July 17, 2007

 

Monsanto -BASF partnership, a "promising venture"

 

 

The merger of two of the world's biggest biotechnology companies could further boost plant genetics to speed up the next generation of genetically-engineered crops. , moreover, peer into each other's private vault of genetic code. And the companies say the initial results are promising.

 

Monsanto Co. and Germany-based BASF AG announced their partnership as a "promising venture" as both companies could peek at each other's private vaults on genetics.

 

The US$1.5 billion partnership also gives both companies access to decades-worth of research that each had been carrying on in private to pool resources in developing new lines containing multiple engineered genes which can withstand a variety of challenges like pests and droughts.

 

Much of the work is occurring at Monsanto's research campus in the St. Louis suburb of Creve Coeur.

 

Since the deal was struck in March, the companies have been swapping research documents and patents.

 

In May, the first batch of genes from BASF's sites in Germany began arriving in Creve Coeur for study. Monsanto scientists say the findings have been positive.

 

The two firms have discovered different sets of genes with beneficial characteristics to crops such as corn, soybeans, cotton and canola. For each of the four row crops, Monsanto found that less than 10 percent of BASF's varieties had genetic overlap with those already discovered by Monsanto, according to Steve Padgette, Monsanto's vice president for biotechnology.

 

That boosts the menu of genes from which researchers can choose as they develop new varieties, he said.

 

Even in its early stages, the deal is also getting accolades from some Wall Street analysts.

 

Frank Mitsch, with BB&T Capital Markets, in his tour in Monsanto's research operation last month said that some of the companies' jointly developed crops should reach farmers in good time.

 

In a report, Mitsch said "Monsanto management has (resolve) in not only winning the competitive battles in the near and midterm, but also in the long-term. The venture with BASF was about combining resources to win in future generation technologies."

 

BASF has a vast portfolio of chemical products that produces about US$70 billion in annual sales. Monsanto, on the other hand, focuses on genetically engineered plants, producing 18 commercial biotech crop products over 11 years. Its hybrid and biotech seeds and trait licensing business produced US$4.2 billion of the company's US$7 billion in sales for the first nine months of this year.

 

Monsanto will handle the lengthy and complicated process of getting regulatory approval for whatever plants the companies develop, and will keep 60 percent of revenue from the new products.

 

The company estimates the first new plants should be on the market some time between 2010 and 2015.