Scrapie Plays Surge

As the government investigation into the case of bovine spongiform encephalopathy, or mad cow disease, enters its second week, investors continue to speculate on small-cap technology stocks that could have a role in combating or controlling the disease.

On Wednesday, Orchid Biosciences (ORCH Quote) jumped to a 19-month-high after the company touted plans to capitalize on its expertise combating scrapie, a chronic wasting disease in sheep that is similar to mad cow. Orchid, which rose 43 cents, or 30.1%, to $1.85, on 23 million shares, said in a press release early Wednesday morning that it tested a half-million sheep for scrapie in the U.K. and would be expanding its operations to help trace strands of DNA in food.

"Orchid's business in DNA testing of animals for food safety has grown rapidly in the last few years, increasing from zero in mid-2001 to approximately 15% of our projected $50 million top-line revenues in 2003," said Paul Kelly, CEO. "We are actively pursuing opportunities to expand Orchid's scrapie susceptibility genotyping business in Europe and North America."

On Tuesday, Agriculture Secretary Ann Veneman outlined the government's response to mad cow disease in a press conference. It included stricter testing policies of the nation's meat supply. Sensing the new business opportunities, Orchid -- and a number of other companies -- have been positioning themselves to benefit from the increased vigilance.

Specifically, Orchid announced that it would be using its expertise in scrapie to develop a suite of tests to analyze trace elements of disease in meat and expected to have those tests up in 2004.

"The recent incidents involving mad cow disease in cattle in the U.S. and Canada are fueling consumer food safety concerns worldwide and increasing demands for additional measures to ensure the safety of meat products," said George Poste, the company's chairman. "Both preventative disease susceptibility testing and DNA-based food traceability testing can help governments, farmers and livestock companies to ensure the safety of these products used by millions each day."