Dollars for DNA
Biotech finally seems near to living up to its hype
Say the word biotech and most people think of high-risk start-up companies searching for wonder drugs. Well, think again. Consider these three business developments last week:
DuPont decided there was more money to be made in genes than in oil. The industrial giant announced Monday that it would sell up to 20 percent of its $22 billion Conoco subsidiary and plow the proceeds into its life-sciences businesses, which use biotechnology to develop genetically engineered crops, new drugs, and innovative methods for manufacturing chemicals.
The same day, Monsanto Co. moved still further from its origins as a chemical company and into a biotech future by buying DeKalb Genetics and the Delta & Pine Land Co. The two seed producers had previously been partners with Monsanto in producing genetically engineered crops.
Finally, Perkin-Elmer, a manufacturer of scientific instruments with $1.4 billion in sales, announced that it wouldn't wait around for the federal government to unravel the mysteries of human DNA. In a joint venture with J. Craig Venter, who heads the nonprofit Institute for Genomic Research (TIGR), Perkin-Elmer is forming a new company that it hopes will be able to decode the entire human genome by 2001. If the new company, which doesn't yet have a name, meets its deadline, it will beat the $3 billion federally funded Human Genome Project, which is engaged in the same task, by four years. Such an achievement would allow the company to earn enormous profits by selling exclusive information about how human genes work and can be manipulated.
After years of hype and overpromising, biotechnology is becoming part of the day-to-day business of industrial America, and the potential profits are huge. One measure of that potential is the premiums that companies are paying to buy into biotech. In gradually shedding Conoco, DuPont is divesting itself of a division that provided nearly half of its $45 billion in revenues in 1997. Monsanto paid $2.3 billion for DeKalb, a corn and soybean seed producer, or $100 a share, which was fully three times DeKalb's share price in February. Losing out in a bidding war for DeKalb was rival Novartis, a Swiss company with similar drug, agriculture, and chemical businesses. DeKalb's final price reflects projections by biotech analysts that worldwide sales of agricultural biotechnology alone will reach more than $300 billion in the next 10 years.
"Biotech is as pervasive in the life sciences as the transistor is in the information sciences," says W. Leigh Thompson, head of Profound Quality Resources, a biotech consulting firm in Charleston, S.C. "It is going to totally transform life on this planet in one generation."
Improving nature. Pronouncements like Thompson's don't sound at all hyperbolic to Monsanto's Robert Shapiro, who saw genes in the company's future when he became chief executive in 1995. Shapiro began accelerating Monsanto's transformation from a stolid chemical producer to a cutting-edge bioengineering outfit. He sold Monsanto's chemical business and went on a shopping spree to build up the company's agricultural biotech sector. One of the first purchases was Calgene, which had a technology for creating low-fat soybeans and corn. The company's latest purchases of DeKalb and the Delta & Pine Land Co., which cost a combined $4.2 billion, bring Shapiro's total tab to $6.7 billion. Wall Street isn't complaining, though. Monsanto's stock price rose to 56 1/8 by the end of the week, up nearly $3.
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