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monsanto 09-16-08
 

monsanto 09-16-08

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    monsanto 09-16-08 monsanto 09-16-08 Presentation Transcript

    • Golden Opportunities: Working Jointly for Higher Yields September 16, 2008
    • Agenda 12:50 p.m. Welcome & introduction – Magdalena Moll 01:00 p.m. Yield & Stress Collaboration BASF Monsanto – Hans Kast 01:20 p.m. Growth and Value in Yield & Stress – Steve Padgette 01:50 p.m. Q&A by Hans Kast and Steve Padgette 02:20 p.m. Coffee break 02:40 p.m. Workshop “Pipeline Valuation” – Laura Meyer 03:10 p.m. Finding Outstanding Lead Genes – Johan Cardoen 03:30 p.m. Q&A by Johan Cardoen 04:00 p.m. Departure to Greenhouse by bus 04:30 p.m. Site tour CropDesign 05:25 p.m. Concluding remarks – Magdalena Moll 05:30 p.m. Departure
    • Forward-looking information As It Pertains to BASF: As It Pertains to Monsanto: Certain statements contained in this presentation are quot;forward- This presentation may contain forward-looking statements. looking statements,quot; such as statements concerning the company's These statements are based on current expectations, estimates future product performance, regulatory approvals, business and and projections of BASF management and currently available financial plans and other non-historical facts. These statements are information. They are not guarantees of future performance, based on current expectations and currently available information. involve certain risks and uncertainties that are difficult to predict However, since these statements are based on factors that involve and are based upon assumptions as to future events that may risks and uncertainties, the company's actual performance and not prove to be accurate. 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: the success Many factors could cause the actual results, performance or of the companies’ research and development activities; the costs achievements of BASF to be materially different from those that of and the companies’ abilities to access and enforce intellectual may be expressed or implied by such statements. Such factors property needed for the collaboration; the costs and requirements include those discussed in BASF’s Report 2007 on pages 106ff. of regulatory compliance and the speed with which approvals are We do not assume any obligation to update the forward-looking received; public acceptance of biotechnology products; and other statements contained in this presentation. risks and factors detailed in the company's most recent periodic report to the SEC. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this presentation. The company disclaims any current intention or obligation to update any forward-looking statements or any of the factors that may affect actual results. Monsanto Imagine and Vine Design, Corn States Triangle Design, Asgrow and Design, We Breed Better Beans, DEKALB Strong Roots. Strong Yields. and Design and Roundup Ready 2 Yield are trademarks owned by Monsanto Company and its wholly owned subsidiaries. © 2008 Monsanto Company
    • 1 | Yield & Stress Collaboration BASF Monsanto 2 | Growth and Value in Yield & Stress 3 | Valuation Workshop 4 | Finding Outstanding Lead Genes
    • Challenges in global agriculture Agricultural production has to be doubled in twenty years • Food UN estimate: 9.2 billion people in 2050 • Feed Rising social standards drive global demand for more food, especially for meat consumption in Asia • Fiber Cotton is the single most important textile fiber • Fuel Use of grain for fuel is growing by ~ 20% per year We believe that the only technology to meet future demand is plant biotechnology
    • Global market for biotech traits in 2025 Market value • Estimated market in billion $ value in 2025: 100 $50 billion Specialties Mass market • Market is dominated by agronomic traits Yield and commodities • Yield is the major Feed market 10 Pest Energy resistance Specialty crops traits Herbicide tolerance Trait acreage in million ha 1 1 10 100 1000
    • Collaboration in yield & stress tolerance Strongest partnership in plant biotechnology
    • Collaboration strategy Focus • Joint technology and commercialization collaboration • R&D pipeline for yield and stress tolerance traits • Crops: corn, soybeans, cotton, canola Discovery • Independent discovery programs at each company • Lead genes go into joint development pipeline Development • Nominated projects are jointly funded (50-50 cost sharing) • Potential overall R&D budget of $1.5 billion / €1.0 billion Commercialization • Emerging products are commercialized by Monsanto • Broad-licensing approach across Monsanto’s commercial channels • Value sharing: 60% for Monsanto, 40% for BASF
    • Collaboration creates joint pipeline Focus on yield and stress Joint Development Independent Discovery Commercialization Licensed brands ® Monsanto discovery Regional brands program BASF discovery National brands program • Increased rate of • Potential R&D budget • Broad-licensing approach discovery $1.5 / €1.0 billion to seed companies • Shorter early • Increasing probability • Value shared development timelines of success (volume of 60% Monsanto, 40% BASF lead genes)
    • BASF platform for gene discovery Yield increase in crops Look Look at plant inside Phenotypic screening Metabolic profiling Unique platform to identify and understand the gene functions of plants Combines phenotypic screening with metabolic profiling determining gene function High throughput of 5,000-10,000 genes tested per year
    • Look inside the plant The value of analyzing the metabolome • Plant cell: a complex network of thousands of chemical reactions • Production of thousands of metabolites Metabolite profiling • Process which analyzes metabolite changes in plants: broad, fast, precise • Over 1,000 important target metabolite “sensors” screened in parallel • 9,000 plant signals seen in parallel
    • Look inside the plant The value of analyzing the metabolome Metabolic profiling • Reveal the genes responsible for plant composition • Identify genes and mechanisms for plant performance • Reveal plant response systems against environment and diseases Results support trait development • Composition (e.g. oil, amino acids) • Agronomics (e.g. yield, tolerance) • Trait diagnostics (e.g. for development)
    • BASF discovery platform fuels progress • Fully automated high throughput “live” crop screening in rice • Fastest growing genetic library in the industry - Over 1.5 million metabolic profiles for > 35,000 genes • Cutting edge bioinformatics systems • Fast and thorough intellectual property generation • Early identification of highest potential development candidates
    • Complementary R&D platforms accelerate commercialization Key results of the collaboration • Gene nomination > 90% of gene nominations are unique • Combination of pipelines Accelerated development timeline • Yield & stress transformation events ~ 33% pipeline increase • Genes/events evaluated > 12 million metabolic data points • U.S. field trials 2008 Planted yield & stress trials in nearly 175 locations First products planned from 2012 onward
    • 1 | Yield & Stress Collaboration BASF Monsanto 2 | Growth and Value in Yield & Stress 3 | Valuation Workshop 4 | Finding Outstanding Lead Genes
    • Increasing protein demand, coupled with boost from biofuels, creates sustained long-term grain demand STRETCHING SUPPLY STATE OF AGRICULTURE: WORLD CORN AND SOYBEAN STOCKS-TO-USE1 Strong Demand Environment FACTORS: 50% STOCKS-TO-USE RATIO ► INCREASING PROTEIN METRIC TONS (IN MILLIONS) DEMAND 40% Wealth drives meat 30% consumption – changing feed demand 20% ► ASCENSION OF CHINA China’s growth is reaching 10% limits of domestic production, driving huge 0% P 5 9 3 7 1 5 9 3 7 1 5 changes in export 96 96 97 97 98 98 98 99 99 00 00 9 00 /1 /1 /1 /1 /1 /1 /1 /1 /1 /2 /2 /2 64 68 72 76 80 84 88 92 96 00 04 environment 08 19 19 19 19 19 19 19 19 19 20 20 20 ► ESTABLISHMENT OF SOYBEAN STOCKS-TO-USE BIOFUELS CORN STOCKS-TO-USE Assuming only base-case • U.S. corn ending stocks-to-use ratio projected to be 12% for 2007/08 adoption of biofuels, more and down 28% to a 9% stocks-to-use ratio for 2008/09 corn and soy needed in next • U.S. soybean stocks-to-use estimated to be 4.4% for 2007/08 and decade essentially flat for 2008/09, even with acres up nearly 18% 1. USDA PSD View database query for global corn and soybeans
    • Monsanto’s growth opportunity lies at the intersection of demand, innovation and execution Monsanto’s simple philosophy on opportunity: More demand requires more YIELD More yield requires more INNOVATION More innovation delivers more GROWTH
    • Probability of success improves as biotech traits move through four development phases Discovery Phase I Phase II Phase III Phase IV Launch Phase Proof of concept Advanced development Pre-launch Early product development 1 – 2 years1 1– 2 years1 1 – 2 years1 1 – 3 years1 Key activities • Regulatory • Trait integration/ • Trait • Gene Monsanto approvals breeding development optimization discovery • Seed bulk-up • Field testing • Pre-regulatory • Crop program data transformation • Pre-marketing • Regulatory data BASF generation & • Large scale discovery submission transformation program • Lab & field testing Probability 5% 50% 25% 75% 90% of success2 • $100M = approximate costs to develop a biotech trait (Phase 1-4) • BASF and Monsanto share development costs (Phase 1-4) 50/50 for yield and stress traits 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 estimated time 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. Commercialization is dependent on many factors, including successful conclusion of the regulatory process.
    • Genes selected for evaluation travel the circuit from sequencing to field testing Step 2 Step 3 Gene cloning Transformation & sequencing Step 1 Step 4 Gene sourcing Seed increase & nomination Step 6 Step 5 Data analysis Field testing & decision making
    • Collaborations and cutting-edge enabling technologies enhance Monsanto pipeline Discovery Phase I Phase II Phase III Phase IV Phase Proof of concept Advanced development Pre-launch Early product development BASF Alliance Partners 100’s of collaborations Ceres Arcadia globally Evogene Mendel Chromatin Devgen Divergence Protein Evolution Differentiating Technology Protein Structure Enabling Spectral Imaging Comparative Genomics Automated Transformation Systems Biology Automated Screening
    • Yield & stress field testing builds on a core capability at Monsanto, with nearly 175 trial locations in 2008 2008 Total Monsanto biotech field trials Oriska, MN 2008 Jerseyville, IL 2007 Legend • Phase I and II • Phase III and IV Jacksonville, IL 2007
    • Monsanto investment in molecular breeding is accelerating the rate of gain over conventional breeding • >$100M invested in molecular markers platform • Staff of >150 scientists using proprietary tools are supporting the further development and use of marker technology • Capability to analyze 10s of millions of samples • $75M investment in proprietary software tools Soybean seed chipper • 3 million marker-trait associations providing detailed genome understanding This capability fuels the creation of top-tier germplasm and sets the genetic knowledge base to deliver next- generation biotech traits Automated marker analysis
    • Collaboration boasts industry-leading pipeline in yield and stress January 2008 update Yield and stress pipeline Discovery Phase I Phase II Phase III Phase IV phase Drought-tolerant corn family Drought-tolerant corn 2nd generation drought-tolerant corn Nitrogen utilization corn family Nitrogen-utilization corn Broad-acre higher-yielding corn family Higher-yielding corn Broad-acre higher-yielding soybean family Higher-yielding soybeans 2nd generation higher-yielding soybeans Drought-tolerant cotton family Drought-tolerant cotton Broad-acre higher-yielding canola family Roundup Ready® 2 Plus Yield canola* The colored bar associated with each project indicates which phase that project is in. It is not intended to represent the High Impact Technologies (HIT) project relative status of the project within a particular stage. Jan. 3, 2008 Advancements/Additions * For higher-yielding + Roundup Ready® 2 Plus Yield canola, only the value of the higher-yielding trait is incorporated into the Yield and Stress collaboration with BASF.
    • 2007 dryland field tests of lead drought event offers visual evidence of increased yield in stressed conditions Drought-tolerant corn family: 2007 field testing shows visual proof Lead project (HIT project, phase III) of yield improvement Project concept Drought-tolerance family aimed at providing Superior, NE – field trials – 2007 consistent yield and buffering against effects of water limitations, primarily in areas of annual water stress Family value considerations: • Launch-country acres*: 55M • 2020 value**: $300–$500M Sources of value 1. Improved yield: Targeting 6–10% yield improvement in water-stress environments Field test results In 2007 tests in natural dryland environments from South Dakota to northern Texas, the lead drought- tolerant event outperformed conventional checks in 3 different hybrid backgrounds. Percentage yield difference vs. control ranged from 13.0% to 15.1%. Control hybrid With gene (76 bu/ac) (94 bu/ac) * Acre opportunity reflects acres where technology fits at Monsanto’s current 2007 market share in respective crops ** 2020 value reflects gross sales opportunity in launch country in year 2020 for the family
    • Second-generation drought-tolerant corn delivered eight percent plus yield advantage in 2007 trials Drought-tolerant corn family: Second-gen drought corn events provide consistent yield advantage Second-generation project Drought efficacy for second-gen events (Status: phase II) 2007 2006 Yield difference over controls (%) 16 Project concept The second-generation of drought tolerant corn 14 Product concept is aimed at boosting yield stability for broad-acre 12 target applications and reducing water input required in range 10 water-limited environments 8 Family value considerations 6 • Launch-country acres*: 55M 4 • 2020 value**: $300–$500M 2 0 Sources of value Event 1 Event 2 Event 3 Event 1 Event 2 Event 3 1. Improved yield: Targeting 6–10% yield Lower-yielding environment Higher-yielding environment improvement in water-stress environments Average yield: 53 bu/ac Average yield: 166 bu/ac 2. Water substitution: Variable costs in pumped • Seeking lead genes that work to improve the ways in which irrigation of >$100/acre plants use water • Evaluating plant growth under drought, root mass improvement, * Acre opportunity reflects acres where technology fits at Monsanto’s pollen growth, silk expansion and photosynthesis efficiency in current 2007 market share in respective crops determining drought tolerance ** 2020 value reflects gross sales opportunity in launch country in year 2020 for the family (All three events significant @ p ≤ 0.10); Statistical significance determined by ANOVA (2006) or nonparametric test (2007)
    • In continued field testing, nitrogen utilization lead shows yield improvement under normal nitrogen Nitrogen-utilization corn family: Nitrogen utilization lead demonstrates yield Lead project (Status: phase I) advantage under normal nitrogen conditions over multiple years Project concept 2005 2006 2007 * Targets ways that corn plants can use nitrogen 12 more efficiently, exploring potential to boost yield Yield Increase (bu/ac) * 10 * * under normal nitrogen conditions or to stabilize it * * * * 8 in low nitrogen environments 6 Family value considerations 4 • Launch-country acres*: 55M 2 • 2020 value**: $300–$500M 0 -2 Sources of value Trials in multiple Trials in multiple 1. Improved yield: Yield improvement in normal hybrid backgrounds hybrid backgrounds (16 locations) (15 locations) nitrogen environments * Statistically significant @ p ≤ 0.10 2. Nitrogen reduction: Improving yield in low Bar color correlates with the specific hybrid background tested. Same bar color nitrogen environments in different tests and different years indicates same hybrid was used. All trials conducted under sufficient nitrogen application levels. • Evidence of enhanced nitrogen use efficiency in lead genes * Acre opportunity reflects acres where technology fits at Monsanto’s indicated by enhanced photosynthesis, improved nitrogen current 2007 market share in respective crops assimilation, improved root mass or architecture improvement ** 2020 value reflects gross sales opportunity in launch country in year 2020 for the family
    • Higher-yielding corn offers yield advantage in both normal and high density planting rates Higher-yielding corn family: 2007 higher-yielding corn Lead project (Status: phase II) agronomic testing versus controls Percentage yield difference vs. control: Project concept 5.2% 5.6% 6.4% 5.6% 8.4% 9.7% 7.3% Higher-yielding corn aimed at boosting intrinsic yield 24 potential of corn through insertion of key genes (bu/ac increase over control) Product concept benefit target range Average yield advantage 20 Family value considerations • Launch-country acres*: 55M 16 • 2020 value**: >$1B 12 Sources of value 8 1. Improved yield: Targeting 6-10% yield 4 improvement 0 Hybrid 1 Hybrid 2 Hybrid 3 Normal High density density Event 1 Event 2 • Yield performance at 4–12 locations in the U.S. in 2007; commercial track events yield tested in the U.S. in 2008 * Acre opportunity reflects acres where technology fits at Monsanto’s • Lead genes tested for improved light response, increased current 2007 market share in respective crops biomass and kernel development ** 2020 value reflects gross sales opportunity in launch country in year 2020 for the family
    • Latin America trials of higher-yielding soybeans confirm prior trials with 6-10 percent yield advantage Higher-yielding soybeans family: New: 2007/08 higher-yielding soybean agronomic Lead project (Status: phase II) testing versus controls Percentage yield difference vs. control: Project concept 7.1% 6.0% 6.2% 10.2% 5.4% 8.8% 4.6% 10.5% 2.2% 10.3% Higher-yielding soybeans aimed at boosting 8 intrinsic yield potential of soybeans through (bu/ac increase over control) Product concept Average yield advantage insertion of key genes target range 6 Family value considerations 4 • Launch-country acres*: 45M • 2020 value**: $300–$500M 2 Sources of value 0 1. Improved yield: Targeting 6-10% yield Event 1 Event 2 Event 3 Event 4 Event 5 improvement Season 1: 2007 U.S. field trips (18 locations) Season 2: 2007/08 LAS field trips (12 locations) • 16 top-performing events advanced to Latin America South trial. Lead events showing strong yield advantages over conventional controls in both trials. * Acre opportunity reflects acres where technology fits at Monsanto’s • Higher-yielding trait will be stacked on top of Roundup Ready current 2007 market share in respective crops 2 Yield and other soybean-pipeline traits. ** 2020 value reflects gross sales opportunity in launch country in year 2020 for the family
    • Cotton drought-tolerant leads offer yield improvements ranging from 4-19 percent Drought-tolerant cotton (Status: phase I) Mid-season Halfway, TX – September 2007 Project concept Drought-tolerant cotton is designed to minimize risk in cotton farming by providing yield stability in environments experiencing sporadic or consistent water stress and by reducing water needs on irrigated acres. Family value considerations To be decided when project enters Phase II Drought-tolerant cotton is expected to reduce crop losses on dry-land acres and may reduce water costs in irrigated farming operations. Field testing results In 2 years of testing, across both water stressed and non-stressed environments, and multiple locations, our two lead events generated a yield difference vs. With gene the control of 4-19 percent. Control
    • First year of broad-acre testing of Roundup Ready® 2 Plus Yield canola shows 11-14 percent increase Roundup Ready® 2 Plus Yield canola Top 5 Roundup Ready® 2 Plus Yield events show yield increases from 11–14% (Status: phase II) Percentage yield difference vs. control: Project concept 14% 13% 11% 12% 14% This is a second-generation weed-control trait vector- 2000 stacked with a yield trait, aimed at increasing weed * * control and boosting the yield potential of canola by 15 * * 1800 * percent Yield (lbs/ac) 1600 Value considerations 1400 • Launch-country acres*: 12M • 2020 value**: <$150M 1200 Sources of value 1000 Event 1 Event 2 Event 3 Event 4 Event 5 1. Improved yield: Targeting 15 percent increase in yields With gene No gene • In 1st year of broad-acre testing for commercial events, 5 events show significant increases in yield above 11% over matched control lines in 2007 field trials * Acre opportunity reflects acres where technology fits at Monsanto’s • Events show full tolerance at 8x current Roundup Ready spray current 2007 market share in respective crops regime ** 2020 value reflects gross sales opportunity in launch country in year 2020
    • Strong pipeline value reflects commercial opportunity in emerging value in yield and stress Yield and stress Discovery Phase I Phase II Phase III Phase IV collaboration Corn: Drought-tolerant Broad-acre yield High family Nitrogen-utilization Family traits High family Broad-acre, Family traits Mega higher-yielding family Soybeans: Broad-acre, Broad-acre yield High higher-yielding family 2020 value ranges: Mega High Mid Low >$1B $300M–$500M $150M–$300M <$150M Corn Soybeans Note: 2020 value reflects expected annual gross sales of trait in launch country in 2020.
    • Golden Opportunities: Working Jointly for Higher Yields September 16, 2008
    • 1 | Yield & Stress Collaboration BASF Monsanto 2 | Growth and Value in Yield & Stress 3 | Valuation Workshop 4 | Finding Outstanding Lead Genes
    • Probability of success improves as biotech traits move through four development phases Discovery Phase I Phase II Phase III Phase IV Launch Phase Proof of concept Advanced development Pre-launch Early product development 1 – 2 years1 1– 2 years1 1 – 2 years1 1 – 3 years1 Key activities • Regulatory • Trait integration/ • Trait • Gene Monsanto approvals breeding development optimization discovery • Seed bulk-up • Field testing • Pre-regulatory • Crop program data transformation • Pre-marketing • Regulatory data BASF generation & • Large scale discovery submission transformation program • Lab & field testing Probability 5% 50% 25% 75% 90% of success2 • $100M = approximate costs to develop a biotech trait (Phase 1-4) • BASF and Monsanto share development costs (Phase 1-4) 50/50 for yield and stress traits 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 estimated time 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. Commercialization is dependent on many factors, including successful conclusion of the regulatory process.
    • Strong pipeline value reflects commercial opportunity in emerging value in yield and stress Yield and stress Discovery Phase I Phase II Phase III Phase IV collaboration Corn: Drought-tolerant Broad-acre yield High family Nitrogen-utilization Family traits High family Broad-acre, Family traits Mega higher-yielding family Soybeans: Broad-acre, Broad-acre yield High higher-yielding family 2020 value ranges: Mega High Mid Low >$1B $300M–$500M $150M–$300M <$150M Corn Soybeans Note: 2020 value reflects expected annual gross sales of trait in launch country in 2020.
    • Key assumptions in expected annual gross sales in launch country in 2020 • Valuation reflects expected annual gross trait sales value in the year 2020. • Gross trait sales are presented for the initial country of launch only. • Acre opportunities are based on acres where there is a technology fit. Additionally, acre opportunities for corn and soybeans reflect only the acres that correspond to the 2007 shares accessed in each respective market by Monsanto’s branded and licensed channels. • These valuations do not reflect value attributed to other traits or germplasm. • “Family” values include both first and second generation traits, if both are launched by 2020. • Assumed launch dates coordinate with phase placement in the R&D pipeline and normal progression timelines.
    • Collaboration agreement provides for sharing of trait profits: 60% Monsanto and 40% BASF Yield & stress valuation metrics In 2007, Monsanto and BASF announced a Yield and Stress collaboration. For projects in this segment of the pipeline, there are additional key criteria that factor into valuation: • Several projects are valued as families to take into consideration the successive generation projects. • The profit in Yield and Stress will be shared between Monsanto and BASF, meaning 60% of the residual trait profits from the yield and stress traits commercialized will accrue to Monsanto and 40% will accrue to BASF.
    • Penetration of traits in countries outside initial launch country provide upside to values Summary valuation table Acreage 2020 Additional Country potential – 1 Project Phase Value geographic country of launch $M opportunity of launch Soybean pipeline HIGH Broad-acre higher-yielding 2 US 45 M Brazil, Argentina $300 – $500 soybeans family Corn pipeline HIGH 3 US 55 M Brazil, Argentina, EU27 Drought-tolerant corn family $300 – $500 1 US 55 M Brazil, Argentina, EU27 HIGH Nitrogen-utilization corn family $300 – $500 MEGA Broad-acre higher-yielding 2 US 55 M Brazil, Argentina, EU27 > $1,000 corn family Cotton and canola pipeline LOW 2 Canada 12 M US, EU27 Roundup Ready 2 Plus Yield canola2 < $150 1 N/A US 10-15 M India, Australia, Brazil Drought-tolerant cotton family 1. For projects noted as “families,” phase designation represents status of first product in family 2. Only the higher-yielding portion of this stack is part of the BASF and Monsanto Yield & Stress Collaboration
    • Pricing to value is hallmark of Monsanto’s value capture system for traits HIGHER YIELDING CORN I EXAMPLE 1) INCREMENTAL YIELD Yield Average Commodity Potential TOTAL VALUE CREATED increment yield price yield value $27-$45/acre, target per acre say $45 for example 6-10% 150 bu1 $3/bu2 $27-$45/acre 2) REPLACEMENT COSTS Monsanto/BASF and partners = 1/3 to 1/2 Crop input Average Opportunity replaced U.S. cost N/A for this example $18 $27 3) OTHER Peace of mind Grower = Potential for reduced crop insurance 1/2 to 2/3 1. Average yield per acre for corn in the U.S. was 151 bushels in 2007, as per the USDA; rounded to 150 bu/acre for example. 2. Utilized a corn commodity price of $3 for illustrative purposes; average price per bushel of corn received by a grower in the U.S. ranged from $2.00 to $4.25 per bushel from 2005 to 2007, as per the USDA.
    • Collaboration provides for sharing of profits generated by yield & stress traits commercialized HIGHER YIELDING CORN I EXAMPLE Retail trait price per acre $18.00 Monsanto/BASF and partners = 1/3 to 1/2 x Volume (Acre opportunity – U.S.)1 55M Gross trait sales peak potential in the U.S. $990M Less: Share to channel (retail or licensed) $18 Net sales for trait $27 Less: COGS for trait (royalties, etc.) Gross profit for trait Grower = Less: S,G & A (marketing, corporate costs) 1/2 to 2/3 Less: R & D TOTAL VALUE CREATED Less: Working capital charges $27-$45/acre, = Residual trait value say $45 for example x 60% = Monsanto portion x 40%= BASF portion 1. Assumes 90M acres of corn in U.S. multiplied by Monsanto’s current branded and licensed U.S. corn share
    • Key data for major crops in the collaboration Metric conversions and average U.S. yields Crop Domestic unit Metric Ton Equivalent Factor1 Soybeans bushels .027216 Cotton 480-lb bales .217720 Corn bushels .025401 Crop 2007,2006,20052 2007 Average U.S. Yield1 U.S. Weighted Average Farm Price Soybeans $6.43, $5.66, $5.74 per bu 41 bushels/acre Cotton $.62, $.60, $.56 per lb 871 pounds/acre Corn $4.25, $3.04, $2.00 per bu 151 bushels/acre 1 Hectare = 2.471 Acres 1. Source: USDA 2. Source: USDA, average price received by farmers for marketing year ended August 31st for soybeans and corn and year ended July 31st for cotton. For cotton used U.S. Memphis 1 Kilogram = 2.20462 lbs territory price per cotton outlook.
    • Reference – Product Pages
    • Higher-yielding soybeans Part of broad-acre, higher-yielding soybean family Phase II Product concept Jerseyville, IL – 2007 Higher-yielding soybeans are aimed at boosting the intrinsic yield potential of the soybean through insertion of key genes. This project aims to increase soybean yields by 6-10 percent. Need Fulfilled Higher-yielding soybeans create additional harvestable yield for farmers, increasing their productivity. Higher yields are becoming important as population expands and as soybean With yield trait Control growers look to meet growing demand for oil in areas like biodiesel and cooking. Additionally, as protein demand Family Value Considerations / Status: phase II increases in key importing markets like China, higher yields 2020 value1: offer farmers a way to better help meet that need. $300 – $500M Launch country: U.S. Current status Launch-country acres2: 45M This project is in phase II, early product development. This Additional geographic includes conducting lab and field testing of genes in plants to opportunity: Brazil, Argentina select commercial product candidates and to advance the best performing events for regulatory testing. In 2007 testing, By increasing yield 6-10 percent, this product would we took 68 events into the field for testing at 18 locations, offer farmers the option to get more yields per acre with lead events showing strong yield advantages over and additional flexibility in crops planted and market conventional controls. opportunities. 1. 2020 value reflects gross sales opportunity, for the family, in launch country, in year 2020 2. Acre opportunity reflects areas where technology fits at Monsanto’s current 2007 – 2008 market share in respective crops
    • Drought-tolerant corn Part of drought-tolerant corn family Phase III Product concept Superior, NE field trails – 2007 First-generation drought tolerance is targeted to minimize uncertainty in farming by buffering against the effects of water limitation, primarily in areas of annual water stress. In the U.S., this area has historically been the dryland farms of the Western Great Plains. Need fulfilled Agriculture uses over 70 percent of the world’s fresh water resources. Drought tolerant corn could offer farmers one way to With gene Control hybrid reduce agriculture’s impact on the environment. Water is the 94 bu/ac (76 bu/ac) biggest limiting factor in agriculture production. Every acre of corn faces some degree of water stress at some point in the growing Family value considerations / status: phase III season. This product could allow farmers to achieve more 2020 value1: $300 – $500M consistent yields even during times of water stress. Increased yield improves farmers’ productivity helping them meet growing Launch country: U.S. demands for feed, food and fuel. Launch-country acres2: 55M Current status Additional geographic The project is in the advanced development stage, phase III. This opportunity: Brazil Argentina EU27 phase involves demonstrated efficacy of traits in elite germplasm and development of regulatory data as appropriate. It completed Farmers value water-use in “acre-inches of water” needed to the fifth year of field trials in 2007. support yield potential. Farmers need 18-to-20 inches of moisture from natural or irrigated sources during the growing season to achieve normal Corn Belt yields. This product is targeting 6–10% 1. 2020 value reflects gross sales opportunity, for the family, in launch country, in year 2020     yield improvement in water-stress environments, primarily in areas 2. Acre opportunity reflects areas where technology fits at Monsanto’s current 2007 – 2008 market  of annual water stress. share in respective crops
    • 2nd Generation drought-tolerant corn Part of drought-tolerant corn family Phase II Product concept The second-generation of drought tolerant corn is aimed at boosting yield stability for broad-acre applications and reducing water input required in water-limited environments. Need fulfilled Agriculture uses over 70 percent of the world’s fresh water resources. Drought tolerant corn could offer farmers one way to reduce agriculture’s impact on the environment. Water is the biggest limiting factor in agriculture production. Every Control hybrid With gene acre of corn faces some degree of water stress at some point in the growing season. This product would allow Family value considerations / status: phase II farmers to achieve more consistent yields even during times 2020 value1: $300 – $500M of water stress. Increased yield improves farmers’ productivity helping them meet growing demands for feed, Launch country: U.S. food and fuel. Launch-country acres2: 55M Additional geographic Current status opportunity: Brazil, Argentina, EU27 This project is in phase II, early product development. This phase includes conducting lab and field testing of genes in Farmers value water-use in “acre-inches of water” needed to plants to select commercial product candidates and for support yield potential. Farmers need 18-to-20 inches of moisture from natural or irrigated sources during the growing season. This advancement of selected events into regulatory testing. product is targeting 6 – 10% yield improvement in water-stress environments, and could offer water substitution savings in pumped 1. 2020 value reflects gross sales opportunity, for the family, in launch country, in year 2020 irrigation. Pumped irrigation has a variable cost of >$100/acre. 2. Acre opportunity reflects areas where technology fits at Monsanto’s current 2007 – 2008 market share in respective crops
    • Nitrogen-utilization corn Part of nitrogen-utilization corn family Phase I Product concept Farm process show – 2007 Nitrogen utilization targets ways that corn plants can use nitrogen more efficiently, exploring the potential to boost yield under normal nitrogen conditions or to stabilize yield where growers choose to apply lower nitrogen amounts due to rising fertilizer costs. Need fulfilled Nitrogen is one of the most important farm inputs and is the most price sensitive to petroleum-input costs. Nitrogen prices have risen sharply in recent years and are one of the most Family value considerations / status: phase I significant crop inputs for farmers. 2020 value1: $300 – $500M Current status Launch country: U.S. The project is in phase I, the proof of concept phase, Launch-country acres2: 55M including discovering new genes and evaluating these genes Additional geographic in our technology programs. opportunity: Brazil, Argentina, EU27 According to the USDA, nitrogen fertilizer represents one of the largest input costs in agriculture, accounting for approximately one- fifth of the operating costs for a corn producer. Improving nitrogen- use efficiency in corn provides an opportunity for increased farmer profitability, while also offering a new way to reduce agriculture’s 1. 2020 value reflects gross sales opportunity, for the family, in launch country, in year 2020 overall impact on the environment. 2. Acre opportunity reflects areas where technology fits at Monsanto’s current 2007 – 2008 market share in respective crops
    • Higher-yielding corn Part of broad-acre, higher-yielding corn family Phase II Product concept Higher-yielding corn is aimed at boosting the intrinsic yield potential of corn hybrids by a targeted 6-10 percent through insertion of key genes. Need fulfilled Higher yields are becoming ever more important. As population expands, as protein demand increases in key importing markets like China, and as renewable fuel becomes more important, higher yields offer farmers a way to better help meet these needs. Higher-yielding corn Family value considerations / status: phase II improves the productivity of farming by increasing average yield per acre. 2020 value1: >$1B Launch country: U.S. Current status Launch-country acres2: 55M This project is in phase II, early product development. Lab Additional geographic and field testing of genes in plants are being conducted to opportunity: Brazil, Argentina, EU27 select commercial product candidates and to advance the best performing events to regulatory trials. With three years Increasing yield on existing acres helps to make farming more of field data proving efficacy, higher-yielding corn emerged profitable. Producing more on the same acre also improves land from proof-of-concept testing to Phase II development. stewardship by not bringing additional acres into production to meet demand. 1. 2020 value reflects gross sales opportunity, for the family, in launch country, in year 2020 2. Acre opportunity reflects areas where technology fits at Monsanto’s current 2007 – 2008 market share in respective crops
    • Roundup Ready® 2 Plus Yield canola Higher yielding portion of this stack is in collaboration with BASF Phase II Product concept This is a second-generation weed-control trait vector-stacked with a yield trait, aimed at increasing weed control and boosting the yield potential of canola by 15 percent. This product would also provide improved nitrogen-use efficiency, giving the farmer the opportunity to trade off fertilizer costs while maintaining current yields. Need fulfilled Higher yields are becoming important as population expands and Higher-yielding Conventional demand for oil in areas like bio-diesel and cooking increases. Canola Higher-yielding canola would create additional harvestable yield for farmers, increasing their productivity while providing increased Value considerations / status: phase II weed control. Producing more on the same acre also improves land stewardship with limited arable land. 2020 value1: <$150M Launch country: Canada Current status This project is in phase II, early development. This includes con- Launch-country acres2: 12M ducting lab and field testing of genes in plants to select commercial Additional geographic product candidates and to identify the best performing events to opportunity: U.S., EU27, Australia advance to regulatory trials. More than three years of field testing demonstrated consistent yield benefit for the lead gene in the By increasing yield 15 percent, this offers farmers the option to get United States and Canada. more yields per acre and additional flexibility in crops planted and market opportunities. 1. 2020 value reflects gross sales opportunity in launch country in year 2020 2. Acre opportunity reflects areas where technology fits in that country
    • Drought-tolerant cotton Part of drought-tolerant cotton family Phase I Product concept Drought-tolerant cotton is designed to minimize risk in cotton farming by providing yield stability in environments experiencing occasional or consistent water stress and by reducing water needs on irrigated acres. Need fulfilled Agriculture uses over 70 percent of the world’s fresh water resources, and a product like drought tolerant cotton would offer farmers one way to reduce agriculture’s impact on the With gene Control environment. Every acre of cotton faces some degree of water stress at some point in the growing season, and water Family value considerations / status: phase I is one of the biggest limiting factors in agriculture production. To be decided when project enters phase II This product would allow farmers consistent yields even during times of drought. Increased yield creates additional harvestable yield for farmers, increasing their productivity to Drought-tolerant cotton is expected to reduce crop help meet growing demands for feed, food and fiber. losses on dry-land acres and may reduce water costs in irrigated farming operations. Current status The project is in phase I, the proof of concept phase. The trait is being introduced into diverse germplasm and undergoing multi-year testing, characterization and quality control. We are in the process of building a portfolio of genes that confer drought tolerance in cotton.
    • Golden Opportunities: Working Jointly for Higher Yields September 16, 2008
    • 1 | Yield & Stress Collaboration BASF Monsanto 2 | Growth and Value in Yield & Stress 3 | Valuation Workshop 4 | Finding Outstanding Lead Genes
    • CropDesign N.V. • Located in Ghent, Belgium; 85 employees • Founded in 1998 as a spin-off from VIB (Flanders Institute for Biotechnology) • Acquired by BASF in June 2006 • Specialized in developing crops with improved traits for increase of crop productivity • Focus is on rice as a commercial crop as well as a model plant for corn and other cereals
    • BASF platform for gene discovery Yield increase in crops Look Look at plant inside Phenotypic screening Metabolic profiling Unique platform to identify and understand the gene functions of plants Combines phenotypic screening with metabolic profiling determining gene function High throughput of 5,000-10,000 genes tested per year
    • Look at plant – phenotypic screening • High throughput screening facility to identify lead genes for yield & stress in crops • Screening rice as a model crop: - testing more than 140,000 plants/year - processing 50,000 digital images/day - screening runs 24/7 • Evaluation of more than 20 parameters for agricultural performance • Identification of key yield components • Testing under different growing conditions (e.g. optimal, drought, low nitrogen)
    • Broad and diversified pipeline of lead genes Higher seed count: + 50% Control Lead
    • Broad and diversified pipeline of lead genes Larger panicles: + 30% Control Lead
    • Broad and diversified pipeline of lead genes Larger seeds: + 30% Control Lead
    • Broad and diversified pipeline of lead genes Increased root biomass: + 20% Lead Control
    • Broad and diversified pipeline of lead genes Increased green biomass: + 40% Control Lead
    • Generating more yield and value for farmers Higher seed count: +50% Larger seeds: +30% More yield, Larger panicles: +30% More value Increased biomass: +40% Increased roots: +20%
    • Field testing of lead genes discovered in greenhouse Gene discovery Field trial Validated lead gene Largest validated crop-based development platform for productivity traits
    • Yield lead genes in the field Increased yield : + 40% • 235 field trials conducted • Rate of lead genes confirmed in the field ~ 50% Lead Control
    • Concerted R&D approach for better products Enabled through data integration from unparalleled platforms Results clustered Methods Results along traits • Unique platform to monitor performance and select better lead genes Metabolic • Faster identification intrinsic profiling yield Data integration of novel lead genes using • Knowledge of mode cutting-edge of action supports bio-informatics regulatory clearance and platform Phenotypic intellectual property screening nitrogen drought generation • Shortened time to market Field trials Value creation through better and faster discovery of outstanding lead genes
    • Strongest collaboration in plant biotechnology • Unites the unique, complementary skills and experience of both companies • Targets four major crops for value-creation: corn, soybeans, cotton, canola • Focuses on yield which represents the largest value-creating opportunity in agriculture • Delivers broadest pipeline in the industry for enhanced yield to the farmer • Will create substantial value for farmers and for both collaboration partners
    • Golden Opportunities: Working Jointly for Higher Yields September 16, 2008