What to Expect

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(No Transcript)
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What to Expect

• Historical Overview
• Financial Overview
• Mergers and Acquisitions
• GM products
• Corn Modifications
• EPAs Opinion
• Pharmacorn
• Conclusion

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History

• In 1901 J.F. Queeny, longtime employee in the
  pharmaceutical industry, started a company to
  produce for the food and pharmaceutical industry.
  The company was named after his wife, whose
  maiden name was Monsanto. It was located in St.
  Louis.
• (Queeny had previously run a refining company,
  which burned down on its first day of operations)
• In the beginning, the company produced saccharin.
  In 1905 it turned its first profit.
• Interestingly, the entire product of 1903 and
  1905 was shipped to a small company called Coca
  Cola.

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• In 1904 Monsanto added Caffeine and Vanillin to
  its list of products.
• In 1913 Monsanto opened offices in New York.
  World War One forced them to stop importing raw
  materials and start making their own, leading to
  massive expansion.
• In 1915 Sales passed One Million Dollars.
• In 1917 Monsanto begins aspirin production.
  Largest producer until 1980. Also in 1917 was the
  first test case against saccharin (according to
  the Monsanto website, the suit was dismissed in
  1925, ending the government's unsuccessful
  attempts then to prove saccharin harmful.
• In 1918 Monsanto made its first acquisition of
  another company, Commercial Acid Company of
  Illinois. Monsanto now had two plants.

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• In 1928 Queenys son Edgar took over.
• In 1929 expansion moved into other industries
  with the acquisition of a rubber chemical company
  and a textile, leather, and paper chemical
  company.
• On October 10, 1929 the Monsanto Chemical Company
  was listed on the NYSE. 19 days later the market
  crashed. Monsanto continued to expand throughout
  the depression, acquiring new companies and in
  1931 moving into Canada.
• In WWII Monsantos Dayton Laboratories were
  heavily involved with the Manhattan Project,
  working on Uranium. Monsanto continued to do
  government nuclear work until the 1980s. Monsanto
  was also heavily involved with synthetic rubber
  production, another strategic product.

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• Monsanto entered the agrochemical business as a
  result of producing DDT during WWII. By the end
  of the war they were also making products to
  control bacteria, fungi, insects, weeds and
  rodents. By 1950 Monsanto had a de-facto
  agrochemical business, and in 1951 it formed a
  research division to create proprietary
  pesticides. Further research and developments, as
  well as acquisitions, led to the formation of the
  Agricultural Division in 1960.

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Expansion Continues

• In the late 40s and early 50s, Monsanto opens
  opens offices in India, Brazil, and Japan. They
  also became involved with joint projects to
  produce Nylon, pain pills, and Corvettes.
• In the 50s Monsanto moved into the oil and
  fertilizer business (via an acquisition). Also
  several of its herbicides are approved.
• In 1955 Monsanto installed the first IBM data
  processing computer (the IBM 702, now housed at
  the Smithsonian institute). In 1959 Monsanto
  opened a silicon production facility.
• In 1962 Monsanto sales exceeded one billion
  dollars. A European headquarters was established
  in Brussels.

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• In 1964 Monsanto Chemical Company drops the
  Chemical from its name.
• In 1966 Astroturf is introduced, based on a
  Monsanto technology.
• In 1970 a molecule that will become known as
  glyphosate, the active ingredient in Roundup
  herbicide, is synthesized.
• In the mid-1970s, a third of Monsantos sales
  are outside the US. Several chemical and plastics
  ventures were introduced, including a bottle
  which was banned as posing a cancer risk by the
  U.S. Food and Drug Administration in 1977,

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• 1981 - Monsanto entered into its first
  collaborative research agreement - with
  Washington University in St. Louis to pursue
  biomedical research.
• 1981 - DuPonts purchase of the other half of
  Monsantos petrochemical venture forces Monsanto
  out of oil and leads to a refocusing on
  high-value proprietary products.
• Biotechnology is firmly established as the
  strategic research focus. By the mid-1980s
  several products were underway, including bovine
  somatotropin (bST)
• Approved in 1993 after considerable controversy,
  and sold under the trade name of Posilac. As of
  1999 Monsanto was still the only producer.
• 1981 - Nutrasweet was approved for use in the US.
  In 1985 Monsanto bought the company (GD Searle).

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• In the late 80s and early 90s Monsanto did a
  major restructuring which included the sale of
  non-strategic businesses such as AstroTurf
  stadium surface and related businesses,
  polyethylene film, sorbate food preservatives,
  Fome-Cor foam board, Fisher Controls
  International, and others.
• Monsanto consolidated businesses around
  high-value-added proprietary products. Emphasis
  was increasingly on life sciences' agriculture,
  pharmaceuticals and food.
• The early 1990s saw several new products
  including GM potatoes (protected from insects),
  insomnia and arthritis medication, as well as the
  bovine sematropin mentioned earlier.

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Monsantos Worldwide Locations
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Patent Expiration Leads to Lower Sales

• According to Monsantos financial statement, one
  of the causes of lower income in 2003 was lower
  sales of Roundup Herbicide.
• Glyphosate, the basic ingredient in Monsantos
  Roundup herbicide, became widely available
  through various generic labels soon after
  Monsantos glyphosate patent expired in 2000.
  Monsanto responded to increased competition by
  lowering the price of its Roundup products.
• But the company may also have sought to maintain
  customers by requiring farmers to use its brand
  of glyphosate on crops grown with Monsantos
  Roundup Ready seed. Using an off-brand of
  glyphosate on a Roundup Ready crop could void
  certain warranty protections from the company.
• Currently this issue is in the courts.

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Financial Overview
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When Large Corporations Get Hungry

• In 2000 Monsanto merged with Pharmacia Upjohn
• Pharmacia merged with Upjohn (of Kalamazoo,
  Michigan) in mid-1990s.
• Merger of Monsanto leads to stripping of
  pharmaceutical elements followed by an IPO of
  Monsanto later in the year. Final spinoff occurs
  in 2002.
• Later that year PNU was gobbled up by Pfizer.

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• Economic weakness and political unrest in Brazil
  and Argentina severely weakened those currencies
  and caused defaults on payments owed to Monsanto
  by growers in South America to skyrocket.
• Analysts and investors say Monsanto's weak stock
  price and management turmoil may put the company
  in play.
• The most suitable candidate is BASF,
• large size of the deal in this uncertain economy
• Monsanto's potential legal liability at its
  former Solutia subsidiary would be hurdles that
  any buyer would have to overcome.

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• DuPont and Syngenta would likely face antitrust
  barriers because of their strong position in
  seeds and herbicides
• Bayer is in the process of integrating its recent
  purchase of Aventis CropScience and is unlikely
  to attempt a major deal
• Dow would "love" to buy Monsanto given its stated
  desire to become a top-tier ag player, but given
  Dow's own weakened financial position and
  management turmoil, such a deal is unlikely.

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Other Recent Monsanto Actions

• Monsanto has announced that it plans to transfer
  some of its new genetically-enhancing cotton
  technology to Cotton Incorporated, the company
  funded by American cotton growers and importers,
  to increase demand for and profitability of
  cotton.
• According to Monsanto, this underscores the
  company's commitment to growers, consumers and
  the ag industry, outlined in the Monsanto Pledge.
• The Pledge is a series of commitments that
  describe the company's policies for the products
  developed through biotechnology - including
  sharing knowledge and technology to improve
  agriculture and the environment.

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Monsanto and GM

• Organic Farmers in Canada filed a class action
  lawsuit against Monsanto and Aventis, saying GM
  canola had infiltrated their crops.
• The Farmers say this makes them vulnerable to
  suits from GM crop producers, due to a case last
  year where a farmer had to pay Monsanto 15,000
  after GM corn was found on his fields, despite
  his protests it had blown in from elsewhere.
• Monsanto's patent for the gene inserted to make
  Roundup Ready seeds mandates that every purchaser
  of the seed sign a Grower's Agreement and a
  Technology Use Agreement
• The farmer can use the seed for one-time planting
  and may only sell it to a commercial purchaser
  authorized by Monsanto for consumption.

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• The farmer may not sell or give the seed to
  anyone else, and he is prohibited from saving the
  seed for replanting the following year
• The Technology Use Agreement also authorizes
  Monsanto to enter the contracting farmer's land
  to verify compliance with the agreement
• Accordingly, the court reasoned, if any person
  knowingly "uses" a plant containing the patented
  gene without having paid for the seed or having
  signed the requisite agreements, he has violated
  the terms of Monsanto's patent
• No determinative inquiry into how that farmer
  came to be in possession of the patented seed is
  necessary

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A Little More History

• The mid 1990s introduced a host of new GM
  products, as well as the creation of a joint
  venture which became the worlds largest producer
  of Rubber chemicals. Six biotech and agricultural
  companies were acquired.
• In 1997 Monsanto spun off the straight chemical
  businesses to focus on life sciences.
• The current decade has shown Monsanto to be
  focusing on GM products and bioenergy, as well as
  expanding into foreign markets with GM products.

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GM Products introduced in the 1990s

• Roundup Ready glyphosate-tolerant soybeans,
• NewLeaf insect-protected potatoes
• Bollgard insect-protected cotton
• Delayed-ripening tomato approved but not
  commercialized.
• Asgrow and Stine Seed acquired by purchase
• YieldGard corn
• Bollgard cotton
• New Leaf potatoes
• New Leaf Plus potatoes
• Roundup Ready canola
• Roundup Ready cotton
• Roundup Ready soybeans

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Focus GM Corn
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Monsanto Protein Technologies

• Overview
• 20 years experience in plant biotechnology
• Leader in plant biotechnology and recombinant
  protein technology
• Planted on over 90 of all biotechnology acres
• Why corn
• Companys vast knowledge genetic structure of
  corn and corn production.
• Experience allows it to create a development
  process that adheres to pharmaceutical and
  regulatory standards.
• Pharmaceutical proteins are stable in maize.
• Large amounts of proteins can be extracted.

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Maize Production

• Total world maize production for 1999/2000
  exceeded 604 million tons.
• 11.5 was traded internationally
• US dominates worlds maize production and is
  largest exporter.
• European Union maize purchased from US is less
  than 1 of total US export.
• World markets will be effected by
• Technical change - genetically modified maize and
  value-enhanced maize
• Reason for no differentiation between gm and
  conventional corn data
• Even non-gmo crop likely isnt completely free
  of gmo germaplasm.

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GM Breakdown
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Genetic Modifications Not Approved in EU
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Corn Modification Why?

• Two of the main reasons
• Resistance to European Corn Borer
• Tolerance to the herbicide glufosinate
• Bt Corn Bacillus thuringeinsis
• Soil bacteria that creates the insecticide when
  the corn pollen is released.
• Can also release smell that attracts feeding
  insects.
• Toxin produced is depended on target insect, ie
  moths or butterflies
• Toxin ingested by larva, toxin paralysis mouth
  and stomach
• Resistance is slow to build up.
• In 1998 20 of total corn acreage planted was
  Bt Corn.

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Negative Effects of Bt Corn

• Destruction of bystander species
• Monarch butterflies killed
• Fed on the milkweed that was contaminated by Bt
  corn pollen.
• Green lacewings died
• Ingested European corn borers that had eaten Bt
  corn.
• Their death is counter productive since they are
  insect predators
• Soil contamination
• Toxin produced by genetically modified corn can
  remain in soil for up to 234 days.

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Conventional Corn Growers Legal Response

• Conventional corn growers must state
• that no seed represented by the seed company as
  GMO seed was planted.
• that seed represented by the seed company as
  non-GMO seed was planted.
• that care was taken in avoiding contamination in
  bins, augers, and in the combine.
• In no uncertain terms should they state
• that the crop in question has no GMO germplasm.
• that no contamination has occurred from
  mechanical handling and storage of the crop.
• that no contamination has occurred from pollen
  drift.

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Monsantos Newest GM Corn

• Corn was designed to resist rootworm.
• Approved by the EPA in February.
• Also a Bt variety.
• Sold as YieldGard Rootworm corn.
• EPA requires Monsanto to ensure that 20 of the
  acreage where the seeds are planted is kept as a
  buffer zone.
• Reason to reduce the risk of the rootworm
  developing a tolerance to the corns pesticide.

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EPAs Take on GM

• EPA is confident that it does not pose risks to
  human health and environment Stephen L.
  Johnson, Assistant Administrator of EPAs Office
  of Prevention, Pesticides, and Toxic Substances
  these corn varieties show no signs of adverse
  effects to human health.
• Therefore, the EPA approved Bt corn sales until
  2008.
• It does require insect resistance management
  (IRM) and grower education. Monsanto is also
  required to provide a validated analytical method
  for detection of the Bt protein in corn.
• Test kits are available to test corn quickly for
  modifications can be used on the corn itself or
  on the corn plant.

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EPAs Opinion of Bt Corn

• no adverse human health effects
• no insect resistance after five years of
  commercialization
• no adverse effect to non-target wildlife, plant
  or beneficial invertebrates under typical
  agricultural conditions
• have provided significant benefits to growers,
  the public and the environment

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EPAs Requirement of Monsanto

• collect data on soil retention of the Bt protein
• conduct studies on the long-term effects of Bt
  corn on the Monarch butterfly population
• conduct studies on the effects of Bt corn on
  birds and other insects
• file annual reports on insect resistance plans,
  and any signs of insect resistance development
• prepare remedial action plans to use if insect
  resistance occurs

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Quality Protein Maize

• Created to provide the nutritional needs (amino
  acids)
• Particularly children being weaned
• QPM is created for both human and animal
  consumption
• Highest impact areas would be Africa, but also
  important in Central America and some South
  American countries.
• Production and distribution concerns
• Must be grown in areas where other QPM is grown.
• Due to recessive gene requiring activation during
  pollination

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Plant-Made Pharmaceuticals

• Corn Modification
• Goal is to maximize therapeutic protein in corn
• Therapeutic proteins are used as pharmaceutical
  antibodies to treat viral infection, cancer,
  heart disease, etc.
• Additional benefits
• Lower capital investment
• Process is environmentally sustainable
• Plants are natural and processes and wastes are
  minimized.
• Plants are isolated and after harvest, the
  proteins are extracted
• Proteins are delivered to pharmaceutical
  companies

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Monsantos Commitment to Plant-Made
Pharmaceuticals

• Full compliance to all applicable laws,
  regulations, and guidelines.
• Food and Drug Administration, Health Canada, US
  Department of Agriculture, and Canadian Food
  Inspection Agency
• Grow and process these plants separately from
  food and feed
• All corn is grown west of the Rocky Mountains -
  away from the Midwest Corn Belt
• Protect people, food, and feed, and the
  environment
• Conduct internal audits of their processes
  regarding their confinement procedures.

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Conclusion

• Monsanto has remade itself repeatedly in its 102
  year history. Although its current focus is on
  Transgenic agricultural products, it clearly has
  the assets and know-how to accommodate the next
  big thing in any of the fields they currently
  work in (and probably many of the ones they do
  not).