.monsanto 01-04-06b

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.monsanto 01-04-06b

  1. 1. FIRST-QUARTER 2006 ROBB FRALEY, PH.D. CHIEF TECHNOLOGY OFFICER ANNUAL R&D PIPELINE REVIEW January 4, 2006 1
  2. 2. Forward-Looking Statements Certain statements contained in this release are “forward-looking statements,” such as statements concerning the company’s anticipated financial results, current and future product performance, regulatory approvals, business and financial plans and other non-historical facts. These statements are based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, the company’s actual performance and results may differ materially from those described or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, among others: continued competition in seeds, traits and agricultural chemicals; the company’s exposure to various contingencies, including those related to intellectual property protection, regulatory compliance and the speed with which approvals are received, and public acceptance of biotechnology products; the success of the company’s research and development activities; the outcomes of major lawsuits, including proceedings related to Solutia Inc.; developments related to foreign currencies and economies; successful completion and operation of recent and proposed acquisitions; fluctuations in commodity prices; compliance with regulations affecting our manufacturing; the accuracy of the company’s estimates related to distribution inventory levels; the company’s ability to fund its short-term financing needs and to obtain payment for the products that it sells; the effect of weather conditions, natural disasters and accidents on the agriculture business or the company’s facilities; and other risks and factors detailed in the company’s filings with the SEC. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this release. The company disclaims any current intention or obligation to update any forward-looking statements or any of the factors that may affect actual results. Trademarks Roundup, Roundup Ready, Roundup Ready2Yield, Bollgard, Bollgard II, YieldGard, Monsanto, Imagine, Vine Design, Asgrow, DEKALB, Monsanto Choice Genetics, Posilac, Processor Preferred, and Vistive are trademarks owned by Monsanto Company and its wholly-owned subsidiaries and are italicized the first time they appear in this presentation. Mavera™ is a trademark of Renessen. 2
  3. 3. OVERVIEW PHASE II PHASE III DISCOVERY PHASE I PHASE IV Early Advanced Proof Of Concept Pre-launch Gene/Trait 2005 Pipeline Development Development Identification AS OF JANUARY 1, 2005 Roundup Ready Flex cotton Roundup RReady2Yield soybeans 2nd-Gen YieldGard Rootworm FARMER 2nd-Gen YieldGard Corn Borer Drought-tolerant corn Drought-tolerant soybeans Drought-tolerant cotton Higher-yielding corn Higher-yielding soybeans Mavera™ High-value corn with lysine PROCESSOR Mavera™ I High-value soybeans Mavera™ II High-value soybeans 2nd-Gen High-value corn with lysine Feed Corn with balanced proteins High oil soybeans for processing CONSUMER Improved-protein soybeans Vistive II Low Lin – Mid Oleic soybeans Vistive III Low Lin – Mid Oleic – Low Sat soybeans Omega-3 soybeans 3
  4. 4. OVERVIEW PHASE II PHASE III DISCOVERY PHASE I PHASE IV Early Advanced Proof Of Concept Pre-launch Gene/Trait 2006 Pipeline Development Development Identification AS OF JANUARY 1, 2006 Roundup Ready Flex cotton Roundup RReady2Yield soybeans 2nd-Gen YieldGard Rootworm FARMER 2nd-Gen YieldGard Corn Borer Drought-tolerant corn Drought-tolerant soybeans Drought-tolerant cotton Higher-yielding corn Higher-yielding soybeans Mavera™ High-value corn with lysine PROCESSOR Mavera™ I High-value soybeans Mavera™ II High-value soybeans 2nd-Gen High-value corn with lysine Feed Corn with balanced proteins High oil soybeans for processing CONSUMER Improved-protein soybeans Vistive II Low Lin – Mid Oleic soybeans Vistive III Low Lin – Mid Oleic – Low Sat soybeans Omega-3 soybeans 4
  5. 5. DISCOVERY PHASE I PHASE II PHASE III PHASE IV OVERVIEW Proof Of Concept Early Advanced Pre-launch Gene/Trait 2006 Pipeline Development Development Identification AS OF JANUARY 1, 2006 Roundup Ready Flex cotton Roundup RReady2Yield soybeans Roundup RReady2Yield canola Dicamba-tolerant soybeans Dicamba-tolerant cotton 2nd-Gen YieldGard Rootworm 2nd-Gen YieldGard Corn Borer Insect-protected soybeans YieldGard Rootworm II FARMER Soybean nematode-resistance Bollgard III Drought-tolerant corn 2nd-Gen Drought-tolerant corn Higher-yielding canola Drought-tolerant soybeans Drought-tolerant cotton Higher-yielding corn Nitrogen utilization corn Higher-yielding soybeans Mavera™ High-value corn with lysine PROCESSOR Mavera™ I High-value soybeans Mavera™ II High-value soybeans 2nd-Gen High-value corn with lysine Feed Corn with balanced proteins High oil soybeans for processing CONSUMER Improved-protein soybeans Vistive II Low Lin – Mid Oleic soybeans Vistive III Low Lin – Mid Oleic – Low Sat soybeans Omega-3 soybeans 5
  6. 6. PIPELINE UPDATE Corn Germplasm Improvements Are Tightly Linked to Market Share Gains U.S. KEY MARKET ACRES BRAZIL ARGENTINA BRAND LICENSED ASI Corn breeding 80M 30M 6M AVAILABLE MARKET CREATING VALUE 16% 32% 3% 35% 49% PERCENT PENETRATED 2005 CORN YIELD (BU/A) PROJECT UPDATE MONSANTO BRANDS 200 COMPETITORS Corn Breeding 190 2005 PERFORMANCE 180 RESULTS • Average yield differential of Monsanto versus 170 competitors’ best material is better than one-third greater in 2005 compared with 2004 testing 160 • Strong yield advantages are consistent across maturity zones and outperform best competitive commercial 150 material sold in 2005 95 100 105 110 115 RELATIVE MATURITIES (DAYS) 2006 FOCUS CORN PIPELINE HYBRID PERFORMANCE (110 RM) • Continue marker-based breeding approach 120 • Continue focus on broadening the genetic base of our 115 SELECTION INDEX market offerings, including strengthening our 110 international portfolio RESULTS 105 100 95 90 85 MONSANTO MONSANTO OTHER MONSANTO COMPETITIVE COMMERCIAL NEW 2006 PIPELINE HYBRIDS HYBRID LEADERS HYBRIDS LEADERS 6
  7. 7. PIPELINE UPDATE Cotton Breeding Program Provides Rich Source of Germplasm to Branded and Licensed Businesses U.S. COTTON STONEVILLE KEY MARKET ACRES STATES Cotton breeding 14M AVAILABLE MARKET CREATING VALUE 14% 0% PERCENT PENETRATED PROJECT UPDATE 2005 COTTON GERMPLASM PERFORMANCE (19 LOCATIONS) Cotton Breeding 1600 1400 2005 PERFORMANCE 1200 • Monsanto varieties competitive with current market LBS LINT/ACRE 1000 leaders and include Roundup Ready Flex stacked with Bollgard II 800 • Stoneville will offer 9 varieties either with the Roundup 600 RESULTS Ready Flex trait or with Roundup Ready Flex stacked 400 with Bollgard II 200 • Cotton States will have 7+ licensees in 2006 with 0 access to 5 varieties with Roundup Ready Flex stacked 2005 MONSANTO with Bollgard II COMPETITIVE VARIETIES LEADERS 2006 FOCUS • Introduce 4-6 new, improved varieties with latest trait offerings • Continue marker-based breeding approach • Expand breeding program and evaluations of additional varieties 7
  8. 8. OVERVIEW Efficient Discovery Program Is in Full Gear, Fueling Pipeline Expansion and Performance PHASE II PHASE III DISCOVERY PHASE I PHASE IV Early Development Advanced Proof Of Concept Pre-launch Gene/Trait Development Identification AVERAGE 24 to 48 MONTHS 12 to 24 MONTHS 12 to 24 MONTHS 12 to 24 MONTHS 12 to 36 MONTHS DURATION1 AVERAGE 5 PERCENT 25 PERCENT 50 PERCENT 75 PERCENT 90 PERCENT PROBABILITY OF SUCCESS2 ION AT GR E INT IT RA T G STIN D TE FIEL MONSANTO DISCOVERY + REGULATORY DATA GENERATION COLLABORATIVE REG U LATO PARTNERS RY S UBM IS SION KEY INFLECTON POINT: SE ED BU AFTER PHASE II COMMERCIAL LK UP SUCCESS GOES TO >50% WITH LEADS ON COMMERCIAL TRACK TENS OF THOUSANDS THOUSANDS 10s <5 1 GENES IN TESTING •HIGH-THROUGHPUT •GENE OPTIMIZATION •TRAIT •TRAIT INTEGRATION •REGULATORY KEY ACTIVITY SCREENING DEVELOPMENT SUBMISSION •CROP •FIELD TESTING •MODEL CROP TRANSFORMATION •PRE-REGULATORY •SEED BULK-UP •REGULATORY DATA TESTING DATA GENERATION •PRE-MARKETING •LARGE-SCALE TRANSFORMATION 1. Time estimates are based on our experience; they can overlap. Total development time for any particular product may be shorter or longer than the time estimated here. 2. This is the estimated average probability that the traits will ultimately become commercial products, based on our experience. These probabilities may change over time. 8
  9. 9. PIPELINE UPDATE Drought-Tolerant Corn Advances to Phase II Based on Second-Year Field Test Results KEY MARKET ACRES U.S. BRAZIL ARGENTINA Drought-tolerant corn 80M 30M 6M AVAILABLE MARKET CREATING VALUE 0% 0% 0% PERCENT PENETRATED PROJECT UPDATE 8 DURING DROUGHT STRESS Drought Drought-tolerant corn tolerance % IMPROVED GROWTH 6 established DISCOVERY PHASE I PHASE II PHASE III PHASE IV RESULTS through plant physiology 4 (performance) 2005 PERFORMANCE over three 2 • Moved into Phase II years 2003 2004 2005 • In second year, lead genes tested in drought conditions in 7 locations, broad-acre application in 10 locations • Physiological drought tolerance repeated over past 3 40 In multiple years locations of % YIELD ADVANTAGE drought- 20 2006 FOCUS condition field RESULTS trials, best- • Continue to screen lead events for performance 0 performing • Continue commercial transformations for second events show 60 80 100 120 generation of drought tolerance; Second set of genes significant yield -20 are being evaluated in Discovery and Phase I advantage over conventional • Select optimal germplasm for drought genes checks -40 LOCATIONS WITH INCREASING DROUGHT SEVERITY DISCOVERY PHASE I PHASE II PHASE IV LAUNCH PHASE III Proof of Concept Early Development Pre-Launch Adv. Development 9
  10. 10. PIPELINE UPDATE Nitrogen Utilization Corn Emerged from Discovery Engine to First-Year Field Testing KEY MARKET ACRES U.S. BRAZIL ARGENTINA Nitrogen utilization corn 80M 30M 6M AVAILABLE MARKET CREATING VALUE 0% 0% 0% PERCENT PENETRATED PROJECT UPDATE G en Nitrogen utilization corn es DISCOVERY PHASE I PHASE II PHASE III PHASE IV RESULTS HIGH N MED N LOW N 2005 PERFORMANCE Broad screens of hundreds of traits in low, • Emerged from Discovery to Phase I field testing medium and high nitrogen situations allow us to • Lead events show roughly 10 percent increase in yield identify candidates for more intensive field testing in multi-location field trials 190 At standard 2006 FOCUS YIELD (BU/ACRE) nitrogen rates 170 • Enhanced nitrogen utilization is a challenging trait, so (120 lbs/ac) there EVENT 1 is yield industrial scale genomics is continuing to identify more RESULTS 150 EVENT 2 advantage over leads CONTROL conventional • Continue to refine the gene constructs for optimal 130 check performance 110 0 50 100 150 200 POUNDS OF N APPLIED/ACRE DISCOVERY PHASE I PHASE II PHASE IV LAUNCH PHASE III Proof of Concept Early Development Pre-Launch Adv. Development 10
  11. 11. PIPELINE UPDATE Higher-Yielding Soybeans Showing Good Results in Second-Year Field Tests KEY MARKET ACRES U.S. BRAZIL ARGENTINA Higher-yielding soybeans 80M 50M 35M AVAILABLE MARKET CREATING VALUE 0% 0% 0% PERCENT PENETRATED PROJECT UPDATE WITH TRAIT Higher-yielding soybeans DISCOVERY PHASE I PHASE II PHASE III PHASE IV RESULTS CONTROL 2005 PERFORMANCE Higher yield potential is being validated in field • Advanced to Phase II environment versus conventional checks, with • Tested hundreds of events in both first- and second- visible plant height differences year field testing over approximately 20 locations • Volume of current events in testing as a result of 2004 10 Yield partnership with Mendel 2005 advantage 8 YIELD ADVANTAGE (% OF CONTROL) 2006 FOCUS over conventional RESULTS 6 • Initiate commercial transformations and optimization to checks improve trait performance 4 improved in leads in 2 second-year testing 0 Event 1 Event 2 Event 3 DISCOVERY PHASE I PHASE II PHASE IV LAUNCH PHASE III Proof of Concept Early Development Pre-Launch Adv. Development 11
  12. 12. PIPELINE UPDATE Second-Generation Platform Expands Soybean Weed Control Window, Benefits for Growers KEY MARKET ACRES U.S. BRAZIL ARGENTINA Roundup RReady2Yield 80M 50M 35M AVAILABLE MARKET soybeans CREATING VALUE 0% 0% 0% PERCENT PENETRATED PROJECT UPDATE Roundup RReady2Yield soybeans DISCOVERY PHASE I PHASE II PHASE III PHASE IV 2005 PERFORMANCE • Lead event confirmed in April of 2005 RESULTS • 2005 U.S. field trials confirmed the target yield and wider window of application benefits • Trait integration efforts started • Implementation of marker-assisted selection 2006 FOCUS • Continued field testing to build data for regulatory submissions 2005 U.S. field tests confirmed yield targets; The use of marker-assisted selection helped teams working on trait selection DISCOVERY PHASE I PHASE II PHASE IV LAUNCH PHASE III Proof of Concept Early Development Pre-Launch Adv. Development 12
  13. 13. PIPELINE UPDATE Pipeline Success and Continuing Prospects Are Strong Across Food-Trait Discovery Platforms PLATFORM LIPID ENHANCEMENTS VISTIVE II VISTIVE III VISTIVE SOYBEANS LOW LIN – MID OLEIC LOW LIN – MID OLEIC – LOW SAT D I II III IV D I II III IV D I II III IV • Successful first year of planting • Achieved commercial targets in • Analysis from commercial • Kellogg’s makes public its oleic and linolenic composition transformation indicated that project trans-fat reduction program meets oleic and saturate targets • Molecular marker implementation using Vistive moving selection for line • Advancing to multi-location field advancement trials in 2006 PLATFORM PROTEIN ENHANCEMENTS PLATFORM BIOACTIVE COMPOUNDS IMPROVED-PROTEIN SOYBEANS OMEGA-3 SOYBEANS D I II III IV D I II III IV • Advanced to Phase IV • Advanced to Phase III • In October, announced alliance with • Initial taste, sensory and stability Solae, who will use Monsanto tests completed and continue to technology to formulate new line of confirm viability of project concept improved-flavor soy protein 13
  14. 14. PIPELINE UPDATE 2005 Marked Successful Completion of Initial Taste, Smell and Oil Stability Testing for Omega-3 Soybeans KEY MARKET ACRES U.S. BRAZIL ARGENTINA Omega-3 soybeans TBD TBD TBD AVAILABLE MARKET CREATING VALUE 0% 0% 0% PERCENT PENETRATED PROJECT UPDATE 400 Stabilized 20% SDA Omega-3 soybeans 350 DISCOVERY PHASE I PHASE II PHASE III PHASE IV 20% SDA w/ CA 300 PEROXIDE VALUE, MEQ/KG Stabilized Fish Oil 250 2005 PERFORMANCE 200 • Moved into Phase III • Field trials continue to confirm expression of RESULTS 150 stearidonic acid (SDA) levels at concept targets 100 • Initial sensory data superior to fish oil 50 2006 FOCUS 0 • Continue to screen to select the lead event for 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 regulatory submission DAYS AT 55°C In testing for oil stability, SDA oil produced from Omega-3 soybean plants showed less oxidation – an indicator of stability – than fish oil where both oils were stabilized with commercial products DISCOVERY PHASE I PHASE II PHASE IV LAUNCH PHASE III Proof of Concept Early Development Pre-Launch Adv. Development 14
  15. 15. OVERVIEW Combination of Predictable Progress and Early-Phase Additions Create Milestone Year Across Pipeline R&D PIPELINE SCORECARD KEY METRICS MEASURING PIPELINE PROGRESS 2005 PERFORMANCE December No ry ve ua mb PORTFOLIO an BIOTECH TRAIT PIPELINE J er UPDATE PRIORITY DATA Fifteen projects either advanced from one ary Oc UPDATE phase to another or were added to the ANALYSIS bru tob PIPELINE PROGRESS pipeline, representing positive movement Fe er in >50% of current pipeline projects September March Ten projects were added to Phase I or later DATA PIPELINE ADDITIONS as a result of Discovery work or COLLECTION collaborative partnerships BREEDING PIPELINE Ap st gu ril Au Field trial yield differentials versus FIELD CORN BREEDING competitors even greater than in 2004 Ma TESTING y ly First-generation molecular breeding Ju varieties showed better yield results than June SOYBEAN BREEDING current competitive commercial set in field ANNUAL R&D CYCLE: trials SEEDS & TRAITS Breeding effort strengthens Stoneville’s COTTON BREEDING offerings and enables entrance of Cotton States into cotton germplasm market Strong breeding base in place, currently working on targets across farmer, SEMINIS BREEDING processor and consumer segments, as well as converting open-pollinated crops 15

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