Date: Sep 21, 1998 Author: Maggie Galehouse Source: Philadelphia Enquirer (
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Business was blooming for NovaFlora Inc., maker of miniature rose plants. Over the last two years, the biotechnology company had mastered the art of selling flowers by mail order.
But the more popular the roses became, the more NovaFlora's chief executive realized he had to stop growing and selling them. For now.
So in May, NovaFlora halted production and stopped taking orders. What would induce Michael Dobres, an entrepreneur with a young and growing company, to clip its prime source of revenue?
``Imagine an entire golf course that smells like lemon,'' Dobres said.
Or a rose that smells faintly of peppermint. Or lilac.
For Dobres, the future lies in genetically engineered plants. But at NovaFlora's headquarters in the University City Science Center in West Philadelphia, and in California where plant production was taking place, business was beginning to edge out biotechnology.
``We made a strategic decision to stop for a time and get on with the genetic engineering,'' Dobres said.
Dobres and his investors know that the market for ornamental plants is huge; according to his calculations, based on U.S. Department of Agriculture statistics, U.S. retail expenditures exceed $37 billion, more than any other country.
But they also know that in this particular market - which includes flowers, shrubs, grass and ornamental trees - there are many products consumers want that simply cannot be created through traditional hybridization.
Thus plant suppliers have turned to genetic engineering in an effort to develop these products. NovaFlora is just one of the companies in the hunt.
Dobres, 41, has a doctorate in genetics. Born in England, he came to Philadelphia in 1988 to join the faculty at Drexel University. Interested in the applied uses of biotechnology and genetic engineering, Dobres began to teach courses tailored to the corporate community.
Among those attending his 1992 seminar ``Biotechnology for the Non-Technical Professional'' was Bruce Peacock, now chief operating officer of Cephalon Inc., the West Chester drugmaker. During a break, Peacock said to Dobres, ``Why don't you start your own company?''
In 1993, he did. With Peacock as mentor, Dobres conceived NovaFlora, whose objective was to improve and commercialize high-value ornamental plants. Dobres envisioned three phases of production over five years, beginning with plants grown from tissue cultures and ending with genetically engineered plants.
NovaFlora's roses, marketed as Rose Naturl, were grown from tissue cultures. By manipulating the growth environment of miniature roses, Dobres and his team created conditions that enhanced their vigor and bloom. Four inches in height, the roses could grow to 18 inches over a year or two.
``Ornamental plants are a large but fragmented business,'' Dobres said. ``No single player owns more than a small percentage of the market.''
Dobres tried selling the plants to florists, garden centers and supermarkets, but was largely unsuccessful. So in late 1996, NovaFlora decided to try direct sales, advertising in major daily newspapers. The response was immediate and dramatic.
``People would pick up the paper, head to work, and then place an order,'' Dobres said. Generally, the flowers were shipped by private courier, with large numbers going to customers in California and Florida. In February 1997, with Valentine's Day approaching, sales increased 15-fold.
By May 1998, NovaFlora was selling three rose bushes for $24.95, Dobres said, and the business was paying for itself.
Yet the miniature roses essentially were a by-product. ``Rose Naturl was a spin-off of our longer-term objectives,'' Dobres said.
Funded initially by private investors and the Ben Franklin Technology Center of Southeastern Pennsylvania, NovaFlora established its most important business relationships in 1994 and 1995.
The most significant partner in terms of reputation and experience - but not in terms of capital - is Conard-Pyle Co., the 101-year-old West Chester company that is one of the largest privately held growers of garden roses in the United States. It signed on with NovaFlora in 1994. Conard-Pyle controls one of the largest U.S. patent portfolios of plant varieties, according to CHI Research Inc. of Haddon Heights. The company has obtained 197 patents on plants, mostly roses, since 1980, CHI Research said.
``Our investment in NovaFlora was $50,000, and we had a research investment above and beyond that of $25,000,'' said Steve Hutton, chief executive of Conard-Pyle. ``Our real interest is in having the first right of refusal on new products, specifically roses. We're an investor, but we look at ourselves as a collaborator and partner.''
Conard-Pyle created a greenhouse for NovaFlora in its West Grove facility, which is certified by the U.S. Department of Agriculture to receive genetically engineered plant material.
What does that mean?
``They don't want `The Eggplant That Ate Chicago' to leak out,'' said Hutton. ``They want to make sure that a genetically altered plant is contained, that insects can't get in and out, that irrigation water is trapped.''
The other significant player in NovaFlora's future is InterAg, a Roswell, Ga., investment group that provides venture capital to industries that are using technology to build and promote agricultural products nationally.
Dobres declined to reveal how large a stake InterAg has in his company, but called it ``significant.''
``We like to involve ourselves in industries where you have a product that is in demand, like flowers,'' said Kirk Pendleton, chief executive of InterAg. ``One of the fastest-growing sections of a supermarket is its floral area. Ten years ago, you wouldn't have found one anywhere. Today, there are well-established counters of them, and the demand for ever-better flowers - both fresh-cut and for planting around your house - is growing.''
But if consumers ever want to get their hands on a blue rose, or one that doesn't have to be sprayed for insects, or a rhododendron that blooms more than once a year - none of which currently exists - they need people such as Dobres behind the scenes.
Which is why in May, NovaFlora and its investors decided that too much energy was being put into production, diverting valuable time and resources from the science. ``The purpose of developing the miniature rose was to prove what we could do, what we could develop,'' said InterAg's Pendleton. ``We want Mike to concentrate his efforts elsewhere.''
NovaFlora employs only six people: four scientists, a bookkeeper, and a personal assistant. Dobres is busy directing the science.
Unlike working with tissue cultures, which means manipulating plants from the outside in, genetic engineering works from the inside out. In the laboratory, Dobres and his team are working mostly on fragrance, genetically engineering flowers to keep some of their own smell, but also to express other fragrances, such as lemon, pine, spearmint, lilac, orange and peppermint.
NovaFlora's technology portfolio includes a family of genes for monoterpene and sesquiterpene biosynthesis. Terpenes are small, volatile chemicals known to have antimicrobial and insect-deterrent properties. Dobres is trying to develop plants that will not only emit novel fragrances, but repel bugs and fungus.
``We want to be in the position of leveraging the technology,'' Dobres explained, noting that NovaFlora has obtained the exclusive right to use these particular genes for the engineering of all major ornamental plant species.
``We have the genes,'' said Dobres, ``now we just have to see what happens.''
