monsanto 12-01-08

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monsanto 12-01-08

  1. 1. TED CROSBIE BREEDING LEAD CITIGROUP PRE-CONFERENCE TEACH-IN December 1, 2008 1
  2. 2. Forward-Looking Statements Certain statements contained in this presentation are quot;forward-looking statements,quot; 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, including Delta and Pine Land Company; 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 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. Trademarks Trademarks owned by Monsanto Company and its wholly-owned subsidiaries are italicized in this presentation. Extrax is a trademark of Renessen, LLC. © 2008 Monsanto Company 2
  3. 3. STRATEGIC OUTLOOK Monsanto’s Innovation Targeted at Doubling Yield by 2030, Extending Competitive Lead and Creating New Value DOUBLING YIELD WITH TECHNOLOGY: DOUBLING YIELD BY 2030 U.S. CORN EXAMPLE U.S. BASELINE CROP 2000 BASELINE1 300 137 bu/ac Corn: 280 GERMPLASM IMPROVEMENTS 37 bu/ac Soybeans: AGRONOMIC PRACTICE IMPROVEMENTS 260 632 lbs/ac BREEDING IMPROVEMENTS Cotton: BIOTECH IMPROVEMENTS 240 STRATEGIC RATIONALE Helping meet global 220 demand 200 Furthering competitive lead 180 Creating new value for 160 farmers that creates sustainable growth 140 opportunities 120 2000 2005 2010 2015 2020 2025 2030 2030 U.S. YIELD TARGET >2x 2000 BASELINE 2030: OF 137 BU/AC 3
  4. 4. OVERVIEW Breeding and Biotech Provide Parallel R&D Paths to Commercial Products BREEDING and BIOTECHNOLOGY form two R&D pathways Separate, but parallel, the BREEDING and BIOTECHNOLOGY pathways are linked by shared tools. DISCOVERY PHASE I PHASE II R&D PHASE: PHASE III PHASE IV LAUNCH BREEDING G COMMERCIAL IT PLATFORM GERMPLASM ANALYTICS MARKERS GENOMICS SEED ELITE Germplasm SOLD TO R FARMERS BIOTECHNOLOGY 4
  5. 5. BREEDING Germplasm Is Building Block for Better Seed; Germplasm Library Is Building Block for Better Breeding CORN SEED GERMPLASM LIBRARY GERMPLASM ASSEMBLED GEOGRAPHIC POOLS OVERVIEW: Germplasm is like breeding in thoroughbred race horses – just as breeders select for the fastest race horses, seed breeders look to pair the best pool of genes for the strongest TEMPERATE yielding seed SUB-TROPICAL APPLICATION: Germplasm pools allow breeders to target key TROPICAL physiological traits: • Increased Yield SUB-TROPICAL • Disease Resistance TEMPERATE • Stress Tolerance • Grain Quality / Added Value Monsanto’s corn germplasm library is assembled from 36 breeding programs in 12 different countries Annually, breeders exchange more than a million different “packages” of germplasm material >50% of Monsanto’s corn hybrids result from intra- company crosses 5
  6. 6. BREEDING Markers Allow Breeders to Get Best Combinations of Germplasm Faster With Greater Predictability TRACKING CHARACTERISTICS FOR YIELD MARKERS YIELD-RELATED AREAS ON CORN CHROMOSOMES OVERVIEW: A corn plant has 40,000 genes spanning 10 chromosomes. Characteristics – or traits – are 9 10 1 2 3 4 56 7 8 built from different pieces on different chromosomes. Markers are DNA ‘flags’ that indicate where particular genes are located APPLICATION: Using markers to make better selections, breeders can improve the probability of success: Probability of finding 1 trait that is controlled by 20 genes “Random” crosses: 1 per trillion After application of markers and Regions associated with breeding yield coming from Parent 1 technology Regions associated with yield coming from Parent 2 1 in 5 6
  7. 7. BREEDING Monsanto Investment in Molecular Breeding is Accelerating the Rate of Gain Over Conventional Breeding MOLECULAR MARKERS ► >$100M invested in molecular markers platform ► Staff of >150 scientists using proprietary tools are supporting the further development and use of marker technology Automated Marker Analysis Soybean Seed Chipper ► Capability to analyze 10s of millions of samples ► $75M investment in proprietary software This capability fuels the creation of top-tier tools germplasm and sets the genetic knowledge base to ► 3 million marker-trait deliver next- generation biotech traits. associations providing detailed genome understanding
  8. 8. BREEDING Core Research Methods Have Applicability Across Crop Platforms, Magnifying Investment and Productivity SHARED TECHNOLOGY AND METHODS CROP IT MARKER-TRAIT MARKER MARKER PLATRFORMS SYSTEMS ASSOCIATIONS DETECTION DISCOVERY Focused on methods Focused on state-of- Focused on creating Focused on the best for discovering new the-art platforms to unified decision- application of markers, moving to a detect markers that making systems to marker-trait “SNP” (single maximize efficiency better enable associations to CORN nucleotide and minimize cost breeding efficiency select for most polymorphism) commercially- platform for all crops relevant traits APPLICATION TODAY: APPLICATION TODAY: APPLICATION TODAY: APPLICATION TODAY: Thousands of SNP Proprietary Proprietary Associations used SOYBEANS markers already automated systems interconnected IT for complex traits – identified and in use in place for corn, systems in place for like yield – in corn for corn soybeans and cotton corn, soybeans and and soybeans, and and soybeans cotton simpler traits in OPPORTUNITY: vegetables Leverage existing OPPORTUNITY: OPPORTUNITY: Development of SNP platforms for COTTON Utilize existing OPPORTUNITY: markers for 9 additional species systems to provide Marker-trait different row crop and upgrading comparable associations will and vegetable systems for all crops capabilities for allow for predictive species vegetables breeding for key traits in all relevant crops VEGETABLES 8
  9. 9. BREEDING & BIOTECHNOLOGY MAB Application in Soybeans Led to Roundup Ready 2 Yield Soybeans GOAL: Use DNA Markers To Improve the Efficiency of Plant Breeding Procedures STRATEGY: Identify genes that control key agronomic traits; use new breeding procedures to better select for these genes; increase rate of genetic gain in breeding programs. 2007 RR2Y - 170 Total Testing Sites • Roundup Ready 2 Yield soybeans offer 7% - 11% yield advantage, based on near-isoline comparisons, based on four years of field comparisons 9
  10. 10. BREEDING + BIOTECHNOLOGY Delivering Yield Favors Companies That Can Provide Both Breeding and Biotechnology Improvements in Concert FOCUS: YIELD WHAT MATTERS TO FARMERS IS THE YIELD AT HARVEST, WHICH IS A FUNCTION OF HOW MUCH POTENTIAL A SEED HAS AND HOW IT’S PROTECTED: GENETIC POTENTIAL (FUTURE) CURRENT GENETIC POTENTIAL AND TRAITS NET REALIZED YIELD + BREEDING ADVANCES WITH FUTURE PROTECTION AND PROTECTION + ENHANCEMENT IMPROVED OPPORTUNITIES BIOTECH ADVANCES ADVANCES NITROGEN BIOTECH UTILIZATION FUTURE GENETIC PLATFORM DROUGHT TOLERANCE SECOND- GENERATION INSECT CONTROL GENETIC POTENTIAL (FUTURE) ADVANCES BREEDING GENETIC POTENTIAL (CURRENT) INSECT NATURAL YIELD NET REALIZED YIELD WITH PRESSURE SUPPRESSION BELOW-GROUND CURRENT PROTECTION CURRENT YIELD WEED PRESSURE INSECT CONTROL PROTECTION NUTRIENT ABOVE GROUND GENETIC POTENTIAL PRESERVED INSECT CONTROL DEFICIENCY THROUGH BIOTECH TRAITS AND PRODUCTION ADVANCES WATER WEED-CNTROL DEFICIENCY TRAITS NET REALIZED YIELD WITH SEED NO PROTECTION MANUFACTURING 10
  11. 11. BIOTECHNOLOGY Early Pipeline Work Focuses On Identifying Best Genes and Introducing Leads Into Plants for Development AGROBACTERIUM BIOTECH DISCOVERY Agrobacterium tumefaciens GENE SOURCES: DNA naturally inserts DNA Hundreds of thousands of genes are screened to find segments into plant cells – candidates for biotech traits this is used to transfer AGROBACTERIUM GENE TRANSFER • Genes come from plant TUMEFACIENS identified genes PLASMID sources, including bacteria, fungi, microorganisms (like baker’s yeast) and native GENE genes in plants TRANSFORMED INSERTION PLANT CELL NUCLEUS • Genes used in insect- WITH GENE CHROMOSOME protected crops to date are from “bacillus thuringiensis,” or “Bt,” a class of naturally PARTICLE ACCELERATION – GENE GUN occurring soil bacteria with thousands of different strains DNA-COATED that target specific insects Gene guns use “biolistics,” PELLETS DNA using particles coated in DNA GENE INSERTION: that are introduced into plant There are two key methods cells used to insert genes into PARTICLE ACCELERATION plants: • Agrobacterium • Particle acceleration (gene GENE gun) INSERTION TRANSFORMED NUCLEUS PLANT CELL CHROMOSOME WITH GENE 11
  12. 12. BIOTECHNOLOGY Biotech Pipeline Follows Pharmaceutical-Like Development PHASE II PHASE III PHASE IV DISCOVERY PHASE I Early Development Advanced Pre-launch Proof Of Concept 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 MONSANTO DISCOVERY + REGULATORY DATA GENERATION COLLABORATIVE PARTNERS KEY INFLECTION POINT: AFTER PHASE II COMMERCIAL SUCCESS GOES TO >50% WITH LEADS ON COMMERCIAL TRACK GENES IN TENS OF THOUSANDS THOUSANDS 10s <5 1 TESTING 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. 12
  13. 13. BIOTECHNOLOGY Stage-Gate Model Provides Systematic Evaluation and Built-In Cost Prioritization DISCOVERY PHASE III PHASE IV PHASE I PHASE II Advanced Gene/Trait Early Development Pre-launch Proof Of Concept Development Identification AVERAGE 24 to 48 MONTHS 12 to 24 MONTHS 12 to 24 MONTHS 12 to 24 MONTHS 12 to 36 MONTHS DURATION1 • High- • Optimizing gene • Commercial • Extensive field • Completion of throughput in greenhouse transformations testing to regulatory gene screening and fields to of genes into generate submissions KEY establish proof crop plants regulatory data • Model crop • Commercial ACTIVITY of concept and for • Scale up events testing seed bulk up agronomic for large-scale testing field testing RELEVANT REGULATORY “BEST” GENES TRIGGER TO LEAD EVENTS GENE LEADS REGULATORY PACKAGES IDENTIFIED ADVANCE TO SELECTED IDENTIFIED REVIEWS SUBMITTED NEXT PHASE COMPLETED AVERAGE 5% 25% 50% 75% 90% PROBABILITY OF SUCCESS2 RELATIVE R&D COST PER PROJECT3 COST-INFLECTION POINT: PER-PROJECT COSTS ONLY MOVE UP ONCE COMMERCIAL TRANSFORMATIONS ARE MADE, AND THE PROBABILITY OF SUCCESS ALSO INCREASES 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. 3. Relative cost reflects an estimate of cumulative costs for a composite project. Actual spending will vary for any individual project. 13
  14. 14. BIOTECHNOLOGY Genes Selected for Evaluation Travel the Circuit from Sequencing to Field Testing LIFE OF A GENE LEAD IN PLANT BIOTECHNOLOGY Step 2 Step 3 Gene cloning Transformation & sequencing Step 1 Gene sourcing Step 4 & nomination Seed increase Step 6 Step 5 Data analysis Field testing & decision making
  15. 15. BIOTECHNOLOGY Performance of Lead Genes Re-Affirmed From Early Testing in Model Crops to Large Scale Field Trials DISCOVERY: MODEL CROPS PHASE II & III: LARGE SCALE FIELD TRIALS Gene E Gene B Gene D Gene A Gene C PHASE I: TARGET CROP Gene F Gene A Gene H Gene I Gene F Gene G Gene A 15
  16. 16. R&D PIPELINE R&D Engine Is Poised to Launch Average of One Game- Changing Technology Every Other Year Through Mid-Decade R&D PIPELINE: ADVANCED GAME-CHANGING TECHNOLOGIES 2008 2009 2010 2011 2012 TO MID-DECADE Roundup Drought- Nitrogen- SmartStax Ready 2 Yield Tolerant Corn Utilization Soybeans Family1 Corn Family1 • Second-gen soybean • All-in-one corn trait • Value likely in improved • Targets ways to use trait platform platform yield under stress and nitrogen more efficiently potential for water • China import approval • On track for 2010 launch replacement received in September – Submitted for 2008 regulatory review and refuge reduction • On track for 2009 release; 2010 full launch SUPERIOR, NE - FIELD TRIALS – 2007 FARM PROGRESS SHOW – 2007 WITH GENE CONTROL HYBRID FARM PROGRESS SHOW – 2007 (94 BU/AC) (76 BU/AC) 1. Part of the Monsanto-BASF Yield and Stress R&D Collaboration 16
  17. 17. SUMMARY Monsanto’s Yield Leadership Widens With Each New Game- Changing Technology Launched DuPont Syngenta 2009 Option to License  2011 2nd‐Gen  Roundup Ready 2  Roundup  Soybean Trait Optimum®GAT®³ Yield⁶ Ready 2 Yield¹ 2012 All‐in‐One  2010 No Specified  Corn Trait  Optimum  Platform⁷ SmartStax Platform  AcreMax™ Plus⁴ Biotech  Drought  2012+² 2014+⁵ Post‐2014⁸ Tolerance  Corn 6. Press Release: “Monsanto and Syngenta  1. Controlled commercial release of 1‐2M  3. Optimum® and GAT® are registered  Reach Royalty‐Bearing Licensing  acres; Large‐scale launch of 5‐6M in 2010 trademarks of Pioneer Hi‐Bred; Date as  Agreement on Roundup Ready 2 Yield stated in DuPont press release 07‐17‐08 2. First trait in the Drought‐tolerant corn  Soybean Technology,” 05‐23‐08 family, currently Phase III 4. AcreMax™  is a trademark of Pioneer Hi‐ 7. No specified platform indicated via Corn  Bred; Date as stated by William S. Niebur,  Technology Pipeline, Syngenta Half Year  Ph.D., Merrill Lynch Agricultural Chemicals  Results Presentation, 07‐24‐08, Slide 22.   Conference, 06‐05‐08, Slide 14 Relevant component traits: VIP/Broad lep:  5. Ibid, Slide 23 2009 and RW dual mode of action: 2012 8. Ibid. 17

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