Struggling Mycogen Weighs Options As Losses Mount

By Mary Welch

Mycogen Corp. is questioning its corporate direction and exploring multiple options following a quarterly loss and record stock prices of competitors that are considered ripe for takeover.

The company reported total revenues of $71 million for its second fiscal quarter, ending Feb. 28, 1998, compared with $72.3 million for the same period last year. Net loss for the quarter was $14.9 million, or $0.46 per share, compared with net income of $2.7 million, or $0.08 per share, for the same quarter in fiscal 1997.

For the first six months of fiscal 1998, which began Sept. 1, 1997, revenues were $94 million compared with $91 million over the first two quarters of fiscal 1997. Net loss for the period in fiscal 1998 was $29.5 million, or $0.92 per share, compared with a loss of $7.5 million, or $0.25 per share, for the first six months of the previous fiscal year.

Mycogen's stock (NASDAQ:MYCO) closed Tuesday at $18, down $0.125.

Strategy May Include Merger

"The object of our board is to maximize shareholder value, and there have been some very unusual circumstances in the industry where speculation is resulting in record multiples," said Michael Sund, vice president of communications and investor relations. "It is the duty of our board to evaluate and examine all the options. It may do nothing. But we expect the board to consider all their options within the next 60 days."

While Sund refused to speculate about what Mycogen's options are, he pointed out that when a competing company, DeKalb Genetics Corp., of DeKalb, Ill., said it was for sale, its stock more than doubled. After DeKalb's announcement in February 1998, the stock of another competitor, Delta and Pine Land Co., of Scott, Miss., soared amid speculation it was a takeover target.

"When you look at those two examples, it is only natural for the board and the shareholders to ask about our shares' price," he said.

Sund said Dow AgroSciences LLC, a wholly owned subsidiary of the Dow Chemical Co., of Midland, Mich., owns 69 percent of Mycogen.

"Of course, our board won't make any decision without a majority of the board," Sund pointed out. "But still you have to realize that it all goes back to what's best for the shareholders."

Dragging down Mycogen's bottom line are the legal costs of its five-year battle against Monsanto Co., of St. Louis, over crop enhancement trait licensing.

A California state court jury awarded $174.9 million in damages to Mycogen but Monsanto has filed a motion to have that verdict set aside — the first step to an appeal.

"We fully expect Monsanto to appeal and if the verdict is set aside, we'll appeal," said Sund. "We're waiting for the judge to rule. Ideally we would find grounds for a settlement, but we're not there yet."

As the case continues, legal fees are piling up. The company spent $7 million on litigation, or $0.22 per share, for the second quarter of fiscal 1998 compared with $1.5 million, or $0.05 per share, the second quarter of fiscal 1997. For the first six months of fiscal 1998 legal bills have reached a whopping $10.9 million compared with $2.1 million for the first six months of fiscal 1997.

"We consider the legal fees a sound investment and are encouraged by the legal process. When we collect the damages they will go toward the legal fees," Sund said. *