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The Country Cousin Is Blossoming, Too


Cover Story

THE COUNTRY COUSIN IS BLOSSOMING, TOO

Roger H. Salquist, chief executive of Calgene Inc., can smile as he tours his greenhouses in Davis, Calif. In a few months, he hopes to market the world's first genetically engineered, good-tasting tomato. The yellow flowers blooming in his hothouses are a treasure, too: The plants produce canola, which can be used to make nonpolluting industrial lubricants, healthier cooking oils, and cheaper cosmetics ingredients. It's exciting stuff. Yet Calgene's market value of $180 million trails that of many biomedical companies. "Everybody assumes if you can spell 'gene' you can cure Alzheimer's," says Salquist. "I've got to bury a guy in 50 pounds of oil before they believe me."

Calgene, two dozen other small companies, and several research efforts inside the likes of Monsanto Co. and Ciba-Geigy Ltd. are the ugly ducklings of biotech. A decade ago, they, too, embraced genetic engineering. But they took the road less traveled--into agriculture and industrial processes. So far, the payoff has been small: James McCamant, editor of the AgBiotech Stock Letter, says that less than $200 million worth of ag biotech products are sold worldwide each year.

LEANER MEAT. That number should soon start to grow. This year, the industry could receive two key product approvals from the Food & Drug Administration. One is Calgene's tomato. The other, sold by Monsanto, American Cyanamid Co., and others, is called BST. It's a growth hormone that increases milk output in cows. Meanwhile, Celgene Corp. in Warren, N. J., has just won a contract from General Electric Co. for eight "bioreactors," the first such plants in the U.S. They use microbes to break down cancer-causing methylene chloride, an industrial solvent.

Ag biotech's weakness hasn't been a lack of markets: Total agribusiness revenues in the U.S. top $1 trillion a year. Companies such as Biotechnica International, DNA Plant Technology, Escagenetics, IDEXX, and Belgium's Plant Genetic Systems, have a roster of exciting projects: disease- and pest-resistant crops, alternatives to petrochemicals, animal drugs and vaccines, food safety tests, and ways to grow livestock with leaner meat. Companies such as Mycogen Corp. and Ecogen Inc. are replacing chemical pesticides with safer, less polluting "biopesticides" that use microbes, not chemicals, to fight pests. Still others are developing microbes that eat pollution. Monsanto alone has spent about $1 billion in the past decade on ag biotech.

The problem is, none of this happens fast. Ag biotech lags behind biomedical companies in basic research, partly because altering whole plants and animals is trickier than making cells churn out a single protein to use in a drug. And the industry is constrained by other forces of nature. "There is only one summer a year," notes Peter S. Carlson, chief scientist at Crop Genetics International Corp. in Hanover, Md., which is developing pesticide-producing bacteria that live inside corn plants. Researchers have to wait for growing seasons or for gestation cycles in animals to see if their experiments work.

BLUE YONDER. Even more frustrating is that while Wall Street cheers medical companies as if they were prizefighters, ag biotech companies are dodging bullets. Opponents such as gadfly Jeremy Rifkin and the Environmental Defense Fund argue that the long-term effects of genetic tinkering are unknowable, potentially dangerous, and not worth the risk. Their protests have delayed initial field trials of some ag biotech products.

It hasn't helped that the industry has been caught in regulatory never-never land. The FDA, the Agriculture Dept., and the Environmental Protection Agency haven't written final regulations governing the industry, in part because of an internal Administration battle over how to regulate ag biotech products. The industry is lobbying to break the logjam. But if the resulting regulations are seen as lax, says Margaret G. Mellon, the National Wildlife Federation's biotech expert, "environmental groups will generate opposition as never before."

A lot rides on Calgene's Flavr Savr tomato. Calgene's technology blocks genes in tomato cells from making an enzyme that triggers rot. The tomatoes can be picked riper, so they taste better and still withstand shipping. Salquist hopes the Flavr Savr will have a market of $150 million annually by the late '90s. If it's a hit, it might dispel fears of ag biotech and grease the regulatory wheels--even without Calgene's fancy oils.Joan O'C. Hamilton in Davis, Calif., with John Carey in Washington and Julia Flynn Siler in Chicago


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