March 7, 2008

 

China's Origin to develop world's first phytase corn seed

 

 

Beijing-based Origin Agritech is now getting closer to developing and marketing the world's first GM phytase corn.

 

Origin's phytase corn is expected to be one of the first transgenic corn approved and sold commercially into the Chinese market.

 

The phytase corn is expected to be commercially launched in 2009.

 

The worldwide phytase potential market size is US$500 million, including US$200 million for China alone, according to the China Feed Industry. The corn seed market in China is estimated at US$1 billion.

 

Currently microbiology is used to produce phytase, which helps animals absorb more phosphorus and prevents its release into the environment. Phytase use is now mandatory in Europe, Southeast Asia, South Korea and Japan. Origin plans to be the world's first to introduce transgenic phytase corn.

 

Phytase corn will allow animal feed producers to eliminate purchasing phytase and corn separately and the need for mixing them together.

 

The company's Phytase transgenic corn has passed the Ministry of Agriculture evaluation for safety in the transgenic "intermediate-test" and "environmental-release" stages and is currently in the final stage of evaluation for "production test" safety, the company said.

 

Origin recently also announced the approval of five new corn hybrid varieties for distribution in provinces throughout Central and West China.

 

The company said it will evaluate its seeds for an increased yield of 8 percent or higher compared to the control seeds.

 

Only the top six seeds will be cleared to proceed to the second year of testing. When successful, the approval is granted.

 

Origin Agritech Ltd., formerly known as Chardan China Acquisition Corp., specializes in the research, development, production, sale and distribution of hybrid crop seeds.

 

It launched its first internally developed seed in 2003. The following year, it introduced four corn hybrids to the market. In 2005, the company had five more corn hybrids and one cotton hybrid approved by the government registration office.

 

This meant a total of 11 hybrid varieties approved in the span of three years.

 

In January 2006, Origin acquired a 52.21 percent interest in Denong Zhengcheng Seed Company, Ltd., a seed developer of hybrid rice, cotton and rapeseed in the southwestern region of China.

 

Later that year, it increased its stake in the company to 94.6 percent through a subsidiary.

 

Beijing Origin was established in 1997 and was listed on Nasdaq in November 2005.

 

The company started as a small-scaled technology with registered capital of RMB 3 million (US$420,000) which has since grown to RMB 100 million (US$14 million). The company has 8 distribution centres, 5 production centres, 6 nurseries and one research centre. With sales spanning over 30 provinces in China, Currently it has annual sales of RMB 500 million (US$70.3 million).

 

Shares of the company plunged recently after the company said it swung to a loss in fiscal 2007 as prices plummeted amid an oversupply in the market.

 

The company reported a loss of US$21.8 million in the year ended Sept. 30 compared to a profit of US$7.3 million the same period a year ago.

 

Revenue fell 6 percent to US$65.2 million from US$66 million.

 

Origin said a change in China's policy on commercial seed sales also led to lower selling prices.

 

The company said Chinese regulators required local, provincial seed authorities to separate from existing commercial sales affiliates by June 30, 2007. Thus many local seed producers ceased operations and their seeds were sold at lower than expected prices as these businesses liquidate their remaining inventory.

 

Total expenses for the year also rose 46 percent to US$23.9 million.

 

The company forecast 2008 profit of US$500,000 to US$2 million on revenue of $75 million to US$80 million.

 

The company said it continues to see further industry consolidation, which will lower overall capacity and slow the decline of average selling prices.

 

However, it sees overall inventory remaining high throughout the industry with total seed supply still outstripping demand.

 

Origin develops, grows, processes, and markets hybrid seeds to farmers throughout China and parts of Southeast Asia through a network of 3,200 distributors.