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July 26, 2003 An acquaintance recently indicated that I should note that I hold stock in one of the companies mentioned in the initial article on Igene Biotechnology (Reel Fish Food? March 21, 2003). I do indeed hold stock in this company, and there are several reasons that I do. Igene Biotechnology, if you remember from the article, is the company who recently struck a deal with Tate and Lyle, a major UK conglomerate, to produce astaxanthin in large quantities during the upcoming year. Igene (symbol IGNE) is what I consider a top stock pick. In the current issue of Fortune, Andy Grove delves into the innovations that have the power to transform entire industries. The innovation in Igene’s case is astaxanthin, which provides a natural, healthy alternative to feeding fish. Grove notes that “as a technologist with an interest in business strategy, I have long been intrigued by what happens to industries when a new technology changes the rules of the game, usually by providing an order of magnitude - 10X - improvement in cost effectiveness. The history of technology-based industries - communications, computing, and health sciences - is marked by such transformations.” And you can say the same for biotechnology. It will be interesting to see what changes the large scale production of astaxanthin has on the industry. Certainly as the intake of wild fish decreases (due to smaller and smaller amounts of wild salmon available for consumption) along with the increase in demand for salmon collide, the necessity of farmed fish will increase. Add to the mix the health concerns with chemical fish coloring, and you have the potential for a large scale shift in the way business is conducted. The recent lawsuits against major food chains such as Safeway and Albertsons, seeking to require labeling of what fish have been fed, will only serve to work in the favor of the use of astaxanthin. The combination of this new feeding approach by Igene along with the production power and reach of Tate and Lyle will provide a powerful push forward in the fish food industry. Will it transform the industry? It could. And Igene stands to benefit substantially. Tate & Lyle are putting up approximately $25 million into the venture to kick things off. Igene is also closely tied to an affiliate, ProBio of Norway, which also allows a venture into the supplement industry as well as the fish food companies. In the Fortune article, Grove goes on to state that “as I’ve studied business history, I’ve found that strategic actions with profound consequences aren’t caused only by technological innovations.” Strategy plays a key role in conjunction with technological innovations in fostering tremendous change. Igene’s strategic moves have been sharp recently. The joint venture with Tate and Lyle has more than one aspect to it. Certainly the main aspect is the ability for large style production from a powerhouse company. However, there are other strategies seemingly involved as well. Working with a European company will assist in cracking Europe’s version of the FDA to obtain final approval for the sale of astaxanthin to the continent, which in large part are salmon consumers. It will also provide a powerful legal ally and access to more marketing than previously possible. There are a plethora of benefits in Igene’s strategic move into a joint venture with Tate & Lyle. Will the combined efforts to produce a new supplement/food item transform the fish food industry, and even successfully foray over into the human supplement side as well? Time will tell. It will be interesting to see how some of the bigger players in old industry (chemical fish food) respond - companies such as Archer Daniels Midland and Roche. Grove states that “10X changes are usually initiated by one firm whose strategic action changes the environment for all the others.” What Igene and Tate & Lyle are doing is definitely a strategic action that could bring a seismic change in the industry. The lawsuit against the users of chemical food coloring is serendipitous, as is the opening of the United States markets to areas where Igene is already in production of astaxanthin (Chile, for example, which is Igene’s current major production region). Igene’s stock should start to climb steeply as the huge production at Tate & Lyle’s UK plant begins to crank up in 2004. For Igene and Tate & Lyle, 2004 could be a breakout year of, as Andy Grove puts it, a magnitude of 10X, in the fish food industry. ------------ About the author: Dwayne Hines currently has 12 books selling in major bookstores and writes for major magazines such as Physical and FitnessRX. Email Dwayne Hines: dhines@3dinet.com Comment on this column in the forum. Tell a friend about this site! ------------ |
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