Farm cooperative buys struggling biotech developer

A researcher examines sorghum developed by Ceres, a biotech developer that was recently sold for $17 million to the Land O'Lakes farm cooperative.

A major farm cooperative is buying a money-losing biotechnology company that’s introduced several genetically engineered crops exempt from USDA’s regulatory process.

Land O’Lakes, a Minnesota-based cooperative with roughly $13 billion in annual revenues, has agreed to pay about $17 million for Ceres, a publicly-traded California biotech firm that lost more than $28 million in its most recent fiscal year.

Ceres’ performance has disappointed investors since selling its shares to the public in 2012: Revenues have since dropped by nearly half, to $2.7 million in 2015, while its stock price plummeted from a high of more than $130 to as low as 16 cents before the takeover was announced.

With profits topping $300 million in 2015, though, Land O’Lakes isn’t taking a serious financial risk with its 40-cent-per-share acquisition of Ceres, while the investment has the potential upside of expanding the cooperative’s biotech portfolio.

Land O’Lakes already owns Forage Genetics International, which sells glyphosate-resistant biotech alfalfa that was targeted in high-profile lawsuits by critics of genetic engineering.

In the past couple years, Ceres has re-oriented its focus from bioenergy crops grown in Brazil to food and forage crops, such as sorghum and sugarcane.

Notably, the company has received written assurances from USDA that nine varieties of sugarcane, corn, sorghum and switchgrass it developed through various biotechnology methods don’t need to be cleared by the agency to be commercialized.

Many common genetically engineered crops must first be deregulated by USDA, which typically involves a time-consuming environmental analysis.

However, crops whose genes were altered without the use of plant pests don’t have to undergo this process according to USDA’s policy, which has been affirmed by the 9th U.S. Circuit Court of Appeals.

Ceres, for example, has used a “gene gun” to shoot genetic material into plant cells, thereby avoiding any parasitic or disease-causing organisms for gene transfer.

Chris Policinski, CEO of Land O’Lakes, said the “acquisition brings complementary strengths together, adds new advanced plant breeding and biotechnology to the FGI research and development pipeline and accelerates the process of bringing new forage solutions to existing and new markets.”

The takeover may face some legal hurdles, however: Several shareholders are pursuing a class action lawsuit against Ceres alleging that its board of directors approved the deal against the best interest of investors.

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