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Newsletter number 2, edition 37

News of company's DNA meat tracking test boosts share price

PRINCETON, N.J. - DNA test maker Orchid BioSciences saw its stock price surge this week after it said its first test to genetically identify and trace disease in meat - a response to the mad cow disease scare - could go on sale in 2004.
That could bring a steady revenue stream to the tiny, money-losing biotechnology company. It is a leader in DNA testing for paternity and criminal investigation purposes, and the top provider of DNA tests for sheep to determine which are susceptible to scrapie, a brain-destroying disorder similar to mad cow disease.
"The recent incidents involving mad cow disease in the U.S. and Canada are fueling consumer food safety concerns worldwide and increasing demands for additional measures to ensure the safety of meat products," George Poste, Orchid BioSciences' chairman and a former veterinary medicine researcher, said in a statement released Wednesday.
The Princeton-based company said growing demand for DNA tests of animal food for tracking programs "could generate very large ongoing testing volumes."
Orchid shares rose as much as 50 percent Wednesday, hitting their highest level in 20 months at $2.13, before closing up 30.3 percent at $1.85. Trading volume was extremely heavy, at 28.2 million shares, compared with barely 1 million shares on many days.
Poste's statement was part of an update on Orchid's food safety business. The company said it is developing a group of tests for tracing meat based on technology that identifies variations in segments of DNA. Orchid called the project a high priority and said the first test should be available in 2004.
"Both preventative disease susceptibility testing and DNA-based food traceability testing can help governments, farmers and livestock companies to ensure the safety of these products used by millions each day," Poste said. "Orchid has the requisite technology, systems, infrastructure and expertise to further build its leadership in these important and growing segments."
In 2003, Orchid tested samples from more than 500,000 sheep at its United Kingdom labs to determine whether they are susceptible to scrapie. Its subsidiary, Orchid Europe, and is doing much of the testing funded by the British government to identify which sheep in the nation's flock are genetically resistant to scrapie. Using only those sheep for breeding would gradually eliminate scrapie-prone animals.
The European Union is requiring all member nations to start a scrapie-susceptibility testing program this year. Orchid said it plans to seek testing contracts in other European countries, and that even in the United Kingdom, which has about 40 million sheep, it sees strong potential for further growth in the business.
Some researchers think cattle also may vary in how susceptible they are to mad cow disease. If scientists can discover those genetic differences, cattle also could be bred selectively to eliminate the threat of mad cow disease from herds.
Already, Orchid's revenue from DNA testing of animals for food safety has grown from zero in 2001 to about $7.5 million in 2003, according to the company's chief executive officer, Dr. Paul J. Kelly.

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