BUSINESS

Changing the face of the farm

The biotechnology revolution produces new crops and better farming techniques

BRENDA DALGLISH March 6 1995
BUSINESS

Changing the face of the farm

The biotechnology revolution produces new crops and better farming techniques

BRENDA DALGLISH March 6 1995

Changing the face of the farm

The biotechnology revolution produces new crops and better farming techniques

BUSINESS

BRENDA DALGLISH

The problem was that the rats would not die. A Saskatoon company had sought the approval of federal regulators to begin selling a new prod-

uct aimed at increasing crop production. The agriculture biotechnology company wanted to use micro-organisms—in this case, a fungus—that enables plants to grow better. Regulators, however, were concerned about the

environmental impact of releasing huge quantities of the micro-organisms. They told the company to perform tests to determine the toxicity of the fungus by feeding it to white rats in increasing amounts, until the rats died. Months passed but the rats did not die. On the contrary, they seemed to thrive on a diet of fungus. Eventually, persuaded that the micro-organisms were not toxic to rats, the regulators then requested a test on birds. They told the company to feed two litres of the fungus, in one sitting, to a quail, a bird no bigger than a small grapefruit. The outcome was predictable. ‘Two litres of anything fed to a quail at one time is going to kill it,” recalls one industry participant. “It’ll explode.” And, indeed, the quail died.

The anecdote is making the rounds in Saskatoon, the capital of agricultural biotechnology in Canada. The point is that Ottawa’s bureaucrats are so nervous about approving even the mildest, least controversial biotechnology products that they will go to absurd

lengths to avoid giving a final ruling on whether a product is safe for widespread use. The point of the same story from the regulators’ perspective is that when dealing with the emerging biotechnology industry a regulator can hardly be too careful. But for outright opponents of the genetic manipulation of Canada’s food supply, the lesson is that the government’s safety tests are inadequate in determining the long-term effects of the new technologies.

Despite such trials and tribulations, Canada’s agriculture biotechnology industry has come of age. Although the commercial potential of biotechnology only began to be recognized 10 years ago, the 310 biotech companies in Canada had revenues of $1.7 billion in 1993. Despite the difficulties of raising capital, the so-called ag-biotech sector of the industry, which includes about 80 companies in Canada, is thriving. Some have even reached the stage of selling shares to the public. The range of the industry is broad. There are companies that genetically manipulate tomatoes to retain flavor after long storage periods, others that use micro-organisms to enhance fertilizer use and one that makes genetically engineered vaccines that will turn bulls into steers without mechanical castration. In the medical field, plants are given genes that enable them to grow pharmaceutical products, like the cancer drug interleukin, in greater volumes and at lower prices than would be possible using conventional laboratory production methods.

The work of many of the agriculture biotechnology companies is based on genetic engineering. In the past, genetic traits could only be passed between plants or animals that could be cross-bred. Now, however, new techniques permit scientists to remove individual genes from one living organism and transplant them into another. The result is a transfer of genetic traits between plants and animals that could not occur by natural reproductive techniques. Scientists at the University of Calgary, for instance, have transplanted a human gene into canola plants. The aim is to determine whether it is possible to use the plant to manufacture a protein with immunological properties for humans.

Proponents say that agriculture biotechnology is the best hope for increasing food production to sustain the world’s growing population. In addition, scientists say that the new technologies are creating renewable bio-products from genetically engineered crops—grown in so-called factory fields—that are capable of replacing products now made from non-renewable resources. Canola plants, which are used to produce edible cooking oil, can now have their genetic structure altered again to produce tailor-made industrial oils and vehicle fuels. The canola oils are not only renewable, experts say that they cause less environmental pollution than traditional petroleum-based products. Still, some experts warn that there is a danger that the new technologies can also create mutant hybrids that pose unforeseeable dangers to the eco-system. “I wouldn’t say that we’re playing God, but we are helping nature,” said Kutty Kartha, research director of the Plant Biotechnology Institute in Saskatoon. “The technology is opening up all kinds of opportunities,” added Kartha. “But there are risks, and we must be extremely careful about deciding what is good for society.”

The principal goal of most agricultural biotechnology initiatives is to increase the value and yields of crops and livestock production. Two of the best-known and most

controversial biotech products to reach supermarkets are the Flavr Savr tomato—genetically engineered by Calgene Inc. of Davis,

Calif., to produce a fruit that tastes good long after it has been picked—and bovine growth hormone (BGH), also known as bovine somatotropin (BST), a hormone that increases milk production in cows. The Flavr Savr is now on sale in some parts of the United States, while the sale of BGH is under a voluntary moratorium in Canada at least until July. Milk produced using BGH is on sale in the United States.

Nowhere is the debate over the commercial potential of agricultural biotechnology more keenly felt than in Saskatoon. It has become the capital of industry research in Canada—and one of the top five centres in the world.

One of the leaders is Murray McLaughlin, president of Ag-West Biotech Inc., a private company established by the Saskatchewan government in 1989 to support the development of the biotech industry. His office adjoins the University of Saskatchewan campus, overlooking the Prairie grasslands

GROWING COMPANIES

The range of products currently being developed by Canada’s agriculture biotechnology companies is broad. A snapshot of some of Saskatchewan’s 27 biotechnology companies:

• Philom Bios Inc. and MicroBio RhizoGen Corp. (MBR) use similar technologies to produce micro-organisms that, when dusted on seed as it is sown, work with the root systems of the germinating plant to increase its nutrient intake. This increases crop production and cuts down on the use of expensive fertilizers. Philom Bios uses a natural soil fungus, penicillium bilaii, to help the plant take up phosphate, one of the three most important plant nutrients. MBR applies rhizobium, a naturally occurring bacterium, to legume crops to help them absorb more nitrogen, another key nutrient. Said John Cross, who founded Philom Bios in 1980: “In a teaspoon of soil, there are 10 million micro-organisms. Our task is to figure out which of them are the good guys that help plants grow.” The technology Cross uses was developed by Agriculture Canada, which receives a royalty payment each year based on Philom Bios’ sales.

• Multinational chemical companies, including AgEvo Inc., Monsanto Co., DowElanco Canada Ltd., Cyanamid and Comineo Fertilizers Ltd., are developing new strains of the major crop plants that are resistant to the chemical herbicides that they already sell. By creating more commercial plant varieties that can survive applications of their herbicides, the companies expect to expand their sales. Plant Genetic Systems, a Belgian company, opened its North American headquarters in Saskatoon because of the city’s leading role in canola research. PGS specializes in molecular genetic research and crop development.

MBR president Murray Trap, a banker for 22 years before becoming an entrepreneur, says that financing was one of his company’s most difficult tasks. “The banks don’t want to finance you,” said Trap. “How do they take a mortgage out on someone’s brain?” MBR is profitable now, but to expand, it acquired a partner who is able to supply the capital it needs.

• Canamino Inc. is a company started by John Shaw, a former federal bureaucrat, to develop products from oats for the cosmetic industry. Canamino is using a patented refining process to break down oats into about 20 separate powders and liquids. Canamino has begun selling to cosmetic giants like Cheseborough Ponds, Avon Products and Estée Lauder. Shaw says that oats, which have been proven to soothe irritated skin, produce a powder that can replace talc, a mineral mined from deposits running parallel to asbestos, a known carcinogen. Shaw says that making raw materials for the international cosmetic industry has hefty profit potential. “A ton of oats costs about $110,” said Shaw, “and the value of our processed products ranges from $5 a kilogram up to $1,000 a kilogram—at the latter price, that would work out to about $1 million per ton of oats.” And, added Shaw, “the interesting thing is that the cosmetics industry isn’t regulated.”

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at the edge of the city. Says McLaughlin: “If we do things right with biotech, we can produce healthier, safer foods in a much more environmentally sensitive way.” He adds that the rapid growth of Saskatoon’s biotech industry has surprised even its most enthusiastic supporters: almost all of Saskatchewan’s 27 biotechnology companies are in the city, ranging from small start-ups to large multinational operators (page 41).

Another driving force is Stephen Acres, president of Saskatoonbased Biostar Inc., which produces veterinary pharmaceuticals using biotechnology techniques. He says that Saskatoon has produced a flourishing industry by capitalizing on the established research facilities that exist on the university campus. Biostar is using research conducted by the University of Saskatchewan’s Veterinary Infectious Disease Organization, of which Acres was a former director, to produce vaccines that prevent infectious diseases in livestock. Acres says that Biostar is also close to seeking regulatory approval for a vaccine that will use genetic alteration techniques to end the mechanical castration of animals, a process that retards growth. The vaccine will eliminate the traits in male animals that cause them to fight and that make their meat taste strong, while retaining the potential for faster and larger growth.

That vaccine, like Biostar’s other products, began with research done at the University of Saskatchewan. Indeed, the university’s agriculture research facilities are the foundation on which much of the industry is built. For almost a century, in conjunction with other federal and provincial research organizations on the campus, the university has carried out extensive crop and livestock research. Initially, the work concentrated on breeding strains of wheat that would withstand the rigors of Saskatchewan’s harsh climate and voracious pests. The early stages of ag-biotech started in the 1960s when Keith Downey, an Agriculture Canada scientist in Saskatoon, began to develop oilseed canola. Until then, the plant,

which is related to the turnip, was known as rape and was grown primarily as a forage crop for livestock.

As a result of Downey’s success, canola is now a valuable oilseed plant that produces a cooking oil that is lower in unhealthy saturated fats than most other oils. Researchers are studying the potential of canola as an industrial oil and vehicle fuel as well. The new prospects for canola have profited farmers, as well as consumers. Last year, the crop generated almost $2 billion in revenue and is rapidly gaining on wheat, which brought in revenue of almost $3.7 billion.

In the early 1980s, at about the time when the commercial potential of canola and biotechnology were being explored, a recession sent the agricultural sector in Europe and North America into a decade-long decline. On the Prairies, thousands of family farms were wiped out. Grain prices dropped to levels not seen since the Depression of the 1930s and supply gluts in the industrialized world flooded global markets. That crisis prompted farmers, governments, universities and the private sector to begin reconsidering the future prospects of Canadian agriculture.

Ag-biotech appeared to provide solutions to many of the problems posed by the market slump. It created new applications for traditional crops or increased the yield per hectare. Ag-biotech also offered the potential of new, higher-value crops and products that could be exported to large foreign markets. Above all, like the computer software industry, it provides well-paying, high-skilled jobs.

From the beginning, federal and provincial governments have provided crucial start-up support for Canada’s biotech industry. In fact, Ottawa recognized the potential of the sector more than a decade ago when it gave the National Research Council a specific mandate to pursue biotechnology in 1983. In January, Ralph Goodale, federal minister for agriculture and agrifood, and MP for Regina/Wascana,

BETTER IN BIGGAR

From the outside, the MicroGro greenhouse on the edge of town in Biggar, Sask., looks ordinary. But MicroGro

International Research Inc. is an unusual company. Unlike most commercial greenhouses, it uses a biotechnology tissue culture technique that can turn a few cells of a rosebush or houseplant into a million thimble-sized clone plants within a few months. The idea for the company started five years ago when a research scientist from Saskatoon and 13 of Saskatchewan’s biggest retail nurseries began discussing how they could replace imported garden plants—bought from growers as far away as Holland—with homegrown varieties better suited to the harsh prairie climate. But the most innovative thing about MicroGro is its financing: about 25 per cent of its investment capital comes from 62 townspeople, who have invested a total of $350,000 in the greenhouse project. “The way I look at it, $5,000 isn’t going to make or break me,” said investor Stan Grondin, owner of Biggar’s funeral home. “If the banks and credit unions won’t supply the money, then we will.”

MicroGro is a company on the fringe of the agriculture biotechnology revolution. Using tissue-culture technology, MicroGro will take a few cells from the growing tips of high-quality plants and, in special sterile growing mediums, rapidly reproduce those cells into thousands of tiny, new plants.

For the longer term, it is working on developing hardy versions of non-native plant species. MicroGro president Paul Fowler cites work done by an associate, Hugh Skinner, who has developed a Douglas fir, a tall evergreen native to the temperate rain forest of British Columbia’s coastal region, hardy enough to survive in Manitoba’s cold, dry climate.

But as with all knowledge-based technology companies, financing has been a challenge because most traditional lenders are reluctant to loan money to those whose main assets are good ideas. Gany Faye, a Biggar accountant decided that if MicroGro would build its greenhouse in town, the town could help with its financing. In October, 1993, Faye called a meeting of a few Biggar residents to discuss an investment. “I had each

one tell three other people,” Faye said, “and at the second meeting about 30 people showed up.” Faye says that residents of Biggar were eager to invest—especially after the project qualified for inclusion in registered retirement savings plans.

The first phase of the MicroGro project will create almost 20 fulland part-time jobs in the town, which has a population of 2,600. “The majority of the people were interested in helping their community,” said Faye. “And they were excited by the project.” Grondin’s enthusiasm was evident when he launched into a detailed explanation about why the project’s second phase, a research laboratory, must go ahead. Concluded Grondin: “This could be a big thing for a small town.”

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confirmed an ongoing commitment to the industry when he declared: “Biotechnology is a critical component of Canadian growth and economic development.” The Saskatchewan government has been even more supportive. In the mid-1980s, it identified agricultural biotechnology as one of a handful of industries that held the most promise, and provided funding for companies in the crucial start-up years.

Earlier this year, both levels of government continued their support for biotechnology by providing joint financing for the construction of a $10-million bio-fermentor facility in

Saskatoon. Many local companies require the mass production of micro-organisms in a process comparable to culturing yeast to make bread. The proposed bio-fermentor facility will help smalland medium-sized companies to produce these micro-organisms in marketable quantities.

That kind of government investment is gradually beginning to pay off. As with most high-technology companies, experts say that it takes about 10 years to turn an idea into a commercial product. And in the last year or two, the first products have begun to trickle onto the market from some of

Saskatoon’s biotech companies. Royal Hinther, an agricultural biotechnology specialist with the Saskatchewan Economic Development department, says that the industry currently employs about 700 people-many of them highly trained—in the province. Overall, the industry in Saskatchewan posted sales of $200 million last year. And, he notes, the provincial government projects that employment in biotechnology will double and sales will triple by the end of the century.

Still uncertain, though, is how consumers will respond to products that have been genetically engineered. Rod MacRae, coordinator of the Toronto Food Policy Council, a subcommittee of the city’s board of health, argues that the commercial motivation behind most ag-biotech products is not to improve on the flavor or nutritional value of nature’s best foodstuffs. Instead, MacRae argues, the goal is to increase farm production and, ultimately, to make profits for the manufacturers of the biotech products that are sold to farmers. MacRae says the industry is paying little attention to the broader effects of the technologies on man and the environment. “Bovine growth hormone is, like a lot of biotech stuff, a solution looking for a problem,” said MacRae. “There’s no shortage of milk in this country. In fact, we have more milk that we can use. Why do we have to give hormones to cows to get more milk?”

Nor is MacRae convinced that increasing food production will feed the hungry of the world. “The problem is that many people in poor countries can’t afford to buy the food that they need,” said MacRae. “Just increasing production isn’t going to solve that.” At the very least, consumer advocates like MacRae say that biotech products should be labelled. But the industry argues against that stance, claiming that if a biotechnology product cannot be distinguished from a conventional product, at least using current state-of-the-art analytical technology, it should not have to be labelled differently.

For now, however, MacRae says that consumers have a healthy suspicion of biotech products even though they do not fully understand the science behind them. ‘The more complicated a science is, the more fearful people become,” said MacRae. “And that’s justified, because the more complicated a science is, the more difficult it becomes to accurately predict its outcomes.” Still, many in the biotechnology industry acknowledge the risks inherent in their business, but seem confident that they can manage them. “It’s like anything in life, there are always risks and benefits,” said Ashley O’Sullivan, director of Agriculture Canada’s research centre in Saskatoon. “I think biotechnology is the key to the future. We’re just on the verge of understanding its potential. In terms of what our crops will do in the future, the sky’s the limit.” Clearly, science is on the verge of revolutionizing farming one more time. □