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Major Scientific Breakthrough For Wine Industry

A group of New Zealand scientists have discovered a biological control agent for Botrytis, one of the international grape growing industry’s main diseases, it was announced today

The biological control agent is a naturally occurring saprophytic fungus, has the potential to solve the international wine industry’s billion dollar challenge when the Botrytis cinerea fungus occurs in humid conditions, causing major damage to grape crops.

The discovery has been made by a team of scientists from HortResearch, jointly funded by HortResearch, the Wine Institute of New Zealand and the New Zealand Grapegrowers Council, through their joint research arm, Winegrowers of New Zealand.

A special purpose investment company is being formed to raise money to commercialise the discovery, which is to be marketed as Botry-Zen, and a prospectus is expected within weeks. A manufacturing plant is currently being established in Dunedin.

The HortResearch team, consisting of Dr Philip Elmer, Dr Tony Reglinski, Dr Robert Hill and Peter Wood describes the discovery as “a true breakthrough”.

“Bunch rot is a major problem for the wine industry and the disease, also known as grey mould, is arguably the single most important disease problem confronting the international Wine Industry. With mechanical harvesting predominant in the industry infected grapes cannot be separated from healthy ones at the time of harvest.”

“One of the real attractions of Botry-Zen, is that it is completely organic, rather than chemical based, and it controls the Botrytis without affecting the grape. “ Dr Elmer said today.

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Winegrowers recognise the importance of biological control of this disease and reducing the industry’s reliance on synthetic fungicides.

Winegrowers of New Zealand believe the cost savings just to the local industry will be considerable and immediate. According to Philip Gregan, Executive Officer of Winegrowers of New Zealand, “Bunch rot costs the New Zealand Wine Industry millions of dollars annually in terms of lost crops, control measures and reduced wine quality.”

The research was jointly undertaken pursuant to the HortResearch and Winegrowers of New Zealand research programme. Rapid progress of the research was facilitated by support from the Foundation of Research, Science and Technology, through Technology New Zealand; and Montana Group.

“Extensive laboratory tests and field trials by HortResearch have now established that the beneficial organism is an effective control agent for Botrytis cinerea. Successful field trials have been undertaken between 1997 and 2001 in selected vineyards in three major New Zealand growing areas, Hawke’s Bay, Gisborne and Marlborough”, said Mr Gregan.

Once the discovery had been scientifically validated by HortResearch, Dunedin based bio-tech company Zenith Technology Corporation Ltd developed a formulation and manufacturing process, and the new product should be in production within a year, according to Zenith executive director Dr Max Shepherd.

Dr Shepherd is a former University of Otago biology Professor, whose company Zenith Products conducts clinical trials and develops, manufactures and markets animal health products.

Issued on behalf of Botry-Zen Ltd by Weber Shandwick Worldwide.

Background Information

The Fungal Disease Problem – Botrytis Cinerea or “Bunch Rot”
“Bunch Rot” of grapes, caused by the fungus Botrytis cinerea, is a major problem for the wine industry world-wide. The disease, also know as “grey mould”, is arguably the most important disease problem confronting the New Zealand wine industry.

The most favourable conditions for development of the fungus are warm temperatures and high humidity. The disease can occur on grapes at any time during the growing season but it is most destructive when there is rainfall accompanied by warm temperatures late in the growing season. The disease spreads easily via airborne spores that are produced in abundance from infected plants. The fungus develops as a moist rot on the fleshy parts of plants and is visible as a grey felt-like mat of spores.

Limited or controlled Botrytis infection can result in a non-destructive stage of the disease known as “noble rot” which can be managed in order to make “noble” or “botrytised” wines. More usually, the fungus continues to penetrate the grapes on the vine causing them to rot and be useless for winemaking.

Grapes from most large vineyards are mechanically harvested rather than hand-picked. This means that grapes infected with "bunch rot" cannot practicably be separated from healthy grapes. So even where the proportion of Botrytis-infected grapes within a bunch is low, the volume, quality, taste and value of the whole bunch, and ultimately the wine made from it, is reduced.

“Bunch rot” caused by Botrytis has been estimated to cost the New Zealand wine and grape growing industry more than $18 million in lost grape sales and a further $12 million in the cost of control measures annually. Given that New Zealand represents a fraction of 1% of world-wide wine production, the cost of Botrytis infection to the grape growing industry world-wide is enormous.

Chemical Fungicides – The Fungal Resistance Problem
Chemical fungicides either kill the fungus itself (fungicidal products) or stop its growth (fungistatic products). In both cases, the fungicide attacks the biological structure (for example, the cell wall) or function (for example, protein synthesis) of the fungus. Over time, natural selection frequently occurs, with resistant strains of the fungus surviving and eventually replacing the strains that are susceptible to the fungicide. The fungicide becomes progressively less effective and must eventually be either modified or replaced by an entirely new fungicide.

Chemical Fungicides – The Environmental and Health Problems
Chemical fungicides are all non-specific and therefore act on organisms other than the target fungus. Because of their chemical nature, they may also be toxic and non-biodegradable. Chemical residues can build up in the soil and throughout the food chain.

Chemical Fungicides – The Consumer Resistance Problem
Consumers world-wide are increasingly conscious of the potential environmental and health problems associated with the build-up of toxic chemicals, particularly in food products. This has resulted in growing consumer pressure to reduce the use of chemical pesticides. As a result, “organic” products – grown or produced without the aid of chemicals - are increasingly perceived as more healthy, more desirable and of premium value. The active ingredient in Botry Zen is a naturally occurring organism and the excipients in the product are organic compounds approved in the United States and Europe for use in the food and pharmaceutical industries. The Company therefore considers that Botry-Zen will be an attractive alternative Botrytis control product for grape growers who want to be able to describe their crops as “organic”.

The Natural Advantages of a Biological Control Agent
The use of a biological control agent for fungus diseases such as Botrytis can help avoid dependence on chemicals and is therefore perceived to be a “natural” alternative to chemical fungicides.

Botry-Zen is a non-pathogenic fungus which acts as a biological control agent by competing for the same biological niche as Botrytis cinerea. Firstly, it occupies the same physical space and secondly it metabolises the dead and senescent vegetative material on the vines and on the surface of grapes thereby competing with the Botrytis for nutrients. Botry-Zen is non-invasive and will not penetrate live plant tissue. With this mechanism of action it is highly unlikely that resistance to Botry-Zen will develop.

A biological control agent is therefore likely to remain effective for a longer period than a chemical fungicide without needing modification or replacement and without contributing to the environmental and health problems perceived by consumers to be associated with the application of chemicals.

The use of biological control agents, rather than chemical fungicides, is one of the horticultural practices that enables growers to describe their food crops as “organic”. There is growing consumer preference for “organic” food products and it is this consumer demand that has created a demand by grape growers and wine makers for an organic alternative to chemical control of Botrytis infection.

Funding – An Industry –Wide Effort
The research undertaken by HortReseach was partially funded by the Wine Institute of New Zealand Incorporated and the New Zealand Grape Growers Council whose commercial arms, Winegrowers of New Zealand Limited and New Zealand Grape Growers Limited, have formed a joint venture called Winegrape Tech. Winegrape Tech has the right to commercially exploit the HortResearch patent rights and other intellectual property rights associated with the organisms themselves and has granted to Botry-Zen Limited an exclusive licence of those rights in all countries that are parties to the Patent Cooperation Treaty. The research was also partially funded by the Foundation for Research Science and Technology.

Extensive laboratory tests and field trials have now established that the organism is an effective control agent for the particular kind of Botrytis fungus that attacks wine grapes – Botrytis cinerea. These trials have included successful field trials as part of the Winegrowers of New Zealand Limited Integrated Winegrape Production Scheme, between 1997 and 2001, at selected vineyards contributed to the project by Montana Wines and others in three major New Zealand grape growing regions – Hawkes Bay, Gisborne and Marlborough. Villa Maria also assisted.

The Commercial Keys To Success – The Botry-Zen Product
The crucial extra element necessary for commercial success is to incorporate the biological control agent into a product that can be applied through a commercial sprayer and maintains effective Botrytis control over a variety of vineyard conditions.

To meet New Zealand regulatory requirements, the product must be registered under the Pesticides Act 1979 or substitute legislation. An application for registration under the Pesticides Act 1979 has been lodged. It is expected that application will be dealt with under section 22 of the Pesticides Act 1979 pursuant to the transitional provisions of section 165(7) of the Hazardous Substances and New Organisms Act 1996.

The product must also be cost-effective in comparison with existing chemical fungicides currently used to control Botrytis on grapevines. Zentech has successfully developed a formula for such a product incorporating the biological control agent and a specialised manufacturing process enabling cost-effective commercial production. Botry-Zen Limited has acquired an exclusive licence from Zentech to the intellectual property rights in the product formula and manufacturing process and has engaged Zentech to undertake the necessary work to achieve registration of the product as a pesticide. Botry-Zen is the trade name chosen by the Company for the product.

Combining Botry-Zen Limited’s exclusive licence to the biological control agent in all Patent Cooperation Treaty countries from Winegrape Tech with the licence to the formula and manufacturing process acquired from Zentech gives the Company the ability to develop the commercial potential of the world-wide market for the biological control of Botrytis.

The Immediate New Zealand Market
Direct losses attributed to Botrytis infection and associated control costs have been estimated to cost the New Zealand industry $30 million per year.

The Company will focus initially on establishing a market for Botry-Zen in New Zealand and achieving widespread grower acceptance. By the year 2000, there were 12,194 hectares of planted grapes in New Zealand. The planted area has increased by 62% since 1995, when there were 7,500 hectares under vine, and continues to grow.

Not all grape growing areas are equally susceptible to Botrytis infection, as this depends partly on prevailing climatic conditions, although any grapevine anywhere in the country can be a target for the fungus. As the more susceptible areas – those that are warmer and wetter - include major grape growing regions such as Auckland, Gisborne, Hawkes Bay and in some years Marlborough, the Company’s conservative assumption is that Botrytis infection represents a significant annual risk to at least two-thirds of the total New Zealand vineyard area.

The Company aims to achieve a significant market penetration for Botry-Zen, as the product of choice for the control of Botrytis infection in the New Zealand grape growing industry, within 3 years of the commercial launch of the product.

The Australian grape growing industry, measured by hectares of grapevines planted, is about 10 times the size of the New Zealand industry and growing exceptionally quickly. The area under vine in Australia doubled between 1988 and 1998. There are now (in 2001) approximately 122,915 hectares of grape vines in Australia.

The Company therefore expects there should be demand for Botry-Zen in Australia and intends to move quickly to establish an Australian manufacturing facility (or export Botry-zen to Australia) and a distribution network.

The Potential Market in other Patent Co-operation Treaty Countries – The Grape Growing Industry
In addition to Australia and New Zealand, the company’s exclusive licence from Winegrape Tech includes the production, distribution and sale of Botry-Zen based products for the grape growing industry in all other countries covered by the Patent Co-operation Treaty (PCT). The 100 countries that are parties to the PCT include most of the world’s major wine producers.

The following PCT member countries are among the top 10 world wine producers and represent markets for Botry-Zen or similar Botry-Zen-based products:

PCT Country Number of Hectares of Grapes (1998)
Australia 98,000
France 914,000
Germany 105,000
Greece 129,000
Italy 891,000
Romania 111,000
South Africa 253,000
Spain 1,180,000
United States of America 364,000

Total hectares: 4,045,000

New Zealand hectares 12,194

New Zealand hectares as % 0.3%

Opportunities for either exporting Botry-Zen to these countries, or establishing licensing arrangements or directly controlled manufacturing facilities in them, are to be pursued by the Company. Many countries have rigorous bio security, quarantine and other import controls for products containing live biological organisms and the results of the field trials required for registration purposes in one country may not be accepted in other countries. Accordingly, the Company intends to undertake a comprehensive cost-benefit analysis of the relative advantages of exporting Botry-Zen from New Zealand to those countries or manufacturing it in those countries or the local market.

The Potential Market – Other Crops
Botrytis cinerea is just one of various forms of Botrytis fungus. Other forms of Botrytis fungus attack other crops such as berryfruits, cut flowers, tomatoes, lettuces and cabbages. In New Zealand and elsewhere, Botrytis infection can also be a significant problem in the kiwifruit industry. With kiwifruit, the fungus attacks the fruit after it has been harvested, making it soft and unmarketable.

Under its exclusive licence agreement with Winegrape Tech, Botry-Zen Limited has the right to pursue commercial development of the patent rights and other technology associated with the biological control agent in relation to all other crops in all PCT countries. The Company intends to focus its initial commercial efforts on the grape growing industry but plans to continue the co-operative research programme with HortResearch into the use of Botry-Zen or similar products on other crops.

New Company formed to raise capital for Botry-Zen discovery commercialisation

A new company to raise capital for the commercialisation of the newly discovered grape Botrytis control organism has been formed by interests associated with Dunedin investor Howard Paterson and Zenith Technology Ltd founders Dr Max Shepherd and Dr Cheung-Tak Hung.

Called Botry-Zen Ltd, after Botry-Zen the commercial name given to the discovery, the new company will in the next few weeks issue a prospectus to raise an initial $5 million.

The offer will be made to private investors only.

Spokesman Mr Max Shepherd confirmed today that Botry-Zen Ltd now owns the exclusive licence to the technology giving the company the ability to product distribute and sell the new product which provides biological control of plant diseases caused by Botrytis fungus infections.

The company’s initial focus will be on the development of the product, Botry-Zen, to control bunch rot in grapes however other forms of Botrytis fungus attack crops such as berry fruits, cut flowers, tomatoes, lettuces and cabbages and Botrytis infection can be a significant problem in the kiwifruit industry following the harvest of fruit.

Initially, Botry-Zen Ltd will seek registration of the product in New Zealand under the Pesticides Act 1979 and will then commence commercial manufacture distribution and sale of Botry-Zen in New Zealand.

The same procedure will be followed in Australia, under the Australian equivalent of the local Pesticides Act.

The company will also investigate international market potential in overseas grape growing regions as well as investigating the use of the discovery in other food crops.

Issued on behalf of Botry-Zen Ltd by Weber Shandwick Worldwide.

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