By Nancy Volkers
Special To BioWorld Financial Watch
Over the past six months, agbiotech biotechnology continued to experience consolidation and controversy as the "pro players" of the industry consumed other companies, and the outcry from the European Union (EU) rose to deafening levels.
DuPont's March purchase of Pioneer Hi-Bred International surprised analysts; DuPont, which owned 20 percent of Pioneer, bought the other 80 percent for an estimated $7.7 billion. At the time, Pioneer was the world's largest corn-seed developer and distributor.
"No one really expected it," said Christine McCracken, of Vector Securities International Inc., in Deerfield, Ill. "It seemed like the joint venture was going well, but it looks like [DuPont] wanted more influence over what kind of projects they were working on."
Deals mixed and matched other companies, though not all of them came to fruition. Cargill Inc. and Hoechst Schering AgrEvo GmbH cancelled an agreement for AgrEvo to acquire Cargill Hybrid Seeds North America for $650 million. Cargill's international seed operations were sold to Monsanto Co. for $1.4 billion in June. AgrEvo is merging with Rhone-Poulenc-Agro to form Aventis CropScience; the agreement is expected to be completed in mid-1999.
AxyS Pharmaceuticals Inc. created Xyris Inc., an agbiotech company, in May 1998. Eleven months later, Xyris announced a merger with Global Agro Inc., a plant-science company, to form Akkadix Corp.
Consolidation may be worrying, but McCracken thinks it's necessary.
"If you look at the entire industry, there are huge mergers that will reduce the number of downstream processors [as well]," she said. "The number of farmers has also certainly been reduced. It's a low-margin business, and you need maximum efficiency. The only way to get that at this point is to get on a global scale."
Competition among the big guns of agbiotech is tough. Most seem to have brought suit against one another. In March, Zeneca Agrochemicals, Monsanto and Pioneer agreed to dismiss pending lawsuits in Delaware and Missouri that relate to the use of Touchdown over Roundup Ready crops, and related Monsanto patents and to Monsanto's marketing practices. This came after Monsanto and Zeneca announced a long-term license agreement under which Zeneca will test, develop and register the Touchdown herbicide products for use on or over the top of Roundup Ready soybeans, corn and cotton in the U.S.
Last month, DeKalb Genetics Corp. (a subsidiary of Monsanto) was found to have fraudulently induced Rhone-Poulenc-Agro to license its glyphosate-tolerance gene, which is used in Roundup Ready corn. The jury also determined that DeKalb breached agreements with Rhone-Poulenc to disclose test results of the gene, which led to the 1994 license agreement. The jury awarded damages of $15 million and punitive damages of $50 million. Neither DeKalb nor Monsanto now has rights to Rhone-Poulenc Agro's gene, and thus neither can sell Roundup Ready corn.
"[The decision] calls into question the whole licensing arena, and what you're allowed to do when you're field testing," McCracken said "Monsanto put the gene in, and they didn't tell [Rhone-Poulenc] what the results were. [Rhone-Poulenc] figured that there weren't very good results, so they licensed it to Monsanto at a low price."
The resolution of the suit opens the way for a new Rhone-Poulenc trial against Monsanto and DeKalb for patent infringement and trade-secret misappropriation.
On the regulatory side, in October, Congress cut fiscal year 1999 funding for the U.S. Animal and Plant Health Inspection Service (APHIS), which oversees all field trials for genetically engineered crops. APHIS will receive $739,000 less than it did in fiscal year 1998, though the agency will probably work harder; the number of approved field tests has increased every year since 1996.
Compromise Text But No Compromise
Since the cut, "we've been working with appropriators on both the House and Senate sides right now," said Val Giddings, vice president for food and agriculture at the Biotechnology Industry Organization. "Everyone thinks it's been an unfortunate mistake."
As of last week, no funding had been restored.
"Each day the workload increases, and we have a nontrivial issue with public acceptance in Europe," Giddings said. "Part of that is due to the fact that people in Europe think there's no regulation in the United States, and now the folks at APHIS can't even travel because they don't have the funds."
In the past, APHIS has traveled overseas to document oversight of genetically modified organism (GMO) crops and present U.S. regulatory requirements to European regulators.
A February effort to create consensus on a biosafety protocol, held at a meeting of the United Nations Convention on Biodiversity, produced compromise text but no compromise. Several EU member countries, environmental groups and developing countries called for strict controls on GMO products. The U.S. and other grain-exporting countries wanted fewer restrictions, including a specification that only GMO organisms, and not commodities, require permission before import. The issue will be revisited at the next convention meeting in May 2000, in Nairobi.
Concern 'Never Fully Addressed'
Last month, A.E. Staley Manufacturing Co. and Archer Daniels Midland Co. (ADM) said they will only accept corn varieties approved by the EU. The companies will not accept Roundup Ready and some Bt corn varieties.
"Cargill also said they'd try to avoid non-EU-approved corn," said McCracken. "That highlights the impact the EU is having."
Peter McCann, president of AgWest Biotech Inc., a non-profit organization established to foster biotechnology initiatives, said conditions in the EU have been exacerbated by several factors.
"There is public concern and lack of public understanding in some EU countries which has never been fully addressed by those in a position to do so," McCann said. "This has lead to the development of a politically difficult situation that some EU governments appeared reluctant to tackle until recently. There has also been a lack of information from sources the public feels it can trust," but this is changing with the formation of organizations such as European Food Biotech Network, he said.
Also, export markets are a concern, said McCann.
"Some EU governments have become aware that they have fallen behind in agbiotech [research and development], and that their traditional export markets may now be at risk," he said. "Some have suggested that the reluctance of Brussels and individual EU member states to approve biotech crops from outside [the] EU may be related to this."
A recent agbiotech meeting in Chicago was filled with talk about the EU's reluctance to permit GM imports, said McCracken.
"What they identified at this conference as the problem is that there's nobody standing up in the EU that's respected, like the FDA here."
The FDA, however, is also under attack; the agency is being sued by a group of consumer advocates and scientists for failing to require manufacturers to label genetically modified foods, and for what they see as shortcomings in regulations. The suit, filed in May 1998, was coordinated by the Alliance for Bio-Integrity, with collaboration from the International Center for Technology Assessment (CTA).
Despite the suit which alleges, among other charges, that current FDA policy is a violation of religious freedom a February survey found that consumer support remains strong for foods produced through biotechnology. However, consumer awareness of GMO foods seems to have declined since 1997, when a comparable survey was completed.
The Wirthlin Quorum Survey, commissioned by the International Food Information Council (IFIC), polled 1,000 adults. IFIC is a non-profit organization based in Washington, D.C.
Only 33 percent of those surveyed were aware that products produced through biotechnology are now in supermarkets; 47 percent said no such products were being sold; and 20 percent said they didn't know or refused to answer. Seventy-eight percent supported the current FDA policy for foods produced through biotechnology, which requires they be labeled only if the food has been significantly changed.
Sixty-two percent of consumers (up 7 percent from 1997) would be likely to buy produce "that had been modified to taste better or fresher." Of those polled, 77 percent said they would be likely to buy produce modified by biotechnology to provide protection against insect damage, resulting in less use of pesticides.
Despite difficulties, the agbiotech sector presses on. The "next wave" of agricultural biotechnology involves output traits increasing the amount of healthy oils, improving taste rather than modifying input traits to protect crops from pests or herbicides.
This "next wave" may change some EU attitudes considerably, McCann said. With first-generation biotechnology, "there is no benefit to the consumer from a product derived from corn that is resistant to borers, yet [the consumer] accepts all the perceived risk in being asked to consume the product. If the product has a health benefit, such as increased vitamin content or better nutritional value, there is 'something in it for me.' I believe consumer attitudes will change once products with consumer benefits are more widely available." *