Mervyn Jacobson with a bull at an XY Inc. location on the Colorado State University west campus. XY Inc. also operates from a 50-acre farm in north Fort Collins.

XY Thriving On Predetermination of Livestock Gender

By Rod Franklin
Front Range TechBiz
June 28, 2002

Mervyn JacobsonÕs latest challenge isnÕt a question of science. ItÕs jet lag.

In recent months, the XY Inc. president has become one of Northern ColoradoÕs busiest globetrotters as business connections have begun to expand for sexed sperm technology, which allows breeders to predetermine the gender of their livestock using in vitro fertilization or artificial insemination.

JacobsonÕs June 11-18 schedule: Close talks with Russians and United Kingdom clients. Then return to Fort Collins from London. Meet with Front Range TechBiz. Then meet industry representative from Uruguay. Then meet group from Mexico. Then meet people from Argentina. Then jump on a plane to Australia.

And keep checking in with Helen at the office about next weekÕs schedule.

Lots of these huddles and time zone hurdles are traceable to the woes of dairy industries around the world. JacobsonÕs London itinerary had him meeting with client company Cogent, which is trying to engineer more females into the U.K. dairy herd in an effort to scale back the slaughter and incineration of male calves.

He also negotiated with the Russian Ministry of Agriculture and Russian Academy of Agricultural Science, with whom XY Inc. and other agricultural companies are organizing a joint venture to ensure that more of the nationÕs dairy herd are milk-producing females.

Those two relationships represent just a corner of XYÕs burgeoning business network. The company is well along in its grand design for delivering sexed sperm technology to breeders of cattle, horses, swine, sheep, seeing-eye dogs, bison and various exotic and endangered animal species. Since forming in 1996, it has expanded its business dealings to about 20 international locations.

"ItÕs unfolding almost before our eyes -- very, very quick," said Jacobson, who predicts his Fort Collins company will reach profitability this year and be listed on Nasdaq by 2004.

Patents a-plenty

XY owns more than 85 patents on methods to sort, purify, freeze or otherwise selectively process sperm from agricultural stock and other animals. It licenses flow cytometry-based technology to clients who want to stack the odds in favor of predetermining livestock gender.

The implement used to sort X (female) from Y (male) sperm, called the MoFlo, is made by XYÕs cross-licensing partner Cytomation Inc., also of Fort Collins.

In many cases, XYÕs customers are linked to other buyers who are willing to pay a per-dose premium for sperm selectively sorted to produce males or females. Dairy herd owners in the United States, for in-stance, will pay more to ensure the birth of females, ratcheting the price for cattle sperm in a market that has commoditized the product.

Customers definitely will pay more for sorted female sperm in England. Mad cow and foot-and-mouth disease control efforts there resulted in breeding reductions and even more active slaughtering than before. Bans on beef exported from England didnÕt help the countryÕs cattle industry.

For a time, the British have significantly discounted the value of male dairy herd calves Ñ though neighboring European countries are willing buyers of veal, according to Jacobson. Prevailing attitudes have helped seal the fate for young male cows.

"Some of them are, if you like, misguided views on animal welfare," he said. "They wonÕt allow these cows to be shipped to places like Belgium and Holland from England because they think itÕs cruel to ship the cows and less cruel to slaughter them."

Epidemics and market policies have thrown English dairy and beef herds somewhat out of balance from a gender point of view. Now, ranchers wanting females will pay as much as $50 more than the normal sperm price of $20 to $30 per dose.

Cogent a prime customer

Cogent, a supplier to dairies in the country, is trying to provide the means for more effective European milking herds. It deploys 10 MoFlos -- more than any other organization -- to sort and sells doses of concentrated female-producing sperm. In October 2001, XY Inc. received its first royalty payment on Cogent sales.

In Russia, the situation is different. Jacobson attributes problems there to the fall of Com-munism, which threw a serious kink into food production and distribution mechanisms.

The U.S. & For-eign Commercial Service and U.S. Department of State have reported that Russian cattle herds fell from 57 million head in 1990 to 25.3 million in 1997. Milk cow populations dropped from 20.5 million to 14.6 million during the same period.

Continuing devaluations of the ruble exacerbated the situation, diluting RussiaÕs buying power in commodities markets. And from his contacts, Jacobson learned that the situation became even more frantic at times.

"People were generally hungry and desperate, so they slaughtered the animals that were available to them. They effectively slaughtered their dairy herd," he said.

The meetings in London were not XYÕs first with Russian breeders. A sexed sperm experiment in Russia two years ago resulted in 14 calves, 12 of which were female. Now, specialists in the country are excited about improving the ratio of females in dairy herds.

XYÕs activity in other parts of the world involve the gender selection of cattle, pigs, sheep, and horses. The company is developing business and research relationships in Poland, Switzerland, Japan, Germany and Hol-land. Jacobson has also been invited to Ukraine, Spain and China. And he hopes to explore opportunities in New Zealand.

One collaboration with a facility in Sydney, Australia, is so active that Jacobson has begun to think of it as a satellite operation. Recently, the organization sorted sperm from baboons and gorillas.

"Last week they sorted giraffes," Jacobson said.