Gene Editing Versus Genetic Modification in the Research and Development of New Crop Traits: An Economic Comparison

Abstract

Gene editing is a relatively new plant‐breeding tool that, unlike earlier methods such as genetic modification, is more precise in targeting its manipulations to site‐specific locations within the genome. This precision with gene editing offers considerable research and development cost economies and a higher probability of success, particularly for the initial discovery phase of research and development. This study quantifies the advantages of gene editing versus genetic modification by examining the minimum required planted area for a proposed trait where a typical crop technology company can expect to break even on its research and development investment using a real option valuation model. A novel feature of the model is the combination of a decision tree with a binomial lattice for project valuation with an embedded abandonment real option. A primary numerical result from the model was the observation that gene editing required a much smaller potential market area (96% smaller) to break even on the financial investment when compared to genetic modification for the same trait value per acre. This result held across a wide range of potential trait values. Sensitivity analysis on the results indicated that the much higher probability of success for gene editing in the discovery phase of research and development was the primary driver of the difference in break‐even acreage.

Valuing an agricultural technology startup using real options

“…This combination of a decision tree and a binomial lattice is illustrated in Figure 1 where decision trees are modeled during private risk (R&D), and the binomial lattice is modeled during the commercialization phase. A couple of recent studies utilized this approach (Bullock et al, 2021; Dotta, 2018).…”

Regional Analysis of the Impact of the 2020 Health Crisis on the Private-Sector Wage Bill: Structural and Local Effects

“…The products created using these new technologies can also be obtained by conventional (natural) plant breeding techniques. A major advantage of these new technologies is their lower procurement cost in research and development (only 5% of the cost of conventional technology - Bullock et al, 2021). The cultivation of these new seeds has recently begun in the United States (Gotch et al, 2021).…”

The future of CRISPR gene editing according to plant scientists

“…In Europe and North America development costs were not perceived as an issue. This could be because of the fact previous research (Bullock et al, 2021) found gene editing required a much smaller potential market area (96% smaller) to break even on the financial investment when compared to genetic modification for the same trait value per hectare.…”