managed to raise $1 million to conduct research into microbes. This sum came from the three founders' own pockets, along with some from the brothers of one of them, and more from investors.

Since then, Bionovar has raised another $5.7 million for its prawn farms.

Its founders, who come from varying backgrounds, are Dr Chia, 46, a telecommunications executive; microbiologist Angelito Abaoag, 39; and aerospace engineer Liaw Kok Eng, 39. The trio, who met in 2003, got together 'by chance', said Dr Chia.

Back then, all three had been leading comfortable lives working for multinational companies.

'But we were also at that age when we wanted to go out and do something on our own,' said Dr Chia.

Rather than just talking about how to 'make the world greener', they decided to put their words into action.

The plan: use a combination of microbes - nature's own rubbish collectors - and beneficial bacteria or probiotics to help farmers reduce their reliance on pesticides and antibiotics.

The heavy use of chemicals in agriculture, said Dr Chia, has been increasing the level of pollution. Meanwhile, over-reliance on antibiotics has created new strains of diseases increasingly resistant to the drugs.

This, he added, was one reason that the region's aqua-farming, already a 'high-risk' industry, was going into a 'downward spiral'.

For instance, the typical prawn farmer finds it increasingly difficult to rear bigger - and more profitable - prawns.

Today, most prawn farmers harvest the prawns after 120 days. Dr Chia said keeping prawns alive after this period is very difficult because of the build-up of sludge in the pond.

The sludge, a combination of prawn faecal matter, uneaten prawn food that has begun to rot and plankton, eventually causes the pond's ecology to crash - and the prawns perish.

Bionovar uses microbes to break down the sludge, said Dr Chia. Compared to using chemicals as an alternative, microbes are a 'non-intrusive way to nurse the pond back to its original healthy state', he added.

He said that when Bionovar first tried to sell its microbes, it found itself up against many more well-established companies, all peddling similar products.

Customers were sceptical of the company's claims, having been burnt once too often by competitors' unfulfilled promises.

In the end, Bionovar managed to sell only some 'tens of thousands' of dollars of biotech products.

The resulting move into prawn farming has produced good returns. He said last year's profits from selling the prawns has already surpassed its original biotech sales.

Last year's revenue was $1 million. This year's revenue is expected to be several times that amount.

The company's profit margins are fattened by probiotics - dietary supplements containing beneficial bacteria like those used in drinks like Yakult. They help boost the prawns' health and survival chances. Bigger prawns mean wider profit margins, said Dr Chia.

For instance, Pacific white prawns harvested after the typical 120-day cycle usually weigh 10g to 12g and retail at about $10 per kg. By comparison, the same prawns harvested after 180 days weigh about 35g and retail at $24 per kg, he added.

Bionovar, which believes its success in prawn farming is due to its biotech origins, continues to maintain a research facility at Nanyang Polytechnic to continue improving its microbes.

However, it no longer offers its products for sale. Instead, it keeps them for its own use and thereby maintains its competitive edge over other prawn farmers, But it does offer a profit-sharing scheme for those interested in working with the company.

Its early forays into prawn farming were not always successful, Dr Chia said.

While Bionovar's prawn-farming process, on paper, was sound, there were a few instances when the entire population of its prawn ponds died due to 'human error', he said.

Today, though, its 50 staff at its prawn farms are more reliable and such heart-stopping moments are a thing of the past, said Dr Chia. Bionovar has 15 more employees in Singapore doing research and development, sales and other functions.

Dangers that lie ahead include disease and industrial espionage, he added.

Disease has led to tiger prawns, previously the dominant species among cultivated prawns, being largely wiped out and replaced by the more disease-resistant Pacific white prawns, said Dr Chia.

He believes it is only a matter of time before a similar outbreak hits Pacific white prawns.

The company has already started working on anti-viral products aimed at suppressing such outbreaks among prawns, as well as improving their resistance to diseases.

And as for competitors looking to steal its biotech, Bionovar has put in place countermeasures to prevent them from reverse-engineering its products.

Any attempts to reproduce the biotech in large quantities will result in products with 'significantly reduced capability and potency', said Dr Chia.