Crop Genetics plans to lay off 20 researchers Move will cut firm's expenses

September 17, 1993|By Kim Clark | Kim Clark,Staff Writer

Crop Genetics International announced yesterday that it is laying off 20 researchers and hiring about the same number of lower-paid production workers in an attempt to turn a money-losing research house into a profitable maker of environmentally friendly insecticides.

The first layoff in the 10-year history of the biotechnology company is part of a plan to cut expenses by about $2 million a year, said Joseph W. Kelly, CGI's chief executive officer. He said, however, the restructuring would probably not make the company profitable this year. The company expects that as of Oct. 1, 25 percent of its work force would be involved in production.

Columbia-based CGI reported losing $9.5 million in 1992 and $5 million in the first half of 1993. Earlier this summer it announced it would delay paying a dividend on its preferred stock.

The company's stock has been lagging as a result of the continuing losses. CGI closed at $3.25, down 12.5 cents, in over-the-counter trading yesterday. The stock traded above $6 a share in January, but has rebounded since falling to $2 a share last month.

Mr. Kelly said Wall Street's patience with the company has worn thin, and it can no longer raise money in equity sales to pay for research.

The company has plenty of cash -- $12 million in current assets and no debt -- but it is time for sales to start paying for research, he said.

"What we have to do is turn this company profitable. And the fastest way to do that is to create some viruses" that can be sold to generate cash, he said.

CGI identifies and then searches for ways to replicate viruses that attack insects considered troublesome by humans, such as corn borers and other crop pests.

Although all the employees to be laid off are researchers, Mr. Kelly said the company will still emphasize research. The layoffs won't delay any projects, Mr. Kelly said.

George S. Dahlman, a biotechnology stock analyst for Piper Jaffray & Hopwood in Minneapolis, described the company's move as part of a corporate maturation.

Biotechnology companies' needs for people change as research projects become commercial successes, he said.

"It is never fun to lay off people," Mr. Dahlman said. And a reduction in research staff will likely slow development of new products, he said.

But if the company is to make any money, it must produce and sell.

"This is evidence that they are making some progress," Mr. Dahlman said.

Mr. Kelly said the production workers, who will inaugurate the company's new laboratory in Columbia, will help grow thousands of caterpillars that will be infected with a virus fatal only to the army beet worm -- a pest that harms lettuce and cotton crops.

The workers will allow the virus to take over the caterpillars' bodies, then crush the caterpillars to extract the virus. The virus will be marketed to farmers by Du Pont starting early next year.

CGI also hopes to start production of two other caterpillar viruses, including diseases that attack cotton and apple crop pests, Mr. Kelly said.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.