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For AGS, the Chill Is Gone : Frostban Test a Milestone for Biotech Firms

May 03, 1987|DONNA K. H. WALTERS | Times Staff Writer

OAKLAND — When Joseph Bouckaert left here last Tuesday afternoon to catch a flight to Los Angeles, he was a little nervous but plenty proud.

Bouckaert, a native Belgian who came to Oakland in 1985 to become chief executive of Advanced Genetic Sciences, had been invited by the Belgian consulate to be the guest speaker at the Belgian-American Chamber of Commerce's annual dinner meeting. He was to tell his story as a successful Belgian businessman in America.

It was a story Bouckaert couldn't have told even a week earlier.

Bouckaert's company, known as AGS, made history on April 24 in a strawberry field in Contra Costa County, about an hour's drive east of here. It became what is believed to be the first company in the world to release a genetically engineered microorganism into the environment.

As precedent-setting as the spraying was, the experiment is just the first step in a series of tests that will be needed to determine whether the microbe, a product AGS calls Frostban, will work to help plants fend off damaging frosts.

Even so, the experiment marked a turning point for the small Oakland company, which had spent four years battling to do the test, and for the fledgling agricultural biotechnology industry as a whole. Now that AGS has gone through the "labyrinth," as company officials termed the review and approval process, it will be easier for it to negotiate other products through. Also, AGS left some conspicuous markers on the trail that could help guide other companies as well.

Yet it was an experience that strained the company's resources, tested its resolve and, some in the industry contend, left an indelible black mark on the new industry's image.

"It's darn hard to be carrying the weight of the whole industry on our back," said Kaley Parkinson, the company's chief financial officer.

AGS was already staggering under the weight of its own problems in July, 1985, when Bouckaert was enlisted by AGS from his work in Belgium, where he successfully financed, managed and exploited commercial outlets for research of universities and other companies and was co-founder of Plant Genetic Systems (32% owned by AGS).

And AGS' situation would get worse before it got better.

Management of the company already had changed twice in the six years since it was founded. Chronic under-funding problems dogged the company, especially since it went public in 1983--a time when the investment community's enthusiasm for all high-technology start-ups, and biotech companies in particular, had begun to ebb. Of the $40 million the company hoped to raise in its initial outing in the stock market, it got only $16 million.

Qualified Opinion

In fact, after the company's 1984 financial results, which included a $7-million loss and a precipitous drop in revenue, auditors Arthur Andersen & Co. rendered a qualified opinion, saying AGS' ability to survive was in doubt.

"The company was, from Day One, under-financed. And it came home to roost in 1985," said Parkinson, who joined the company last August.

The losses deepened to $8.2 million in 1985, and revenue had only marginally improved. It had begun initial production of its first product, Snomax, but sales were nominal. And, despite its excellent reputation in the scientific community, Advanced Genetic Sciences' efforts to draw in additional revenue through research contracts were stalled.

In late 1985, the Environmental Protection Agency gave approval for AGS to test Frostban in a Monterey County strawberry field--a move that, by all rights, should have propelled AGS into a an enviable position in the agri-biotech business.

But AGS, and other researchers planning to test genetically engineered microbes, ran smack into a wall of opposition, led primarily by industry opponent Jeremy Rifkin. AGS had neither anticipated the controversy, nor was it prepared to handle it.

"We substantially underestimated the need for a public relations effort the first time around," said John R. Bedbrook, the company's director of research. "We focused on the regulatory process; in hindsight, we made an error."

Outside observers consider that an understatement. "In the short-run, indeed (the AGS experience) makes companies aware--if they weren't already--that an essential part of new technology is public education. The problem was, AGS was one of the companies that didn't believe it before they got into trouble," said Roger Salquist, chief executive of Calgene, a Davis, Calif.-based plant biotech company.

"In a sense, it's unfortunate that AGS was first out of the chute" with a microbe release, he added. "They made virtually every mistake a company could make."

The company did not pave its way in the community by meeting with local groups and explaining the inherent safety of the experiment, critics have noted. The most debilitating mistake, however, was made in 1985 and surfaced in 1986.

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