Fort Collins Company Enters Homestretch Of Breeding For Gender

June 16, 2001

Star Man is a frisky, dark chestnut colt with a white star on his nose -- and so much more.

The colt's birth represents a milestone in horse breeding technology. Star Man also will help determine the potential fortunes of the Fort Collins-based company XY Inc.

"The implications of Star Man's birth for the equine industry and Fort Collins are enormous," said Dr. Mervyn Jacobson, XY president and chief executive officer.

Star Man's birth last month at the 50-acre Moondrift Farm in Fort Collins marks the transition of XY's horse-breeding technology out of the research lab and into the commercial arena.

XY, a private company, is the only company in the world licensed to sort sperm and artificially inseminate it into animals to predetermine the offspring's sex. The 4-year-old company focused initially on cattle and horses but has explored using the technique for pigs and endangered species.

"It's rare to work for a company that has an exclusive worldwide license to a product," said Jonathan Sanders, who joined XY in March as chief operating officer. He was formerly general manager of treasury and capital management for an Australian-based mining company with 7,000 employees and $2 billion in assets.

XY uses a sophisticated electronic high-speed cell-sorting machine to separate sperm and select X- and Y-bearing chromosomes. Sperm carrying the X-chromosomes produce females, while Y-chromosomes produce males.

High concentrations of selected sperm are then used to fertilize female animals, using U.S. Department of Agriculture methods.

XY has spent several years researching and proving its technique, and only recently has the 28-employee company set its sights on reaping the financial rewards of commercialization.

More than 100 companies, research institutes and ventures such as cattle-breeding cooperatives in the United States, Great Britain, Japan, Russia, Argentina and many other countries have approached XY about the technology, said Jacobson, a physician and entrepreneur who has focused his energies on reproductive innovations for animals.

The ability for horse breeders, cattle ranchers, hog farmers and others to preselect the sex of offspring can save them millions of dollars.

"From a horse breeder's perspective, time is money," said Brigitte Von Rechenberg, who heads the muscular-surgical unit of the University of Zurich in Switzerland. She also owns top-class Arabian horses.

Breeders say a horse's gestation cycle typically is almost a year, making for a long, expensive wait for foals. So predetermining the sex is critical, they say.

On one year alone, U.S. horse breeders reported spending $548 million in stud fees to have stallions impregnate mares or to use their sperm.

Horse breeders also often prefer males because most performance horses such as jumpers are males. In certain industries, predetermining the sex can alleviate unnecessary slaughtering of newborns.

In the United Kingdom, where dairy farmers prefer females, an average of 600,000 newly born male calves are slaughtered and incinerated every year in the dairy industry. Beef cattle breeders prefer females. XY's preselected sex technique ensures "every calf will be a wanted calf," Jacobson said.

Applications for artificial insemination using the sperm-sorting technique could be in excess of $300 million a year in the U.S. horse industry alone, Jacobson estimates. The market outside the United States is estimated at more than $600 million, according to XY.

Since XY was formed in 1996 through a partnership between Colorado State University and Fort Collins-based Cytomation Inc., the company has been learning how to overcome challenges they face with the evolving technique.

One key challenge has been finding a way to inseminate mothers with a low number of sperm.

"The normal dose to get a mare pregnant has traditionally been regarded as 500 million (sperm)," Jacobson said.

But that many sperm cannot survive during the sperm-sorting process, so the company looked at ways to impregnate mares with sperm counts of 5 million or less.

George Seidel, a physiology professor at CSU's College of Veterinary Medicine, has helped alter sperm preparation techniques, timing and placement.

Star Man's birth showed that sorted sperm could be used for artificial insemination with a very low dose, even after being shipped across the country on an 18-hour trek. The sperm doesn't need to be frozen.

The birth also required no surgical insemination, which had been the case in the summer of 1998 when Call Me Madame was born using the sperm-sorting method.

"In the case of the horse, we believe the commercial model will be to put the high-speed cell-sorting equipment where the mare is," Jacobson said.

Cattle breeders, on the other hand, are likely to keep sperm-sorting equipment where the bulls are located, where it will be frozen. Only 2 million sperm are needed to impregnate cattle.

XY has 28 employees, but in March it began hiring key executives to take the company to the next level. It hired John Hasler, for example, to coordinate research with XY's partners worldwide. Hasler co-owned Em Tran Inc., a pioneer in the embryo-transfer field. He said he plans to blend XY's research with new applications to open new markets.

"One characteristic about me is that I'm fairly successful at taking what people are doing at universities and applying the work commercially," Hasler said.

Contact Michael Perrault at (303) 892-2467 or perraultm@RockyMountainNews.com.