Background to the Evaluations
At the end of April, the final set of results from the Farm Scale Evaluations (FSE) of GM herbicide-tolerant (GMHT) crops was published¹. This paper on winter-sown canola (oilseed rape) brought to a close the largest field experiment ever conducted on farmland ecology. The aim was to evaluate the impact on weed and invertebrate wildlife of an agricultural technology that had yet to be introduced in the UK.

The FSE was established because of widely held concerns that GMHT crops (and GM in general) might exacerbate negative impacts upon farmland wildlife already apparent over the last four decades due to intensification of farming practices. There was concern that control of weeds in GMHT crops tolerant to broad-spectrum herbicides might be so efficient that it could help to clean up previously weedy fields, thereby enhancing long term declines in weeds and the wildlife depending on them. Others argued that GMHT crops might mitigate intensification by delaying and reducing herbicide use, allowing weeds and associated wildlife to remain in fields longer.

Four GMHT crops were evaluated during the FSE in at least 65 fields per crop (266 in total). The spring-sown beet crop was genetically modified to be tolerant to the herbicide glyphosate, while the spring-sown maize and canola and the winter-sown canola were tolerant to glufosinate-ammonium. Each GMHT crop was compared from sowing to harvest with a conventional variety of the same crop to assess their impacts on components of farmland weed and invertebrate wildlife. The FSE was conducted as a randomized block experiment in which each field was split and the GMHT and conventional crop randomly assigned to each half of the field². Based on previous evidence, we assumed that it was not the GMHT construct itself that would exert effects on wildlife, but rather differences in the timing and type of herbicide management between the GMHT and conventional treatments. This assumption led directly to the null hypothesis, that there is no difference between herbicide management of GMHT crops and that of conventional cultivars, managed according to current conventional herbicide practice, in their affect on the abundance and diversity of weeds and invertebrates.

Findings
The results fell into three categories. 1) For winter canola, the numbers of weeds (including weed seeds) were similar in the GMHT and conventional treatments, but the composition was different: there were fewer broad-leaved weeds and more grasses in the GMHT crops. 2) In spring canola and beet there were fewer broad-leaved and grass weeds in the GMHT crops. 3) In spring maize there were more broad-leaved and grass weeds in the GMHT treatment. These differences in weeds and weed seeds, in turn, affected the abundance of invertebrates. This was particularly apparent for pollinators (bees and butterflies) that forage for broad-leaved weeds. In spring beet, spring canola, and winter canola, bee and butterfly numbers were lower in the GMHT crop because of the lower numbers of broad-leaved weeds. In GMHT maize, bee and butterfly numbers were higher. One consistent effect found in all crops was that detritus-feeding springtail numbers were higher in the GMHT treatments. For all GMHT crops, therefore, the null hypothesis used for testing impacts on wildlife was rejected: GMHT management did have an effect on farmland wildlife.

These effects on weeds and invertebrates were all explainable in terms of the activity, number, and timing of herbicides used on the GMHT and conventional treatments. Indeed no differences between the GMHT and conventional treatments were found for herbivorous pests and their natural enemies that live directly on the crop, showing that there was no effect of the GM construct itself. What the results did demonstrate was that management changes associated with a GM construct had effects, not only on the weeds targeted, but also on invertebrates higher up the wildlife food chain. For these reasons, the Advisory Council on Releases to the Environment (ACRE), who advises and makes recommendations to the UK Government on the safety of release of GMOs, advised that "if GMHT maize were to be grown and managed as in the FSE, this would not result in adverse effects on the environment, but that a condition should be placed on the existing consent for GMHT maize to limit the management of the crop to that tested in the FSE." For spring beet and canola, their advice was "if GMHT spring oilseed rape and beet were to be grown and managed as in the FSE, this would result in adverse effects on arable weed populations, and that these would in turn be likely to result in adverse effects on organisms at higher trophic levels, such as farmland birds, compared with conventionally managed spring oilseed rape and beet." Advice on winter canola has yet to be published. In essence, as Professor Jules Pretty (Deputy Chair of ACRE) emphasized, "We're saying ‘yes, but' to the maize and ‘no, but' to rape and beet. The ‘buts' are very important." It was the herbicide management of the GMHT crop upon which the buts are dependent.

Wider Implications
What the FSE makes clear is that GM crops and their associated management will have to satisfy the public's concerns over environmental impact if introduced to the UK, and more widely, Europe. That the effects of such crops might change with the number and timing of management interventions, and that these effects could ramify up the food chain, were not fully taken into account by the biotech industry as it promoted GMHT crops in the UK. The herbicide management options designed for the GMHT treatments in the FSE tended to have ‘detrimental' effects on wildlife, yet subsequent experience from the FSE and other studies² shows that modifications to GMHT herbicide management can produce marked benefits for wildlife, as well as those provided by the crop itself.

Despite the FSE results demonstrating clearly that changes with GMHT herbicide management in weed and invertebrate abundance and diversity could be measured, and the environmental risks quantified, the public in the UK is still not convinced of the testing, safety, or benefit of GM crops. This situation will take time to change. It will also require that the UK address the question raised by Lord May of Oxford⁴ that "The most pressing question arising from the Farm Scale Evaluations is not whether GM crops are better or worse for the environment than conventional crops, but rather, what is it that we want from modern agriculture. We need a wide-ranging debate about how future technologies, including new non-traditional methods of genetically modifying crops, might be used to minimize the adverse impact of agriculture on farmland wildlife." Rather than being the end of GM in Europe, to paraphrase both Prof. Joe Perry and Winston Churchill, "It might then be, once issues of coexistence are resolved, that [the end of the FSE] marked not ‘the end for GM crops', but the end of a troubled beginning."

References
1. Bohan DA et al. (2005) Effects on weed and invertebrate abundance and diversity of herbicide management in genetically modified herbicide-tolerant winter-sown oilseed rape. Proceedings of the Royal Society of London B 272, 463-474

2. Dewar AM et al. (2003) A novel approach to the use of genetically modified herbicide tolerant crops for environmental benefit. Proceedings of the Royal Society of London B 270, 335-340

3. Perry JN et al. (2003) Design, analysis and statistical power of the Farm-Scale Evaluations of genetically modified herbicide-tolerant crops. Journal of Applied Ecology 40, 17-31

Genome sequence information for rice, corn, cotton, wheat, and other important agricultural commodities offers tremendous potential for research and commercial success in the plant biotechnology industry. Not to be outdone, a flurry of microarray and proteomic research currently underway proposes to define expression profiles over time and space for candidate signaling pathways and specific regulatory genes of economic interest. However, it is also clear that no single technology will successfully address all challenges simultaneously, and that new methods should dovetail whenever possible with traditional schemes in genetic mapping and gene discovery efforts.

Conventional genetic mapping approaches to traits governed by multiple genes that interact with the environment have long suffered from lack of precision and power, and thus have been viewed at best by plant breeders with lingering doubts and outright suspicion. Their viewpoint is not without merit as most mapping efforts for many economically important traits are not always reproducible across different populations scrutinized in different environments. To add insult to injury, most genetic studies are conducted with highly divergent or mutant strains that are unrelated to genetic stocks used in commercial development of new plant varieties. It is true that extremely large segregating populations with literally thousands of individuals can be used for fine mapping, but the effort is staggering in terms of time, money, and labor to the point that few indulge in such a monumental task on a routine basis.

Help may be on the way, however, with the "association genetics" approach used by human geneticists as an outgrowth of the Human Genome Project, to circumvent the problems of precision and power that will, in turn, complement traditional mapping efforts. Association genetics deals with unrelated individuals or members of a family with varying levels of phenotypic expression that are evaluated to detect and measure the degree of association between molecular markers and traits of interest. The principle advantage of this procedure, also referred to as "linkage disequilibrium (LD) mapping," lies in its ability to capture informative data stored in unrelated individuals who have undergone several rounds of gene shuffling over multiple generations. This approach may actually be more powerful for plant scientists than human researchers because, instead of predicting the value of certain biomarkers or genes applied to a universal population, one can choose to evaluate and improve specific plant lines or families. Moreover, inbred or clonal individuals allow controlled and replicated data collection over time and space that leads to more accurate phenotying than one-time measurements, as is often the case in human clinical trials.

Ed Buckler at Cornell and Fred Van Eeuwijk at Wageningen University have recently demonstrated the potential of LD and regression methods to identify and characterize loci/genes associated with various complex traits in true breeding lines of maize and barley^1,2. In contrast to calculating associations between pairs of loci or genes by the traditional LD technique, or using a single marker-trait regression scheme, my laboratory has recently evaluated a multivariate approach, known as Discriminant Analysis, for whole-genome scans of microsatellite markers associated with economic traits in unrelated inbred lines of rice³. Selected markers pointed to the same regions on the genetic map as Quantitative Trait Loci (QTL) identified by others in previous studies. Additional markers were also found that underscore the potential of Discriminant Analysis to detect new genetic regions affecting various agronomic characters. The often ignored issue of missing marker data, that can severely cripple an otherwise robust study, was addressed by including a multiple imputation step. Use of a standard statistical software package (SAS Institute, Cary, NC) popular with plant researchers did eliminate the need to learn and implement new programming languages.

In a subsequent study with elite U.S. inbred lines, Discriminant Analysis correctly identified a microsatellite marker that lies within the waxy gene, and also selected new markers in other regions believed to be associated with grain and cooking quality (Kadaru and Oard, unpublished). Discriminant Analysis also selected alleles for disease resistance in rice that mapped to within 1-2 cM of proteins identified in a separate proteomic study (Lee, Pinson, and Oard, unpublished data). Current research focuses on the verification and ability of the selected markers to identify superior rice lines with desirable traits among different recombinant inbred lines and within segregating populations. Finally, sweetpotato researchers successfully used molecular markers selected by Discriminant Analysis to classify unrelated clones for dry matter yield⁴.

So what does this mean for the plant biotechnology industry? In spite of recent advances, association genetics is not without certain challenges that include appropriate statistical method(s), proper adjustments for population structure, study scheme (whole genome vs. candidate gene/loci), sample size, and choice of molecular marker(s). Nevertheless, rapid progress is being made in several laboratories, and there is real potential to exploit association genetics in research and commercial plant improvement. Discovery of genes of economic importance may also be possible for certain crops such as maize with "appropriate" evolutionary and breeding histories. So stay tuned, the fun is just beginning.

References
1. Wilson et al. (2004) Dissection of maize kernel composition and starch production by candidate gene association. Plant Cell 16, 2719-33

2. Kraakman et al. (2004) A linkage disequilibrium mapping f yield and yield stability in modern spring barley cultivars. Genetics 168, 435-46

3. Zhang et al. (2005) Identification of candidate markers associated with agronomic traits in rice using Discriminant Analysis. Theor Appl Genet 110, 721-729

4. Mcharo et al. (2004) Linking quantitative traits with AFLP markers in sweetpotato using Discriminant Analysis. Acta Hort 637:285-293

IMPROVING STRESS TOLERANCE THROUGH ENERGY HOMEOSTASIS IN PLANTS
Tawanda Zidenga

Crop yields are frequently lowered by biotic and abiotic stresses, and one of the most effective strategies to improve agricultural output is to breed or engineer plants tolerant or resistant to stress. Initial research on molecular manipulation focused on production of enzymes that detoxify reactive oxygen species, such as superoxide dismutase. Reactive oxygen species are induced by most types of stresses. Since then, many approaches have been pursued to produce plants tolerant to a broad range of stresses. In a paper published in the Plant Journal, March 2005, researchers from Bayer Biosciences report that breeding or engineering for high energy-use efficiency under stress conditions is a valuable approach to enhance overall stress tolerance of crops¹.

When a plant is exposed to stress, survival mechanisms turn on to reduce damage. The balance between stress and survival signals determines the level of damage suffered by the plant. Among key molecules studied in relation to stress are reactive oxygen species (ROS), which, due to their high reactivity and therefore toxicity, have been called the unwelcome companions of aerobic life. Under stress conditions, the steady state level of ROS usually increases, and it has been hypothesized that ROS (specifically hydrogen peroxide) might also act as messengers, turning on stress-related genes⁵. Recent progress in plant signal transduction reveals that ROS are more than just the misfortunes of an aerobic life. They also play a regulatory role in the plant's physiology (for a review please see ref. 2).

Engineering indifference to stress!
Since it is not very practical to completely avoid growing crops in conditions that are stressful, scientists focus on engineering plants to be indifferent to stress. Marc DeBlock and colleagues report a strategy of improving stress tolerance in plants by maintaining the plant's energy homeostasis under stress¹. When plants are exposed to a stress signal, they expend a lot of energy and exhibit enhanced respiration rates. This is partially due to a breakdown in the NAD⁺ pool caused by the enhanced activity of poly(ADP-ribose) polymerase (PARP), which uses NAD⁺ as a substrate to synthesize polymers of ADP-ribose. This poly(ADP ribosyl)ation is a posttranslational modification of nuclear proteins that seems to be initiated by oxidative and other types of DNA damage. Stress-induced depletion of NAD⁺ results in a similar depletion of energy, since ATP molecules are required to resynthesize the depleted NAD⁺. In this paper¹, DeBlock and coworkers show that plants with lowered poly(ADP ribosyl)ation activity appear tolerant to multiple stresses.

First, the researchers demonstrated that inhibiting PARP activity via chemical inhibitors (3-methoxybenzamide, nicotinamide, and isonicotinamide) protects plants from oxidative stress. To produce transgenic stress tolerant plants, they transformed Arabidopsis and oilseed plants with double-stranded RNA constructs of the parp1 and parp2 genes. Use of double-stranded RNA is now a widely accepted strategy for silencing endogenous genes. In this way, the group downregulated PARP1 and PARP2. Arabidopsis and oilseed plants were transformed with dsRNA constructs containing the 5' end of Arabidopsis AtParp1 (hairpinAtParp1 or hpAtParp1) or AtParp2 (hpAtParp2) in the stem structure. The AtParp lines showed enhanced tolerance to stress, such as heat and drought. The figure below shows pictures of transgenic, azygous, and control plants after exposure to heat and drought stress.

Managing the economics of energy under stress
Most stresses interfere with mitochondrial function¹. Stress deregulates the physiology of the plant and causes NAD⁺ breakdown, ATP overconsumption, and enhanced respiration. These reactions deplete the energy of the plant, cause the production of reactive oxygen species, and consequently induce cell death³. According to the paper¹, inhibiting PARP prevents energy overconsumption under stress, allowing normal mitochondrial respiration.

To demonstrate the high energy efficiency of hpParp lines, the researchers cultured hypocotyl explants of control and hpParp plants on medium containing 0.06 M glucose as the sole carbon source (concentrations higher than 0.1 M glucose have to be used to allow a good callus induction and growth). While the control plants were necrotic and showed poor callus formation, hpParp lines remained green and showed vigorous callus. Germination on medium containing 2–6% glucose resulted in no difference in seedling growth between the hpAtParp lines and the non-transgenic control line. This indicates that the differential callus formation and survival of the explants on glucose medium between the stress-tolerant hpAtParp lines and the control line is not due to an altered sugar sensing, but rather due to efficient energy metabolism in the hpParp lines¹.

In summary, this paper provides a potential approach for engineering for broad stress tolerance in crop plants. However, poly(ADP ribosyl)ation has been reported, at least in animal systems, to be a cellular response to oxidative damage⁴. Poly(ADP-ribosyl)ation plays an important role in the recovery of proliferating cells from certain types of DNA damage, and this has been linked mechanistically with an involvement in DNA base-excision repair. Figure 2 below shows an illustration of the role of Parp 1.

It is therefore not clear whether plant parp genes have a similar function as animal parps, in terms of maintenance of genomic stability. If they do, downregulating them may have negative effects to the growth of the plant. The researchers report that they have not found any negative effect of downregulating parp genes on the growth of plants. They suggest that since the activity is not completely downregulated, perhaps the remnant activity is enough to carry out DNA repair. More work on this area will probably be required to show that this approach works without shortchanging the plant.

References
1. De Block M et al. (2005) Poly(ADP-ribose) polymerase in plants affects energy homeostasis, cell death and stress tolerance. The Plant Journal 41, 95–106

2. Ron Mittler et al. (2005) Reactive oxygen gene network of plants. Trends in Plant Science 9, (10)490-498

3. De Block M et al. (2004) Pflanzenschutz-Nachrichten Bayer 57/2004, 1, 105-110

4. Bürkle A (2000) Poly(ADP-ribosyl)ation: a posttranslational protein modification linked with genome protection and mammalian longevity. Biogerontology 1(1), 41-6

On April 26, 2005, Health and Human Services (HHS) Secretary Mike Leavitt told reporters that the current controversy surrounding the National Institutes of Health ethics policy reminded him of a problem that he confronted as Utah's governor. While preparing for the 2002 Olympic Games, security personnel had to decide about the sensitivity of metal detectors that would scan spectators. They could err on the side of caution and set the magnetometers at the most sensitive setting. But this would prolong the admission process and create intolerably long lines. They eventually concluded that the maximum sensitivity setting might be higher than the situation required. Leavitt suggested that, in a similar way, the new NIH conflict of interest rules may be too severe and need to be dialed back.

On several levels, magnetism presents a reasonable image for NIH's policy quandary about outside consulting and stock ownership. The NIH finds itself caught between polarized forces: one group argues that a liberal policy on outside consulting attracts scientists to the NIH, whereas the other argues that a strict policy repels activities that cast doubt on the NIH's integrity. Just as the NIH's recombinant DNA guidelines have become a standard throughout academia, the final ethics guidelines may well induce changes in ethics policies beyond the NIH's borders–not unlike the way that a magnetic field can effect an alignment of atoms in other materials. But, enough about magnetism.

NIH policy attracts researchers and bad press
When Harold Varmus began his tenure of NIH director in 1993, he discovered problems with the Intramural Research Program. Over a decade later, he would testify before a House subcommittee about how governmental restrictions on industrial interactions contributed to the relatively low esteem in which outside scientists held the Intramural Research Program, a system plagued by low morale within the NIH. The consequences of these attitudes, he said, included ineffective recruiting of new staff from the external scientific community and the loss of some of the NIH's most prominent scientists to the academic or industrial sectors. Varmus attempted to cure these problems in 1995 by lifting the bar that prevented NIH scientists from accepting consulting fees and payments in the form of company stock. An understanding that ethics officers would review all outside activities accompanied the liberalized consulting policy.

In December 2003, the Los Angeles Times shattered a sense of complacency that had flourished under the relaxed ethics standards. David Willman's series of articles revealed that NIH institute directors and researchers had received stock options and hundreds of thousands of dollars in consulting fees. Willman's case studies illustrated the potential for conflict of interest. In one example, a drug company paid a senior NIH official as a consultant even though the official's institute performed early clinical trials with the company's new drug.

Perhaps to ensure that readers grasped the message, an editorial accompanied Willman's first article. "The NIH has become an arm of commerce," the editor declared, "a place where objective science is being trampled in a stampede for market share." After identifying the Bayh-Dole Act as "root of the corruption of the NIH," the editor provided a solution: "Congress helped make this system and can help unmake it."

Congress took the hint. In January 2004, Senator Arlen Spector (R-PA) chaired a hearing on NIH conflicts of interest. During the hearing, NIH Director Elias Zerhouni said that he had ordered an immediate review not only of the press' allegations, but of all existing outside activities and current NIH ethics policies. To aid this investigation, Zerhouni called for the formation of a blue ribbon task force that would recommend policy reform to ensure the integrity of the NIH.

Through May and June, House Oversight and Investigations Subcommittee Chairman James Greenwood (R-PA) held three hearings on NIH consulting arrangements and outside awards. On the day that Harold Varmus would testify, Greenwood opened the session by relating an alleged conflicts of interest case study. A National Cancer Institute researcher and an FDA researcher entered into an outside consulting arrangement with a company while working in their official government capacity under a cooperative research and development agreement with a competitor of that company. "There are few situations more destructive of public/private partnerships than this one," said Greenwood. "What company will want to enter a CRADA with NIH if this is the way conflict of interest issues are managed? This isn't transparency. This is an outrage."

At the hearing, Dr. Norman R. Augustine, Co-Chair of the Blue Ribbon Panel on Conflict of Interest Policies, presented recommendations such as a prohibition against senior NIH officials engaging in paid consultations with biotechnology or pharmaceutical companies and a ban on compensation for outside work in the form of equity. The Panel also proposed an increased public disclosure of financial interests, but this would be tricky. Although federal law requires public disclosure for senior level employees, the federal Privacy Act poses a barrier to an agency-mandated expansion of public disclosure. Instead of attempting to amend the Privacy Act, the Panel suggested expanding internal disclosure within the NIH and improving the efficiency of internal disclosure practices.

Even though Zerhouni pledged to move ahead with the Panel's recommendations, new circumstances waylaid this promise. Reports emerged from drug companies indicating that several dozen NIH employees had failed to report their consulting activities. Zerhouni also learned that NIH scientists had written articles for medical journals endorsing drugs without disclosing to readers that they had been paid by the manufacturers. And then, the Senate appropriations committee suggested that the NIH's budget might see a cut if strong measures were not taken. The developments created a volte-face from a position of compromise to an uncompromising policy.

NIH policy attracts criticism from both poles
On February 1, 2005, the NIH announced a new ethics regulation that addressed concerns raised by outside consulting. The new rules prohibit all NIH employees from outside consulting for an assortment of entities, such as a "substantially affected organization" (a category that includes pharmaceutical, biotech, and medical device companies); health, science, or health research-related trade organizations; professional associations; consumer or advocacy groups; and educational institutions or non-profit independent research institutes that are or recently were NIH funding applicants, grantees, contractors, or CRADA partners. The regulations further prohibit NIH employees from engaging in self-employment activities involving the sale or promotion of services or products provided by these organizations.

The new rules decisively tackled the question of stock ownership. About 6000 NIH senior employees and their families must not acquire or hold financial interests in biotechnology, pharmaceutical, and medical device companies, or other organizations involved in the research, development, or manufacture of medical devices, equipment, preparations, treatments, or products. All other employees are subject to a $15,000 cap on holdings in such entities. An exception to these prohibitions applies to financial interests in substantially affected organizations that result from holding an interest in publicly traded or publicly available investment funds.

The rules also place restrictions on receipt of cash awards by senior employees. The rules do allow an employee to accept trophies having "little intrinsic value," as well as free food and attendance at an event held in honor of the employee.

Although the rules went into effect immediately, the HHS planned to evaluate the possible effects on hiring and retention that may result from the prohibition of outside activity and financial holdings. The agency opened a 60-day period for collecting any comments on the rules. About 1,000 responded.

NIH policy moves toward a state of equilibrium
NIH employees and scientific societies criticized the rules as unjustifiably extreme, a punishment meted out to 18,000 employees for the actions of a few. The Assembly of Scientists, a group of NIH investigators, staff scientists, and staff clinicians argued that the regulations substantially overreach and will discourage scientists from being recruited to the NIH and encourage NIH scientists to depart. By early April, four top NIH researchers did leave, citing the rules as motivation to do so.

Members of Congress have also voiced disapproval. Labor-HHS Appropriations Subcommittee Chairman Arlen Specter and ranking member Tom Harkin (D-Iowa) said that the overly constricting rules need to be loosened, while Reps. Chris Van Hollen (D-Md.) and Thomas M. Davis III (R-Va.) asked for a delay in the implementation of the new rules. HHS Secretary Mike Leavitt agreed to postpone the stock divestiture requirement, the most divisive aspect of the ethics regulations.

Zerhouni has characterized his interim rules as a road test. "I will stand up to prevent NIH from being destroyed by people who feel that it's OK to be loose with the rules," he told The Baltimore Sun. "On the other hand, I'm not going to have a rule with no reason that prevents NIH from recruiting and retaining the best people. That's the balance, and in the end, I'll get there."

Selected References
Baer S (2005) NIH Chief Balancing Politics and Science. The Baltimore Sun, page 1A, May 2, 2005

Filmore D (2004) The NIH "Swivel Chair." Modern Drug Discovery, page 45, August 2004

Health and Human Services (2005) Supplemental Standards of Ethical Conduct and Financial Disclosure Requirements for Employees of the Department of Health and Human Services. Federal Register, page 5543, February 3, 2005

Willman D (2003) Stealth Merger: Drug Companies and Government Medical Research. The Los Angeles Times, page A1, December 7, 2003

Former NIH Director Calls for Disclosure, Limits on Officials' Financial Ties to Industry. Medical Research Law & Policy, page 205, March 17, 2004

Part 1 of 2: Fallacies of the Promise of Growth
Over the past decade, biotechnology has become a sector characterized by start-ups and rapid growth. But a disturbing trend has emerged as a growing number of biotech firms fail each year–despite their best efforts to keep pace with the sector. Or perhaps these firms fail because of their commitment to continually investing in expansion–even though the return on investment has yet to be positive. Biotech firms have traditionally funded growth through optimistic venture capital; however, now that VCs are becoming more skeptical and favor shorter time horizons, firms are increasingly turning to the public markets for cash to fund expansion. In 2003, U.S. biotech firms raised more than $4B in IPOs, although only 12 of the 50 largest biotech firms were profitable¹.

Growth is often touted as the paramount goal for business enterprises. But, the question arises: has biotech grown too quickly? Similar to other technology firms in the 1990s, biotech was the promise of the future. Many well-funded start-ups grew their operations quickly and without infrastructure. Now, regions that host much of the sector find gross overcapacity in the form of empty labs and facilities. It seems that biotech companies' growth strategies at the very least need to be qualified or, perhaps, abandoned.

Executives need to understand different models for sustainability and start thinking more "outside-the-box" in today's rapidly changing marketplace. If growth is the right choice, how can management ensure that it sponsors controlled growth that truly contributes additional value to the business?

Effectively managing growth will become an increasingly important issue for biotech executives, for several reasons. First, over the past decade, competition in the U.S. biotech space has become fiercer, dictating smarter management to ensure survival. Second, the predicted growth in European and Asian biotech sectors signals even greater competitive hurdles to come. The European Union has pledged to increase R&D spending in high growth sectors, including biotech, from 1.9% to 3% of EU's GDP, as well as reduce regulatory barriers and strengthen private-public partnerships². But, the highest biotech growth has been seen in Asia³, fueled by labor cost advantages, strong governmental financial commitment, and in many cases, less restrictive regulation. It is not unrealistic to expect these trends in biotech to create an environment favorable to agbiotech growth in these regions. Third, the market for biotech and agbiotech products is growing and offers increasing opportunity. In 2004, the global area for biotech crops grew by 20%, an increase of 13.3 million hectares⁴. In addition, last year the European Commission approved Monsanto's Round-Up Ready^® corn NK 603 and Syngenta's Bt-11 sweet corn as food⁵. Not only does this approval represent growth for genetically modified food in the European market, but spells expansion of Round-up Ready corn in the U.S. market, where lagging penetration has been at least partially attributed to growers' concerns regarding access to the end markets in the European Union.

This article will not address every issue related to growth strategies. Instead, it will offer a perspective to counter the principle that the goal of business should be to grow. The argument will be framed by first attempting to understand why managers strive for growth. It will then refute the idea that growth should be the ultimate goal of business by demonstrating some of the key failings of growth-focused strategies. Next month's article will examine situations in which growth may be necessary for long-run survival, and lastly, it will draw on empirical evidence and case studies to offer alternative approaches to growth that are more successful at ensuring long-term survival for today's small and medium-sized biotech firms.

Why Do Firms Seek Growth?
The destructive pressure to grow
The vast majority of biotech and agbiotech firms are small and medium-sized start-ups where the pressures to grow can be particularly dangerous. Smaller firms often do not have the infrastructure to manage growth nor the financial strength to withstand a shock to their market; indeed small businesses are more prone to failure. In fact, more bankruptcies are declared when sales are at their highest. What then motivates growth beyond a firm's sustainable limits? There are several reasons why managers of small and mid-sized companies consider spurring growth a top priority.

◦ Managers suffer from a common misconception that a firm must grow to remain competitive, a perception reinforced by the media, academia, and by example.

◦ Specifically, small firms feel competitive pressure to grow if they perceive cost disadvantages because their size is less than the market-efficient scale of production.

◦ Entrepreneurs who originate companies are shown to assess growth opportunities more optimistically, a characteristic sometimes interpreted as a higher tolerance for risk.

◦ Firm managers may feel a need to grow in order to access capital or to increase stock performance.

◦ Or perhaps, managers seek growth for their own egotistical reasons.

Hopefully, as awareness increases, more biotech managers will recognize that sustainability does not necessarily equate with continual growth. The paradigm shift has begun, but a new class of leadership needs to understand the fatal failings of growth-strategies and alternative models that yield long-run competitive advantages.

Key Failings of Growth-Oriented Strategies
Failing #1: Growth promotes non-optimal market size
Although Wall Street may seem to disagree, competitive strategists are beginning to emphasize the importance of "right-sizing" a company's target market rather than seeking market share dominance⁶. Very large markets provide high volume, but seldom yield high rates of return and introduce many competitive problems. On the other hand, small markets attract fewer competitors and allow early entrants to shape the market to fit their own competencies. Consultant Michael Treacy, author of Double-Digit Growth, suggests that in order to grow, biotech firms should steer clear of "the huge markets that everybody's going after, where all the science has been picked over" and instead focus on specific segments that have escaped attention⁷. In fact, small firms must actually be very careful not to capture large pieces of competitive markets–even if they succeed initially, small firms usually lack the resources to compete against effectively larger, more capitalized competitors in the long run.

Unfortunately, however, many biotechnology companies did not understand the impact of their decision to grow until too late. Particularly in the 1990s, firms were flooded with cheap capital and decided to grow because they could, but did not fully consider what their unique value proposition would be in the future. When the craze ended, these companies went bust. Now that agbiotech is on the rebound, with last year showing the biggest rise in GM planting since 1998 at a 20% increase in acreage⁸, the lesson here is to avoid the temptation to grow just because the opportunity exists, because it will not ensure long-run survival and may actually contribute to demise.

Failing #2: Pressure to grow can spur fraudulent activities
Wall Street rewards growing companies and penalizes those that do not. The pressures created for executives in publicly traded companies to meet growth targets can ripple through organizations, sometimes with dire consequences. When firm leaders put extreme pressure on their officers and employees to grow the business, they can create an environment that rewards fraudulent behavior. While satisfying short-term goals, clearly such a strategy does not serve the best interests of the company or its shareholders.

Failing #3: Value destroyed by mergers & acquisitions
A common strategy for growth is through merger and acquisition activity. However, mounting evidence shows that mergers and acquisitions, while providing quick growth to the buyer, rarely create shareholder value, and often destroy it. This notion is gaining acceptance in the business community but still many do not fully appreciate the challenges of creating value through M&As, as can be seen by the recent surge in M&As during 2003 and 2004. There are several key reasons why mergers and acquisitions do not achieve the success managers expect⁹.

◦ Innaccurate target valuation and the "winner's curse" When evaluating potential acquisitions, optimistic managers can make a target appear attractive by changing underlying assumptions only slightly. Management may succumb to textbook agency problems–causing them to undertake value-destroying mergers or acquisitions to further their personal interests.

In addition to errors in valuation, the winner of a bidding contest for an acquisition frequently, if not always, overpays for the target by virtue of being the highest bidder (known as "winner's curse"). Blind spots in competitor analysis that lead to the winner's curse do not only apply to multiple bidder situations. In fact, overpayment may even be greater when other firms, particularly those in the same industry, are not bidding on a particular acquisition. The inclination to overpay for targets clearly does not bode well for M&A as a vehicle to promote sustainable growth.

◦ Future realizations of value and cash needs today. Mergers can produce real and valuable synergies; however, often these gains will not be realized until well into the future. Nevertheless, the acquiring company has paid for these potential gains today in the form of a premium over and above the target's intrinsic value. Therefore, the expected value of these synergies is already priced into the acquisition costs–no new value is created! Often premiums require that the performance gains begin immediately, otherwise value will be destroyed because gains in the distant future will not create enough value to justify today's acquisition price or because the firm may not survive long enough to fully realize the potential synergies. It has proved quite challenging for firms to realize unexpected gains in the short run, if such gains exist at all, which makes profitable M&A activity quite rare.

◦ Management's post-merger actions. In order to make an acquisition work, management will often commit significant resources to the integration process. In cases when an acquisition fails to materialize value, managers are prone to escalate commitment and funnel additional resources in an attempt to salvage the purchase. Instead of divesting the failing acquisition and pursuing more profitable projects, management becomes more involved, creating strategic inertia that prevents the company from responding effectively to competitive changes in other parts of the company. On the other hand, many times good managers will leave a company following a merger, particularly contested mergers. This exodus of human capital can also decrease the likelihood that mergers and acquisitions will meet performance expectations.

Overall, the evidence reveals that mergers and acquisitions are not likely strategies to achieve sustainable growth or value creation.

Failing #4: Growth and increasing complexity
While growth can enhance profitability through economies of scale, growth can also introduce new costs stemming from increasing complexity. It appears that firms often grow in an effort to achieve lower unit costs through increasing scale, which can be easily measured. However, they fail to recognize the less apparent costs incurred by adding additional complexity through more management layers, greater investments in coordination and information systems, and the greater risk that accompanies being able to successfully manage a highly complex organization. Decisions to grow must balance the potential gains made with additional complexity, as illustrated graphically below.

Traditional vertically integrated and pyramid-type company organizations are not suitable for today's rapidly changing environment. Instead, a new organizational model is emerging: one that favors smaller, specialized firms or subgroups that serve specialized needs; one that is flexible and can improve time to market with smaller production runs and decentralized decision-making; and one that may not be the most cost effective, but can exact premium prices and higher returns because it more effectively serves its market.

The pressures to grow are real and intense for many small and medium-sized biotech firms. However, the underlying motivation for growth–firm survival–is often not served through growth-focused strategies. Indeed, growth can create non-optimal market sizes, destructive competitive actions, environments that reward fraud, and increased firm complexity that increase costs and cannot be supported. What then, should astute biotech managers focus on to drive success? Next month's News Report will address management strategies that spur competitive advantage in today's dynamic biotech marketplace.

Selected References
1. Robinson, C "Biotech Investment Busy Going Nowhere." Institute of Science in Society, July13, 2004

2. Knight, V "Focus: EU Biotech: A Beneficiary of Borroso Growth Plan." CNNMoney. Feb 2 2005

3. Hopkins, J "More nations want in on biotech action." USA Today. Jun 7 2004

4. "Worldwide Biotech Crops Experience Near Record Growth." ISAAA Media Release, Jan 12 2005

5. Van Arnum, P "Ag Biotech Gains Momentum." Chemical Market Reporter, Nov 8 2004

6. Czepiel, JA Competitive Marketing Strategy. Prentice-Hall, Inc, 1992

7. Treacy, M Double-Digit Growth. Portfolio, 2003

8. "Biotech companies enjoy global growth in GM crops." New Scientist, Jan 22 2005

9. Sirower M The Synergy Trap. The Free Press, 1997