Jacobson sells off XY stake, faces inquiry

One of Northern Colorado’s best-known bioscience companies, Fort Collins-based XY Inc., has a new majority owner after President and CEO Mervyn Jacobson sold off all of his shares in the company.

The sale comes amid a regulatory inquiry into share trading for one of Jacobson’s other companies – Australia-based Genetic Technologies Ltd.

On May 14, Jacobson sold all of his shares in XY, a bioscience company that licenses sex cell-sorting technology, to XY licensee Genetic Resources International, a company based in Navasota, Texas, that does business as Sexing Technologies.

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The sale of XY’s shares came a few months after Genetic Technologies came under scrutiny from the Australian Securities and Investments Commission – the regulatory equivalent of the U.S. Securities and Exchange Commission. Australian media reported in February a raid in which police seized computers from Genetic Technologies headquarters. In response to the coverage, the company issued a press release explaining that ASIC was seeking information from the company regarding past trading in its shares.

“The company cooperated fully with ASIC and has been assured that its inquiries do not involve any activities of the company itself nor any executives acting in their executive capacities,” the March 8 statement read.  

The company issued a follow-up statement the next day “to clarify the position.”

“The company was informed late yesterday by regulatory authorities that their inquiries also relate to activities of the company’s executives,” it read.

On March 29, Genetic Technologies issued a statement announcing that Jacobson requested that the company execute its succession plan “as he has now reached the age of 64.” At that time, it was announced that Jacobson would remain in the CEO role until a successor is found.

Less than two months later, Jacobson sold all of his shares in XY. The transaction was reported to ASIC because XY, over the course of several months, had accumulated more than 3.6 million shares of Genetic Technologies stock. XY first acquired shares in early November – picking up more than 3.2 million ordinary shares.

Jacobson was out of the country and not able to return calls for comment prior to the publication of this story. XY spokeswoman Melissa Katsimpalis said that Jacobson no longer serves as president and CEO, but is currently assisting the company in a consulting role.

Share prices fall

Genetic Technologies trades on the Australian exchange, ASX, as GTG and on Nasdaq as GENE. From September through November, when XY picked up its largest chunk of Genetic Technologies shares, the stock was trading on ASX for an average of 35 cents Australian. Following announcement of the inquiry, the stock took a tumble and is  now trading at around 16 cents per share.

In all, XY holds 3,610,700 ordinary shares and 2,887 American Depository Receipts, which are equivalent to 86,610 ordinary shares. A report filed with ASIC stated that the shares “held by XY Inc. are no longer associated with Dr. Jacobson as a consequence of Dr. Jacobson selling his holdings in XY Inc.” It went on to state that the transaction did not involve the sale of any Genetic Technologies stock.

The future of XY remains a mystery. Maurice Rosenstein, CEO of Genetic Resources International, was unavailable for comment. However, there is speculation that Genetic Resources could move some or all of XY’s operations to Texas.

XY has made international headlines with its sex-sorting technology. Using a cell-sorting mechanism, XY can predetermine sex in non-human mammals. The method has been commonly used in the livestock industry, but also proven in domestic house pets and exotic mammals.

XY formed in 1996 out of research done at Colorado State University and a partnership with Fort Collins company Cytomation Inc. – now known as Dako.  

CSURF assigns patents

The company had another major shareholder change last year. In September, XY bought back its shares held by the Colorado State University Research Foundation. CSURF is the not-for-profit organization that handles CSU’s patent licensing and research funding efforts.

At the same time, CSURF assigned more than 140 patents to XY that the company and the university jointly developed during the past 10 years.

“XY Inc. is now 10 years old and has grown up, and it’s time for XY to graduate as a fully matured commercial enterprise,´ said CSURF CEO Kathleen Henry in an XY newsletter. “This exchange of patents is good for XY, for CSURF and for CSU.”

Henry did not return a call for comment before publication of this story.

The two transactions, selling of the shares and signing over of the patents, probably were not related events, according to George Seidel, a distinguished professor in CSU’s Department of Biomedical Sciences.

“I had a lot to do with starting the company on behalf of the Colorado State University Research Foundation,” he said.

Seidel held the honorary title of director of science but was never employed by the company. Early in the company’s operations, Seidel did much of the sex selection research but has not had a research contract with it for about five years.

Seidel said the sale of Jacobson’s shares is a “huge thing” for the company and the big question is whether or not XY will continue to operate in Fort Collins now that the majority owner is out-of-state.

He said even if the company does move it would be possible for it to continue to contract research to CSU, as it has contracted with universities across the country for many years. However, he added that there are certain services that would be difficult to perform if there were a great geographical distance between the university and the company.

Seidel feels that the collaboration between CSU and XY will not cease to exist under the new ownership, especially since there is still room for continued research into the technology.

“Great improvements have been made with that technology since 1995,” he said, but added that it is still not mature.