Through our model, we derive a ROI rate for biocontrol PPP in EU that is lower than the global figure by nearly 30%. Against this background, it remains financially challenging to justify investments in biocontrol R&D given the present cost structures and opportunity costs.
High potential cost of disinvestment
Disinvestment in R&D activities will have the highest impact on small market segments (e.g. several nut crops). Large EU market sectors (e.g., wheat crop) are still lucrative enough to justify an EU-focused R&D approach, despite high development and maintenance costs and a significant degree of uncertainty about successful registration. This impacts several important crops for EU agriculture and consumers, including fruits and vegetables. As a consequence, there will likely be fewer solutions available to control diseases and pests.
EY’s sample ROI calculation underlines the threat to private research investment in synthetic and biocontrol PPP for the EU. The current lack of private R&D investment presently is contradicting the intention of the European PPP market, since missing innovation is likely to restrict European farmers’ choices for plant protection and might restrict future solutions to currently existing portfolios. A shrinking pool of available products will also accelerate resistance to marketed products, adding additional pressure to the product situation.
Outlook – incentivizing innovation
If PPP manufacturers choose to focus on the larger, non-EU market and avoid the high opportunity costs and risks in the EU, the research pipeline for the EU market would diverge even further from the global research pipeline.