Using biotechnology down on the farm Companies plant seeds in new field

March 26, 1992|By Thomas Easton | Thomas Easton,New York Bureau

NEW YORK -- Crop Genetics Chief Executive Joseph W. Kelly shed the sweater he usually wears around the lab in Hanover, Md., for a dark suit yesterday and the chance to convince 125 big-time investors in Manhattan that his company's persistent losses are the heavy investment prelude to good times.

His comments came at a forum sponsored by the grain-belt brokerage firm, Piper, Jaffray & Hopwood, for a dozen companies that combine agriculture with sophisticated bio-technology.

All but one company -- venerable Iowa seed producer Pioneer Hi-Bred -- have brief histories, bottom lines awash in red ink, and the likelihood of continued losses for at least a while. However, they hold out the possibility of replacing toxic chemicals used for insecticides, weed killers and the like, with safe blends of naturally occurring substances.

Cumulative losses for the 11 young companies were $71.1 million in 1991, just a bit more than total revenues. But by 1996, said Piper, Jaffray analyst George Dahlman, the results will be dramatically different. He projects total revenues in excess of $1.3 billion, with $150 million in profits.

Increasing curiosity about these potential gains has sent interest in biotech-related companies soaring recently, particularly in the pharmaceutical field. Belated interest in applications of biotech to the agriculture market, estimated in excess of $25 billion in size, has developed more recently. In three years, attendance at the Piper, Jaffray conference on agriculture biotechnology has more than doubled.

Among the better-known companies presenting yesterday were Calgene, which is developing products to curb rot in tomatoes, cotton and rapeseed; and Mycogen, which produces a bacterial delivery system that extends the the life of a naturally occurring pesticide sprayed on crops.

Crop Genetics International had revenues of $1.4 million and recorded a loss of about $8.4 million last year. It has one commercially viable segment, a disease-free seed for sugar cane, and three developing technologies for killing fungus, insects and weeds.

"They have high-powered technology that is just taking a long time to develop," Mr. Dahlman said. He estimates 1996 profits of about $11 million, concluding an extended period of losses or minimal earnings.

A particularly promising Crop Genetics product is a plant vaccine that could protect many of the world's largest crops from burrowing insects that avoid many pesticides. In field trials the vaccine has been only 70 percent effective rather than the 90 percent standard the company has set.

Work is further along on an insect virus, known as InStar, derived from dead insects. Two related products could be on the market soon.

"If I worked only on InStar, I would be profitable quickly," Mr. Kelly said. "It's a choice. Our investors would rather we keep investing in these other products."

Crop Genetics' share price has bounced in recent months, from $5.50 to $11.25, soaring on reports of development breakthroughs and marketing arrangements with other companies, then declining in lackluster trading. Yesterday, the company, traded over-the-counter (stock symbol: CROP) closed up 1/4 at $6.75.

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