A grower barn on an industrial pig farm (Source:AgFunderNews)

This environment creates several issues which cause billions of dollars of waste. For instance, 16% of pigs born on a farm (so almost 200 million pigs a year, worth over $50bn) never make it to slaughter because they die prematurely due to unspotted disease. By far, the leading cause of death is a sow crushing her piglets when she gets sick and rolls over them in discomfort.

The reason for this is that operators are flying blind, even though they need to worry about many things. How do I reduce mortality? How do I prevent the spread of contagious diseases? How do I make sure the pig gains weight as it should? How do I reduce medication costs?

Some issues are shockingly basic. One large operator out of Asia reported that it takes 30 days from premature death to management receiving a report. Another told Xsights it recorded over $1 billion of lost revenue due to theft, much of which is where pigs “get lost” when contracted out to other farms.

The root cause of this lack of timely information is the lack of technological progress in the sector over past decades. Pig farms are in remote locations, so until Starlink’s internet service came along, they have not been able to access basic business monitoring processes which are commonplace in other industries. Access to big data is another issue.

Australian tech company Xsights identified this huge opportunity five years ago and put together a team of animal health, data science, hardware and IoT veterans who have since developed, proven and commercialised an award-winning technology that could save the industry billions of dollars.

 A ‘fitbit for pigs’ – and a no-brainer for operators

Xsights’ solution is best explained as a fitbit for pigs – a small sensor that gets added to a pig’s ID tag at birth.

Every second of the pig’s life, the sensor measures metrics like temperature, location and body movement patterns. The data is then fed into a central software platform where each pig has its own unique profile including even feed and medication logs – just like a health watch for humans.

A machine learning algorithm then analyses all the data in the herd and identifies potentially sick pigs by finding outliers. Employees can then address the issue in the pen, as the tag lights up to identify the potentially problematic pig.

Xsights XioT Ear Tag (Source: Xsights)

This is remarkable because an operator is moving from a lack of visibility to getting a full, real-time view of the health of every single pig. But most importantly, Xsights’ solution can identify a pig getting sick as early as 2-3 days before visible symptoms.

What this means can be best seen in the hard data. Testing batches of circa 1,000 pigs each, Xsights compared mortality in a cohort where employees just observed what was happening to another group where they medicated pigs that were identified as sick. In the non-intervention group, 14.7% of piglets died over a 4 week period, while in the intervention group this was just 1.6% – a 89% reduction in mortality.

This is a game changer for the industry in terms of its bottom line effect.

On a medium size farm that processes 100,000 pigs a year, such improvement would represent a $3 million saving (>10% of revenue) after applying Xsights Saas cost. For the largest operators, the annual savings could be over $ 1 billion. The sector is highly competitive, so this could mean doubling of net profits for some parties.

A fitbit for pigs’ – screenshot of the realtime health profile of a pig (Source: Xsights)

Mortality is just one factor Xsights is addressing with its solution. If you can identify a pig getting sick you can remove it before the disease spreads. Current practice is to medicate the entire room of 1000 pigs. Overmedication has a cost in itself but also follow-on effects as it slows down growth. And in Asia, where African Swine Fever has had a devastating effect, any chance to improve disease diagnosis is highly sought after.

The fact that the solution has near zero capex and is offered under a licensing fee, with savings potentially 5x of the cost, makes this an important tool for the pig farming industry.

A $400m pipeline, a deep moat, and a potential near-term exit 

Xsights’ solution, which is fully commercialised with a top 3 Australian producer, is now moving to global scale-up phase in what is a total addressable opportunity of $8 billion in annually recurring revenue.

Based on the global awards the firm has won and the support of the Australian Government, Xsights have received inbound requests from some of the largest operators in the world – without any sales effort. 

This has led to a $400 million pipeline – approximately 5% of the global pig market – where the company is currently running trials or about to run trials.

As it approaches this pipeline, the company enjoys a deep moat. Not only is the solution patented globally – most of all it is extremely hard to replicate. Testing and refining the tech takes years and requires specialists from animal health, Internet of Things, Data Science and Machine Learning coming together.

A top global operator, who is working with the company, stated that they tried to build a solution inhouse for 10 years and gave up. The industry needs this solution but is having difficulties building it themselves, which may be why they haven’t seen a name drop out of the pipeline.

Moving from trial to scale with any single operator has the potential to re-rate the company, with the founders’ clear goal being an early billion dollar plus exit to a large operator.

One candidate is agriculture giant Cargill, who supplies the world’s farming operators with feed and other materials. Cargill could include Xsights’ solutions to its product offering.

At over $250bn annual revenue, Cargill could bolt-on Xsights rather than dealing with it as a partner. Equally, large pig operators, who compete fiercely with each other for market share, might aim to buy Xsights to own the solution exclusively.

Mr Wildisen and his team, who have already commercialised with an Australian top-3 player, are confident that everything is now in place to execute on this pipeline which could lead to an exit.

“The tech is proven and fully commercialised. We are getting inbound requests, and no one has dropped out of the pipeline. Some of the largest operators are pushing us to move faster. And we have the team of specialists to drive this forward. So everything we need to drive this to a large exit is in place, and we are towards an exit within 2 years.”

– Steve Wildisen, Co-Founder and CEO

This capital raise is a wholesale opportunity to get exposure to Xsights as it enters its global scaling phase, targeting an exit within the next 2 years. Click here to request offer documents (Wholesale Investors only).

Reach Markets provide Corporate Advisory Services to Xsights Digital Pty Ltd and will receive fees for its role in managing this offer based on the uptake by investors.

Reach Investment Group Nominees Pty Ltd ATF R Markets Unit Trust, a related entity of Reach Markets, holds shares in Xsights Digital Pty Ltd.

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