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Gene-editing startups ignite the next ‘Frankenfood’ fight

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By Rod Nickel

(Reuters) – In a suburban Minneapolis laboratory, a tiny company that has never turned a profit is poised to beat the world’s biggest agriculture firms to market with the next potential breakthrough in genetic engineering – a crop with “edited” DNA.

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Calyxt Inc, an eight-year-old firm co-founded by a genetics professor, altered the genes of a soybean plant to produce healthier oil using the cutting-edge editing technique rather than conventional genetic modification.

Seventy-eight farmers planted those soybeans this spring across 17,000 acres in South Dakota and Minnesota, a crop expected to be the first gene-edited crop to sell commercially, beating out Fortune 500 companies.

Seed development giants such as Monsanto, Syngenta AG and DowDuPont Inc have dominated genetically modified crop technology that emerged in the 1990s. But they face a wider field of competition from start-ups and other smaller competitors because gene-edited crops have drastically lower development costs and the U.S. Department of Agriculture (USDA) has decided not to regulate them.

Relatively unknown firms including Calyxt, Cibus, and Benson Hill Biosystems are already advancing their own gene-edited projects in a race against Big Ag for dominance of the potentially transformational technology.

“It’s a very exciting time for such a young company,” said Calyxt CEO Federico Tripodi, who oversees 45 people. “The fact a company so small and nimble can accomplish those things has picked up interest in the industry.”

Gene-editing technology involves targeting specific genes in a single organism and disrupting those linked to undesirable characteristics or altering them to make a positive change. Traditional genetic modification, by contrast, involves transferring a gene from one kind of organism to another, a process that still does not have full consumer acceptance.

Gene-editing could mean bigger harvests of crops with a wide array of desirable traits – better-tasting tomatoes, low-gluten wheat, apples that don’t turn brown, drought-resistant soybeans or potatoes better suited for cold storage. The advances could also double the $15 billion global biotechnology seed market within a decade, said analyst Nick Anderson of investment bank Berenberg.

The USDA has fielded 23 inquiries about whether gene-edited crops need regulation and decided that none meet its criteria for oversight. That saves their developers years of time and untold amounts of money compared to traditional genetically modified crops. Of those 23 organisms, just three were being developed by major agriculture firms.

The newly competitive landscape could foster more partnerships and licensing deals between big and small firms, along with universities or other public research institutions, said Monsanto spokeswoman Camille Lynne Scott. Monsanto – which was recently acquired by Bayer AG – invested $100 million in startup Pairwise Plants this year to accelerate development of gene-edited plants.

North Carolina-based Benson Hill, founded in 2012 and named after two scientists, mainly licenses crop technology to other companies. But it decided to produce its own higher-yielding corn plant because of the low development costs, said Chief Executive Matt Crisp.

Calyxt plans to sell the oil from its gene-edited soybeans to food companies and has a dozen more gene-edited crops in the pipeline, including high-fiber wheat and potatoes that stay fresh longer.

Developing and marketing a traditional genetically modified crop might easily cost $150 million, which only a few large companies can afford, Crisp said. With gene-editing, that cost might fall as much as 90 percent, he said.

“We’re seeing a huge number of organizations interested in gene-editing,” Crisp said, referring to traditional crop-breeding companies, along with technology firms and food companies. “That speaks to the power of the technology and how we’re at a pivotal point in time to modernize the food system.”

UNCERTAIN REGULATORY, PUBLIC ACCEPTANCE

Supporters of gene-editing say it allows a higher level of precision than traditional modification.

With CRISPR, one popular type of gene-editing technology used by Syngenta, scientists transfer an RNA molecule and an enzyme into a crop cell. When the RNA encounters a targeted strand of DNA inside the cell, it binds to it and the enzyme creates a break in the cell’s DNA. Then, the cell repairs the broken DNA in ways that disrupt or improve the gene.

(For a graphic on how the Syngenta process works, see: https://tmsnrt.rs/2KJmtxr )

Biotech firms hope the technology can avoid the “Frankenfood” label that critics have pinned on traditional genetically modified crops. But acceptance by regulators and the public globally remains uncertain.

The Court of Justice of the European Union ruled on July 25 that gene-editing techniques are subject to regulations governing genetically modified crops.

The ruling will limit gene-editing in Europe to research and make it illegal to grow commercial crops. The German chemical industry association called the decision “hostile to progress.”

U.S. Agriculture Secretary Sonny Perdue blasted the ruling for enacting unnecessary barriers to innovation and stigmatizing gene-editing technology by subjecting it to the EU’s “regressive and outdated” regulations governing genetically modified crops.

The USDA also has no current plans to regulate gene-editing in animal products, according to a document provided by the agency.

The U.S. Food and Drug Administration, however, plans to regulate gene-editing in both plants and animals, FDA Commissioner Scott Gottlieb wrote in a June blog post. The agency is developing an “innovative and nimble” approach to regulating gene-editing, he wrote, that will aim to ensure its safety for both humans and animals while allowing companies to bring beneficial products to market.

The USDA, by contrast, chose not to regulate gene-edited crops because the process typically introduces characteristics that are “indistinguishable” from those created through traditional plant breeding, which take much longer, USDA Secretary Perdue said in a March statement.

Although there has been no widespread consumer resistance to gene-editing, activists who have long opposed genetically modified crops remain suspicious of any sort of tinkering with DNA. The new technique raises risks of creating undesired changes in the food supply and warrants increased regulation, said Lucy Sharratt, coordinator of the Canadian Biotechnology Action Network.

That kind of opposition is why agribusiness giant Cargill Inc [CARG.UL] is pursuing gene-edited technology with caution, said Randal Giroux, the firm’s vice-president of food safety, quality and regulatory affairs.

Cargill announced in February that it would collaborate with Precision BioSciences to develop healthier canola oil, but is proceeding slowly on agreements to store and transport other companies’ gene-edited crops pending clarity from regulators, Giroux said.

“We really do want to see gene-editing evolve in the marketplace,” Giroux said. “We’re watching to see how consumers adopt these products and react to these products.”

SECRET FIELD-TESTING

Other major agriculture biotech firms are moving more aggressively, hoping to take advantage of lighter regulation to speed development.

A gene-edited crop may take five years to move from development to commercialization in the United States, compared with a genetically modified crop that could take 12 years, said Dan Dyer, head of seeds development at Syngenta.

The firm is working on better-tasting tomatoes that take longer to spoil and hopes to launch a gene-edited crop in the mid-2020s, said Jeff Rowe, Syngenta’s president of global seeds.

DowDuPont – at a secret location in the U.S. Midwest – is field-testing waxy corn, a variety grown for industrial purposes that has been edited for higher yields. The company plans a commercial launch next spring.

Smaller firms will be nipping at the heels of these massive companies in the race to bring the next generation of genetically engineered foods to market, said Robert Wager, a biology faculty member at Vancouver Island University.

“The lack of USDA-regulated status is a huge game-changer,” he said, “for universities and small startups to enter the market.”

(Reporting by Rod Nickel; Editing by Brian Thevenot)

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Lenovo swings to forecast-beating first quarter profit; PC revenue jumps

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HONG KONG (Reuters) – Chinese PC maker Lenovo Group swung to a profit and beat estimates in the first quarter on Thursday, helped by a sharp jump in revenue.

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Net profit came in at $77 million for the three months ended in June, compared with a loss of $72.3 million in the same period a year earlier when it was hit by higher costs amid a shortage of components.

That was ahead of an average estimate of $59.37 million from six analysts polled by Thomson Reuters I/B/E/S.

Revenue rose 19 percent from a year earlier to $11.91 billion, its second straight quarter of double-digit revenue growth.

“The group remains confident in its core PC business, and aims to grow at a premium to the market in revenue without compromising on profitability,” Chairman Yang Yuanqing said in the statement.

Lenovo’s shares gained 3.4 percent in early trade on Thursday.

(Reporting by Sijia Jiang and Donny Kwok; Editing by Edwina Gibbs)

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Tencent shares slide as profit falls and regulatory outlook spooks investors

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HONG KONG (Reuters) – Shares of Chinese technology giant Tencent Holdings plunged on Thursday after it reported its first quarterly profit fall in nearly 13 years and said it did not know whether it would get Chinese approval for its most popular game.

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Chinese censors’ sometimes abrupt and haphazard regulatory measures have clouded the outlook for the world’s largest market for mobile games in a country where the government can make or break a business.

Tencent said late on Wednesday the biggest issue facing the company before it could return to rapid revenue growth was to gain regulatory approval to start charging for its PlayerUnknowns’ Battlegrounds (PUBG) video game in China.

While several brokerages cut their price target for Tencent after its earnings, analysts were broadly upbeat on the outlook.

“Fundamentally, the business is as strong as it has ever been, in our view, and management says that it is working on various initiatives to reinvigorate growth as soon as possible,” Renaissance Capital said in a research note.

Tencent’s shares, which have dropped 13.5 percent so far this week, fell as much as 5 percent in early trade to HK$319, their lowest level in a year. Shares of South Africa’s Naspers, which owns a 31 percent stake in Tencent, slid 8 percent after the results were announced on Wednesday.

Beijing’s move to halt approvals for game licenses has hit shares of video game companies across Asia and in the United States.

Tencent’s profit decline and caution over the gaming business further hit tech shares in Asia on Thursday.

Shares of chipmaker Samsung Electronics Co fell nearly 2 percent, SK Hynix dropped 3.4 percent, while Japan’s Capcom, which developed Tencent’s blockbuster game Monster Hunter:World, fell 3 percent.

(Reporting by Anne Marie Roantree; Editing by Edwina Gibbs and Stephen Coates)

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Apple accused of pressuring game rivals in Japan: Nikkei

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TOKYO (Reuters) – Japanese regulators are investigating Apple Inc over allegations it unfairly pressured Yahoo Japan Corp to slow the expansion of its online games platform, which competes with Apple’s App Store, Japanese media reported on Thursday.

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The Fair Trade Commission (FTC) is looking at whether Apple interfered in Yahoo Japan’s operations by pressuring it to cut back on developing its Game Plus web-based service which enables users to stream games without downloading apps, the Nikkei newspaper reported.

Apple did not immediately respond to requests for comment. A spokesman at Yahoo Japan, one of the country’s most successful internet companies, declined to comment on the report, but said that the site continued to add game titles.

Shares in Yahoo Japan fell around 2.5 percent in early trade, while the broader market slipped 0.5 percent.

Last month, the FTC said Apple could have breached antitrust rules by forcing Japanese mobile service providers to sell its iPhones cheaply and charge higher monthly fees, denying consumers a fair choice.

Game Plus offers free and fee-based games developed by Square Enix Holdings Co and other game publishers, some of which are also available on the App Store for Japan-registered users. Yahoo Japan’s gaming site has more than 60 million monthly users, which the company and game publishers can tap for usage history and other data.

According to the Nikkei, Yahoo slashed its budget for the platform last year, and has largely stopped promoting the service. Meanwhile, game publisher Square Enix in April removed a game that had been developed exclusively for the site, the newspaper added.

Yahoo Japan’s biggest shareholder is SoftBank Group Corp.

(Reporting by Naomi Tajitsu; Editing by Stephen Coates)

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SEC scrutiny of Tesla grows as Goldman hints at adviser role

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By Jan Wolfe

WASHINGTON (Reuters) – The U.S. Securities and Exchange Commission has sent subpoenas to Tesla Inc <TSLA.O> regarding Chief Executive Elon Musk’s plan to take the company private and his statement that funding was “secured,” Fox Business Network reported on Wednesday, citing sources.

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The electric carmaker’s shares fell as much as 4 percent but cut their losses after Goldman Sachs Group Inc <GS.N> said it was dropping equity coverage of Tesla because it is acting as a financial adviser on a matter related to the automaker.

Investors viewed the Goldman statement as confirming a tweet from Elon Musk on Monday about working with Goldman, even as the reported subpoenas indicated the SEC has opened a formal investigation into a matter.

The latest news extended the roller-coaster ride for Tesla investors in recent days, adding to uncertainty about the future course of the company and whether a deal can be done amid growing regulatory complications.

Tesla and the SEC declined to comment.

Musk stunned investors and sent Tesla’s shares soaring 11 percent when he tweeted early last week that he was considering taking Tesla private at $420 per share and that he had secured funding for the potential deal.

The shares fell 2.6 percent to $338.69 on Wednesday, below $341.99, their closing price the day before Musk tweeted his plan to take Tesla private.

The Tesla CEO provided no details of his funding until Monday, when he said in a blog on Tesla’s website that he was in discussions with Saudi Arabia’s sovereign wealth fund and other potential backers but that financing was not yet nailed down.

Musk also tweeted late Monday night he was working with Goldman Sachs and private equity firm Silver Lake as financial advisers. However, as of Tuesday, Goldman was still negotiating its terms of engagement with Musk, according to a person familiar with the matter.

The 47-year old billionaire’s tweet about secured funding may have violated U.S. securities law if he misled investors. On Monday, lawyers told Reuters Musk’s statement indicated he had good reason to believe he had funding but seemed to have overstated its status by saying it was secured.

The SEC has opened an inquiry into Musk’s tweets, according to one person with direct knowledge of the matter. Reuters was not immediately able to ascertain if this had escalated into a full-blown investigation on Wednesday.

This source said Tesla’s independent board members had hired law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP to help handle the SEC inquiry and other fiduciary duties with respect to a potential deal.

The Wall Street Journal said the SEC was seeking information from each Tesla director.

(Reporting by Sonam Rai, Michelle Price and Supantha Mukherjee; Editing by Anil D’Silva, Nick Zieminski and Cynthia Osterman)

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U.S. investor sues AT&T for $224 million over loss of cryptocurrency

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By Gertrude Chavez-Dreyfuss

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NEW YORK (Reuters) – U.S. entrepreneur and cryptocurrency investor Michael Terpin filed a $224 million lawsuit on Wednesday against telecommunications company AT&T <T.N>, accusing it of fraud and gross negligence in connection with the theft of digital currency tokens from his personal account.

In a 69-page complaint filed with the U.S. District Court in Los Angeles, Terpin alleged that on January 7, 2018, the tokens were stolen from him through what he alleged was a “digital identity theft” of his cellphone account. In the complaint, he said AT&T was his service provider.

In an emailed response, an AT&T spokesman said: “We dispute these allegations and look forward to presenting our case in court.”

At the time of the theft, the three million stolen tokens were worth $23.8 million, the complaint said. Terpin is also seeking $200 million in punitive damages.

The complaint said that AT&T had been previously contacted by law enforcement authorities about such frauds.

Cryptocurrencies have a market capitalization of about $200 billion, according to data from virtual coin tracker coinmarketcap.com. Nine years after bitcoin came into existence, the market has seen the emergence of more than 1,800 digital currencies.

Terpin, represented by Los Angeles litigation firm Greenberg Glusker, claimed in the lawsuit that after the theft of the digital currency, his cellphone account was transferred to an international criminal gang.

Terpin co-founded the first angel group for bitcoin investors, BitAngels, in early 2013, and the first digital currency fund, the BitAngels/Dapps Fund, in March 2014. He is a senior advisor to Alphabit Fund, one of the world’s largest digital currency hedge funds.

The complaint claimed that the theft of the tokens occurred through what is called a SIM swap fraud. SIM stands for subscriber identification module, and SIM cards are used to authenticate subscribers on mobile phones.

SIM swapping consists of tricking a provider into transferring a subscriber’s phone number to a SIM card controlled by someone else. Once that person gets the phone number, it can be used to reset the subscriber’s passwords and access online accounts.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Toni Reinhold and Nick Zieminski)

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Cisco’s software push fuels quarterly beat, strong forecast

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(Reuters) – Cisco Systems Inc <CSCO.O> topped Wall Street targets for quarterly revenue and profit and forecast first-quarter sales above estimates on Wednesday, as the network gear maker’s transition to a software-focused company gains traction.

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Shares rose 6.1 percent to $46.53 in extended trading as the company also highlighted improving subscription-based revenue.

Cisco, like other legacy technology companies, has been launching new products focused on high-growth areas such as cyber security and Internet of Things to cushion sluggish demand in its traditional routers and switches business.

“We’re seeing the returns on the investments we are making in innovation and driving the shift to more software and subscriptions,” Chief Financial Officer Kelly Kramer told analysts on a post-earnings call.

The company forecast first-quarter revenue growth of between 5 percent and 7 percent, implying $12.86 billion at the mid-point, and adjusted profit of between 70 cents and 72 cents per share.

Analysts were expecting a profit of 69 cents and revenue of $12.61 billion, according to Thomson Reuters I/B/E/S.

Subscriptions, which provide a more steady revenue stream, represented 56 percent of total software revenue in the reported quarter, the company said.

Revenue in the security business, which offers firewall protection and breach detection systems, rose 12 percent to $627 million, beating estimates of $615.8 million. Deferred revenue in the business jumped 23 percent.

Cisco said in August it would buy cyber security provider Duo Security for $2.35 billion, the latest in a series of acquisitions by Chief Executive Officer Chuck Robbins as he builds out the company’s newer businesses.

CFO Kramer told Reuters Cisco is looking at more acquisitions in the security space.

Revenue in its infrastructure platform division, which houses the company’s traditional business of supplying switches and routers, rose 7 percent to $7.44 billion. Analysts had expected revenue of $7.32 billion.

On an adjusted basis, the company earned 70 cents per share, beating analysts expectation by 1 cent.

Total revenue rose 6 percent to $12.84 billion, topping average estimate of $12.77 billion.

(Reporting by Munsif Vengattil in Bengaluru; Editing by Sriraj Kalluvila)

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