A decade-long bull run in growth stocks ended abruptly this year. But I think this has thrown up a very interesting opportunity in this UK small-cap stock.
Lab-grown meat
Agronomics (LSE: ANIC) is a venture-capital firm that is building a portfolio of the most promising companies in the field of cellular agriculture. That is the growing of real meat directly from animal cells. The portfolio contains over 20 different investments.
The stock has fallen 41% over the last 12 months, down to 14p per share.
Agronomics is projecting that cultivated meat could reach 35% of the global meat market by 2040. Meanwhile, McKinsey estimates that this market could reach $25bn by 2030 alone.
A potential money fountain
Agronomics co-founder Jim Mellon believes that within two decades, world agriculture will be radically disrupted by cultivated meat technology. He views this alternative protein trend as a “money fountain”.
Unlike intensive farming, lab-grown food requires a fraction of the resources required for conventional meat. This means its environmental impact will be much smaller. The whole process only takes 40 days, from isolating animal stem cells to the formation of meat.
Plus, the cultivated products don’t contain the high levels of cholesterol and microplastics found in conventional meat and seafood.
Huge upside
Winston Churchill predicted that “We shall escape the absurdity of growing a whole chicken in order to eat the breast or wing, by growing those parts separately under a suitable medium“.
Upside Foods recently became the first lab-grown meat company to have its product approved by the US Food and Drug Administration (FDA). This was for its cultivated chicken, which the FDA has now ruled is safe for human consumption.
Agronomics called this FDA approval “a landmark event for the field of cellular agriculture and should give investors comfort that the path to commercialisation is now clear”.
Upside Foods, by the way, is an unlisted holding of Scottish Mortgage Investment Trust.
Top 10 Agronomics holdings (as of 30 September 2022)
| COMPANY | PRODUCT | WEIGHTING |
| 1. SuperMeat | Cultivated chicken | 10.6% |
| 2. VitroLabs | Lab-grown leather | 7.1% |
| 3. Formo | Animal-free dairy | 5.9% |
| 4. All G Foods | Animal-free dairy | 5.4% |
| 5. Geltor | Animal-free beauty products | 5.3% |
| 6. BlueNalu | Cultivated fish | 4.8% |
| 7. Meatable | Cultivated pork and beef | 4.5% |
| 8. Every | Chicken-less eggs | 4.5% |
| 9. Onego Bio | Chicken-less eggs | 3.8% |
| 10. Solar Foods | Novel proteins | 3.3% |
Griddle parity
The first lab-grown burger was cooked in 2013, at a cost of $250,000. Today, it costs around $9 to produce a cultivated burger patty. However, that price is still higher than animal-derived meat.
So one risk here is that the price doesn’t come down quickly enough to match that of conventional meat. Jim Mellon defines reaching equal prices as “griddle parity”. It remains a massive hurdle for these firms to becoming commercially viable, especially with soaring food prices.
Still, I think the potential for a couple of the start-ups in the Agronomics portfolio to be acquired by established food companies is very high. It also has uninvested cash of £39.4m, as of September this year. That should enable it to make further investments without issuing more shares.
I own a small position in the stock, but I’m keen to add to my holding as soon as the opportunity arises.
