By Carey Gillam
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 slightly 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 marketshare of biotech corn, soybeans and other
crops that have had their DNA altered to tolerate being sprayed
with herbicides and to ward off harmful pests.
But increasing weed and pest resistance to Roundup and other
crop protection chemicals has been a mounting problem for
farmers, and Monsanto and rivals are racing to offer
The work in microbials could help address some of those
concerns but has broader implications for improved production
and sustainability, using bacteria and fungi to optimize the
performance of crops. Row crops as well as fruits and vegetables
are target areas for product research.
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.
Seed treatments in a group of core crops that includes corn,
soybeans, wheat, cotton, canola and fruits and vegetables is a
priority for the near term, the companies said.
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 an 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 by national antitrust
authorities and is not expected to close before early 2014.
Company officials said as Monsanto extends its research into
the microbrials, that work will help the company strengthen
performance in another new business platform - its precision
planting product called "FieldScripts" that uses individualized
field data to guide farmers in planting decisions.
Monsanto shares rose 78 cents to $112.43 in afternoon trade
while Novozymes shares rose 10.80 DKK or 5.2 percent at 217.50
DKK, boosted also by the company's announcement Tuesday of a new
stock buyback program worth up to 2 billion Danish crowns