DAVIS, Calif. -- Almost a year after narrowing its focus in theseed business, Calgene Inc. officials -- and a few investmentanalysts -- are pronouncing the restructuring a success thatcould leave the company harvesting its first profit two to threeyears down the road.
"We've achieved all the milestones we set out to do from aregulatory and marketing standpoint," Roger Salquist, Calgene'spresident and chief executive officer, told BioWorld. "It'sexactly what we should have done."
The company, which aims to launch the first geneticallyengineered food product in the U.S. market, is also heartenedby a proposed FDA policy last month suggests that geneticallyengineered foods require no more regulatory oversight thanother food products.
Calgene filed earlier this month what it believes to be the firstrequest for federal deregulation of a transgenic food, its FlavrSavr tomato, which its Calgene Fresh Inc. subsidiary hopes tolaunch early next year. The tomato was genetically engineeredfor improved flavor and to ripen on the vine and still have atwo-week shelf life.
Salquist said that Calgene expects to receive full clearance fromthe FDA for the Flavr Savr by Oct. 1 and that the company'smarket testing shows that consumers are ready for a premium-priced tomato.
Calgene (NASDAQ:CGNE) disclosed in a federal filing this weekthat Calgene Fresh signed an exclusive licensing agreementwith a major seed supplier, Ferry Morse Seed Co., for use ofthat company's tomato germ plasm. If any of the Ferry germplasm is genetically engineered and commercialized by Calgene,Ferry Morse would become Calgene's seed supplier.
Also attracting notice is Calgene's strategy, announced lastsummer, to pare back its operating seed businesses to threecrops -- tomato, cotton and canola -- that together represent a$6 billion worldwide seed market. Besides Calgene Fresh,Calgene operates Ameri-Can Pedigree Seed Co., CalgeneChemical and Stoneville Pedigreed Seed Co.
With last year's restructuring, "They're finally getting out fromunderneath many pieces of their R&D portfolio that they didn'twant to pursue," said George Dahlman, an analyst with Piper,Jaffray & Hopwood in Minneapolis.
However, the restructuring is still having an impact onCalgene's bottom line. In a form of corporate spring cleaning,Calgene is taking a broom to its results for the current fourthquarter and year, which both end June 30. In a federal SECfiling this week, the company announced an additional $2.6million in write-offs from selling or discontinuing a fewoperations. This is in addition to about $10 million in write-offsin fiscal 1991.
Calgene said it added $1.4 million to a previously reported$10.6 million write-off resulting from the anticipated sale of itsNobleBear Inc. seed business and its PGI alfalfa seed operation.
Calgene announced that it stopped work on a variety of Arizonacotton seed and will take a $605,000 write-off on theunamortized cost of the germ plasm. Calgene also said itdiscontinued a processed tomato seed operation (unrelated toFlavr Savr), accounting for another $595,000 write-off. Finalfourth-quarter and full-year results are expected to bereported in August.
Piper, Jaffray's Dahlman has predicted a $1.43-per-share lossfor the current fiscal year and an 80-cent loss in 1993. As forprofits, "there'd be a chance in '94, but I really think '95."
Merrill, Lynch analyst Maureen Mcgann, who initiated coverageof Calgene this month, has forecast a 90-cent-per-share loss for1993, rising to break-even results in late 1995. She predictedthat the company could post a $1.10-per-share profit in 1996.
The company itself shares McGann's forecast for break-evenresults in 1995, said Michael J. Motroni, Calgene's chieffinancial officer.
Calgene's stock, which has traded in a 52-week range of $6.63to $16 a share, closed Wednesday at $13, down 38 cents.
-- Ray Potter Senior Editor
(c) 1997 American Health Consultants. All rights reserved.