monsanto MON_06/25/04
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Monsanto Cotton BusinessInvestor’s TourJune 25, 2004
Dr. Randy DeatonDirector, Global Cotton Business
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Key Messages
• Leader in developing technology for cotton farmers• First-mover advantage
– Proven technology– Established brands/market approach– Knowledge of market needs
• Strategies in place to continue growth of business– Second generation products– Introduction of germplasm component thru Cotton States– Continued global expansion– Future products in development
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Product Offerings Through 2002
• Introduced in 1996• Largest agricultural product introduction ever• Planted on 5.7M* acres in 2003 (43% of total)
• Introduced in 1997• Planted on 9.9M acres in 2003 (74% of total)• The “standard” in herbicide tolerance traits
– future Monsanto and competitive products must consider stacking with Roundup Ready® to succeed
• Introduced in 1997• Represents 95% of Bollgard® sales and 55%
of Roundup Ready® sales in 2003
*Source: Monsanto estimates
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Market Approach
• Open architecture - licenses with almost all cotton seed companies
• Thorough distribution/dealer coverage using agency approach– No inventory costs– Grower fee set by Monsanto
• Grower licenses– Detailed information on product sales and customers– Market value pricing
No one has been able to duplicate Monsanto’s success in marketing cotton traits.
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Second generation products
• Advantages over Bollgard®
– Improved control of target insects– Improved spectrum of insects controlled– Improved IRM characteristics – could lead to improved
refuge requirements for growers
• Introduced in 2003 with premium pricing• Expect most growth to occur as second-generation
Roundup Ready® is introduced
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Second Generation Products
• Advantages over Roundup Ready®
– Wider window in which Roundup® can be applied over-the-top – Improved weed control and flexibility
• Planned introduction as early as 2006 pending regulatory approvals
• Anticipate rapid adoption
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is highly anticipated:
• By cotton growers
• By the cotton industry
• By Monsanto
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Cotton StatesMonsanto’s Germplasm Initiative
• Provides growers additional, innovative sources for seed with Monsanto traits
• Provides independent and university breeders opportunity to access market and to do so with Monsanto’s traits
• Provides germplasm licensees the opportunity for new revenue in seed and traits without large R&D investment
• Provides Monsanto new outlets for our traits and gives us access to germplasm for future R&D innovations
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Cotton StatesBusiness Model
• Modeled after Monsanto’s Corn States business• How business works
– Access germplasm• License from third parties• Develop in-house
– Identify “winners” through extensive testing program– Introduce Monsanto traits– License germplasm with Monsanto traits to third-parties on
“win-win” terms– Third-parties licensees create their own seed brands,
inventory and sales• Established practice for corn and soy, but new for
cotton
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Cotton States2003 Trial Results (top 11 of 29 tested)
0
200
400
600
800
1000
1200
1400
Yiel
d (lb
lint
/acr
e)
Varieties
CS1CS2CS3CS4CS5CS6CS7CS8CS9CS10CS11DP 555 BRST 4892 BRFM 966
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Cotton StatesPlanned Timeline
First sales of Cotton States material in CA
Seed production of broad-acre germplasm
Commercialize -BGII/RRF products
Increase share
20062004 2005 2007
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Rapid Market Share Gains
0%2%4%6%8%
10%12%14%16%
1999 2000 2001 2002 2003
Not Uncommon - e.g. FiberMax® Market Share
Conventional w/MON traits
*Source: USDA
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ChinaBollgard 1997
Existing MarketsUnited StatesBollgard 1996RR 1997Bollgard II 2003
ArgentinaBollgard 1998RR 2001
South AfricaBollgard 1998RR 2000
Australia Ingard 1996RR 2000Bollgard II 2003
MexicoBollgard 1996RR 2000
IndiaBollgard 2002
ColombiaBollgard 2001RR 2004
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New Markets
Brazil
Egypt
French WestAfrica
Pakistan
Future opportunities pending in next 4+ years.
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New Innovations
• QTL’s – “mining nature’s genes”– Yield– Quality– Abiotic and biotic tolerances
• Drought tolerance• Lygus/stinkbug resistance
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Strong IP Position in Key Markets
• Existing patents give substantial IP protection to existing/future products
• Patents pending for Bollgard II® and Roundup Ready®
Flex that would provide protection through 2020+ in key markets– Notable decision recently with synthetic Bt patent by U.S.
PTO
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Competition
• Bollgard® competitors– WideStrike™ by Dow in 2005?– VipCot™ by Syngenta in 2006+?– DeltaMax in ???
• Roundup Ready® competitors – BXN® by Bayer in 1995
• Stoneville dropping BXN® after this year– Liberty Link™ by Bayer in 2004– Glyphosate tolerance by Syngenta/Dupont/DeltaMax in
2008+?• Monsanto pipeline products – none as visible as
these
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Hurdles for “Me-Too” Competitors
• Monsanto’s:– second gen products with superior performance and value– established brands and market approach
• Regulatory uncertainties (esp. IRM disadvantages)• IP uncertainties• Lack of interest by seed companies
– Limited R&D dollars to invest in new traits– Aversion to inventory risk– Lack of financial incentives
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Summary
• Planned growth through:– continued innovation– capitalizing on first-mover
advantage• Cotton States key component
of business strategy• Well positioned to manage
future business uncertainties