TCS Daily


Tech Companies Built For War Or Peace

By James K. Glassman - October 8, 2001 12:00 AM

Fortunes will be made and lost as people bet on the impact of the terrorist war. Is it time to buy airlines at a bargain price, or sell them because they've suffered permanent injury? Will information technology firms gain from an increase in videoconferencing, or suffer from the slowdown in corporate spending? Which defense firms will thrive in this new kind of war? Will Americans return to Las Vegas and Disney World? In wartime, will people drink more beer? Will they go to movies or watch more TV?

If you enjoy trying to figure out the answers and can live with the results, by all means take a swing. (Just remember to maintain balance in your portfolio.) But this column is actually for another group of investors. Today I'm writing for the people who don't want to make guesses about the future of airlines, vacation destinations or drinking habits. So let's think about stocks that won't rise or fall based on the latest dispatch out of Islamabad.

Fortunately, there's at least one tech industry that should continue to grow in war or peace. This industry relies for its growth on the simple fact that people need food and medical care. And societies will need more of both as populations get larger and older. Agricultural biotechnology, known as "agbio" for short, is a way to grow more food, use fewer chemicals in the process, and also create new medicines for a range of illnesses.

In fact, this last possibility - the idea that you might engineer plants to produce life-saving proteins - is what really has agbio researchers excited. To this point, biotechnology has been used on the farm to make crops heartier and more plentiful. But anti-technology environmental groups have succeeded in scaring a lot of consumers about foods grown with some help from laboratory science. Now, as the benefits of biotechnology multiply, without the disasters that critics have long been predicting, the scales of public opinion may tip strongly in favor of using the latest science.

In a recent issue of the technology magazine Red Herring, reporter Stephan Herrera puts it this way: "If only agbio scientists had tried to develop therapeutic drugs first. Instead, agricultural biotechnology's first act was to cross a tomato with a flounder, to help the vegetable withstand frost. For a second act, the fledgling industry produced genetically modified corn and soybeans; that proved a boon to farmers and seed companies but won the scorn of environmental groups. Given the perfectly rational response of consumers to be wary of any potential danger in the food supply, the ensuing fear and loathing of these developments was to be expected. Now, however, agbio has a third act: medicine."

Herrera reports on the huge potential of growing monoclonal antibodies (MAbs) inside plants. MAbs are the key ingredients in a host of AIDS and cancer drugs. Right now, the alternative is to grow MAbs for treating humans inside cows or mice, but plants appear to be the better "platform" for growing these disease killers - cheaper, faster, safer.

And what will environmentalists say when a "molecular farm" is allowing thousands or even millions of patients to survive? Mich Hein, president and founder of Epicyte, a pioneer in this field, tells Red Herring: "I can assure you, Greenpeace has no objection to a cornfield that produces medicines."

The medical possibilities are amazing, and they may also succeed in winning people over to biotech generally, making skeptical consumers more eager to accept biotech foods. Already, much of the world is ready to eat the bounty from high-tech farms. Reports Herrera: "The global population is expected to swell by 73 million people a year through 2020, and most of this growth will occur in developing nations, where need outweighs the ethical issues surrounding genetically modified plants for food and medicine. People in nations like China, with 1.4 billion people, and India, with 1 billion, have no qualms about genetically modified food. Nor do people in most sub-Saharan African nations, where malnutrition, HIV, and tuberculosis among children are pandemic."

I believe that rich yuppies will also get with the program once they learn that biotechnology is simply a more careful, precise form of breeding, which farmers have been doing for millennia. So this appears to be a growth field, to say the least. Where to invest? Epicyte is not a public company, but Diversa (DVSA) is a young company in agbio that is showing promise. I'll warn you that DVSA is currently a small, unprofitable venture that carries a great deal of risk along with its upside. If you're looking for a bigger, more established firm with a large stake in agbio, you might consider Monsanto (MON) or Syngenta (SYT).
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