Dec 10 Monsanto Co, the world's largest
seed company, said Tuesday that a deal with Danish company
Novozymes to form a long-term research and development alliance
should accelerate the release of microbial-based products
designed to improve crop production.
The news helped to lightly lift shares in St. Louis-based
Monsanto, and analysts said while the biological work is not
likely to offer a near-term revenue boost, it does hold
"I like the transaction. This is a brand new opportunity,"
said BGC Financial equity research analyst Mark Gulley. "This
supplements Monsanto's current crop protection portfolio."
Monsanto is known for its development of genetically
modified crops and Roundup herbicide. The company has broad
global market penetration of biotech corn, soybeans and other
crops that have had their DNA altered to tolerate being sprayed
with herbicide and to ward off harmful pests.
But resistance to Roundup and other crop protection
chemicals has been a mounting problem for farmers, and Monsanto
and rivals are racing to offer alternatives.
Monsanto has been working to build a new business platform
in what it calls "biodirect" research, over the last two years,
working to find ways to use bacteria and fungi to optimize the
performance of crops and protect them from weeds and pests. The
work is aimed at improving production of both row crops and
fruits and vegetables.
The deal with Novozymes provides an "important
head start" for Monsanto's work in this area and will help
create more value for farmers faster, said Monsanto Chief
Technology Officer Robb Fraley.
"By combining the capabilities of both companies, there is a
unique opportunity to reach a global market... faster than
either company or others in the industry could have accomplished
on their own," said Fraley.
Biologicals are used to complement or replace agricultural
chemical products and represent a growing market segment of
roughly $2.3 billion in annual sales, according to Monsanto.
Novozymes has an established commercial business in
microbials, offering products that improve fertility, yield and
help control disease. The company had 2012 revenue from its
"bioag" portfolio of about $120 million.
One of the company's products, known as JumpStart, is a
micro-organism that is applied to seed before planting. The
active ingredient, a soil fungus, grows on the roots and
interacts with the plant in a way that allows improved nutrient
uptake in the plant's early life and increases yield.
In the deal with Novozymes, Monsanto will make an upfront
payment of $300 million and establish the "BioAg Alliance,"
which joins Novozymes' microbial discovery work with Monsanto's
commercial capabilities, the companies said.
Under the terms of the arrangement, each company will
maintain and independent discovery program to generate leads for
what will be a joint research and development pipeline, Monsanto
Projects will be equally funded at a 50-50 cost sharing for
each phase of development, and Monsanto will act as the lead in
field testing, registration and commercialization of new
The deal is subject to approval of national antitrust
authorities and is not expected to close before early 2014.
Monsanto shares were up 64 cents at $112.29 in midday trade
while Novozymes shares were up $10.80 cents at $217.50, boosted
also by the company's announcement Tuesday of a new stock
buyback program worth up to 2 billion Danish crowns ($367.8