When Is a GMO Not a GMO?

Guild Investment Management |

The development and marketing of genetically modified crops has typically fallen under the regulatory oversight of the Environmental Protection Agency (EPA) and the Food and Drug Administration (FDA), depending on the crop and the technology. The process has been controversial, with ongoing battles about the potential mandatory labeling of GMO foodstuffs, and polls showing deep consumer mistrust of GMO safety. Nevertheless, GMOs are widespread in the North American food chain -- most processed and commercial foods contain corn and soy, and virtually all corn and soy in the food supply are genetically modified.

Sometimes the modifications allow crops to remain fresh longer, to be more drought tolerant, or to express toxins that function as insecticides; sometimes they make crops immune to broad-spectrum herbicides, so that chemicals such as glyphosate (sold commercially as “Roundup”) can be used freely to kill weeds without damaging the crop itself.

While the U.S. has embraced GMOs and has a liberal regulatory pathway for commercial production, other developed nations, and many developing nations, have been far more skeptical. European regulatory regimes in particular are much more stringent, with some EU nations banning GMOs outright.  

GMO Technologies

So far, the predominant technologies for developing GMOs have involved the creation of “transgenic” plants -- so called because they involve the transfer of genes between organisms of different domains, for example, the transfer of genes from a bacterium to a plant. That’s actually one of the most common, and was one of the first GMO crops to go into commercial production: corn which had a gene inserted from the Clostridium botulinum bacterium, so that the plant’s tissues expressed a protein that is toxic to insects. (Basically, a built-in insecticide.)

Critics and GMO skeptics have worries on several fronts. First, ecological systems are extraordinarily complex. Skeptics argue that since GMO crops are open pollinators, their genetic material will inevitably find its way into the wild, where it could have unpredictable long-term effects. (The risk of transmission has proven well-founded, with samples of heirloom maize from remote regions of Mexico testing positive for genetic material from strains of GMO corn.) They argue that more extensive testing and more careful evaluation of the systemic impact of a GMO crop needs to be done than is required under present laws.

Further, critics note that the evaluation of GMO toxicity follows the same regime as required for any crop-protection chemical -- and that this battery of tests may not capture potential chronic effects. We recently noted a study examining unusual brain metabolites in various animals fed a diet of transgenic corn; GMO skeptics are concerned that the rapid, almost pro-forma approval of GMO crops may prevent such an effect from coming to light before unexpected and widespread damage has already been done. They also note that the widespread use of glyphosate-tolerant transgenic plants has allowed the use of greater quantities of glyphosate herbicides, and think that those herbicides may be found to have negative health effects and environmental impact.

From our perspective, the jury is still out on GMOs, and we anticipate further tussles among manufacturers, regulators, and consumers. 

New Techniques Open Even More Doors

It’s not difficult to get a new GMO crop approved in the U.S., but it is very expensive. Anyone who has seen the dossier that needs to be submitted for such a product is aware of the hundreds of studies that need to be performed. One industry report showed that the development of a GMO crop costs $136 million on average, including $35 million in regulatory costs. The time-frame for approval can also be arduous, sometimes years long (some longer-term studies of teratogenicity and carcinogenicity require years-long studies or generations of animals to complete).  

So many companies, large and small, have been finding a way to bypass the approval process altogether, and produce GMOs that don’t fall under regulators’ purview.

How are they doing this?

Simply with new technology. The regulations covering GMOs apply to transgenic crops created with particular technologies, for example, the use of viruses to introduce new DNA into the target organism. But new technologies are being developed that are outside the scope of existing regulations (such as so-called “gene editing,” which changes an organism’s genome without introducing DNA from any other organism). GMO developers are also eschewing transgenic crops, keeping the sources of new DNA from within the plant kingdom, rather than fetching DNA from bacteria or animals. That also puts the resultant organism outside EPA and FDA scrutiny.

"Gene Editing" Promises Less-Regulated GMOs

Proponents argue that in these cases, GMOs are really not fundamentally different from conventional hybridized plants. Skeptics counter that the consequences of the introduction of novel genes aren’t known -- and that in any event, the process is escaping from regulatory scrutiny simply because the technology has outrun the regulators. (Of course, it always does, in every field.)

Investment implications: The development of GMO crops has until now fallen to the biotech arms of the big agricultural and crop-protection companies. The introduction of new GMO development techniques is taking some GMOs out from under the scrutiny of regulatory agencies -- and potentially opening GMO production to a wide range of smaller companies as regulatory and development costs decline. We will watch for new entrants in the space -- as well as keep our eyes on the ongoing conversation among regulators and consumers about GMO safety, and the potential impacts that may have on the share prices of GMO developers. Be careful about GMO foods until they have been proved safe for human consumption over a period of at least 20 years. It will take time for science to identify that allergic or metabolic problems or other damaging side-effects of GMO crops are developing within the population. There is no mystery why GMO-free organic foods are growing so popular with the U.S. consumer. Many shoppers realize the potential for unintended side-effects from GMO foods.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


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