MORE NAILS IN THE AGBIO COFFIN
Quote of the week:
“Aventis CropScience Wednesday was at a loss to explain why another
variety of corn besides its StarLink brand is producing the Cry9C protein.”
United Press International November 22, 2000
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Thanks again to Stokely for these, including Businessweek quote on Aventis sellout and good stock info and processors advice to farmers:
Quotes: ‘it’s clear the life-sciences model is dead’ - Business Week
When Syngenta, the merged agrochemicals businesses of Novartis and AstraZeneca PLC, went public on November 13, its market valuation was around $5 billion, roughly half of what its parent companies had anticipated.
A.E. Staley Manufacturing Co. sent a letter to 1,200 its corn suppliers last week... “The only truly safe seed selection will be seed corn free of any genetic modification,” Staley’s letter said.
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1. Processors caution farmers on sowing biotech seeds
by Julie Ingwersen - Reuters USA, 22 November 2000
CHICAGO - As farmers in the US Midwest begin making seed choices for
their 2001 crops, two
major grain processors are advising growers to avoid genetically modified varieties that have not been approved in export markets.
Archer Daniels Midland Co. has begun airing radio advertisements in
parts of Illinois and Iowa
saying it will only accept crops that have been approved worldwide for feed and food use, spokesman Larry Cunningham said Monday.
A.E. Staley Manufacturing Co., a unit of Tate & Lyle Plc , sent a letter to 1,200 its corn suppliers last week cautioning them against biotech hybrids that have not been approved for export to Europe. “The only truly safe seed selection will be seed corn free of any genetic modification,” Staley’s letter said. “Our suggestions to you for seed corn selection in 2001 are: Non-GMO - yes; EU-approved hybrids - plant with caution; Hybrids not EU-approved - absolutely not.”
ADM is running radio ads in four markets where it has corn processing plants: Decatur and Peoria, Illinois, and Clinton and Cedar Rapids, Iowa. The ads say in part: “To make sure the products ADM produces meet consumer demand and comply with worldwide regulations, we will only accept at our processing plants crops that have full feed and food approval worldwide.”
The messages from both companies allude to problems with StarLink corn,
a biotech variety not approved for human food that was detected in taco
shells in September. The incident prompted the recall of some 300 food
products in the United States and widespread testing of corn shipments
But the two companies say they have not changed their policies toward biotech crops. Cunningham said ADM sent correspondence on the issue to its suppliers for the last two years. This year, he said: “We decided to reinforce it with a radio ad campaign, just to make sure farmers got the message.”
Pat Mohan, a spokesman for Tate & Lyle North America, said Staley sent a similar letter to its suppliers last fall.
“We’ve highlighted a few things given the StarLink situation, but it’s
basically the same suggestions we had for farmers last year,” he said.
The US Department of Agriculture said in a June report that genetically
modified varieties constituted 25 percent of the total 2000 US corn crop
and 54 percent of the 2000 soybean crop.
[Entered November 22 2000]
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2. AN ABOUT-FACE AT AVENTIS
- By Kerry Capell, Business Week 27 November 2000
Setbacks have it seeking a retreat from the much-ballyhooed “life sciences”. Aventis was going to be the holdout. As rivals such as Pharmacia & Upjohn in the U.S., Novartis in Switzerland, and AstraZeneca in Britain sold or spun off their agricultural businesses during the past month, Strasbourg’s Aventis didn’t budge. After all, when France’s Rhone-Poulenc and Germany’s Hoechst formed Aventis last December by merging their drug and agricultural businesses, they proudly proclaimed their new company the world leader in “life sciences.”
By applying the same kind of gene-based technology used in drug discovery to agriculture, their thinking went, Aventis could realize major cost savings and a host of promising new products, including enriched seeds and disease- and insect-resistant grains.
Nearly a year later, it’s clear the life-sciences model is dead. A distressed commodities market and increasing consumer fears about genetically modified foods have forced Aventis to follow the pack. On Nov. 15, the company announced Aventis would sell off its $ 2.7 billion crop-sciences operations by the end of 2001.
Aventis is currently in discussion with Germany’s Schering, which owns a 24% stake in Aventis Crop Sciences, about possibilities, including an initial public offering.
The recent fiasco surrounding StarLink, a genetically engineered corn
developed by Aventis for animal feed, most likely played a part in the
decision. Aventis, Europe’s second-largest drug company, found itself embroiled
in controversy in October, when traces of StarLink corn showed up in taco
shells in the U.S. Aventis no longer produces StarLink, and has withdrawn
its registration with the Environmental Protection Agency.
“Our future is clearly pharma, where we intend to post sustained double-digit, top-line growth,” says Jurgen Dormann, chairman of the management board. But unloading the agriculture division is no easy task. An outright sale to a major rival would face antitrust problems because Aventis Crop Sciences controls about 15% of the global market. And market conditions are unfavorable for floating shares.
When Syngenta, the merged agrochemicals businesses of Novartis and AstraZeneca PLC, went public on Nov. 13, its market valuation was around $ 5 billion, roughly half of what its parent companies had anticipated.
Until recently, however, the life-sciences approach had served Aventis well. On Nov. 9, Aventis reported sales of $ 13 billion for the first nine months of 2000, up 12% from the previous year, with pretax profits of $ 814 million.
The good news for investors is that Aventis “is on target to achieve
40% earnings growth for 2000,” says Commerzbank European drug analyst Mark
Clark. Of course, the weakness
of the euro has certainly helped exports. But according to analysts, savings derived from the merger are fueling earnings growth. “The challenge will be making the right moves to maintain top-line growth once the merger story has played out,” says Mark Ravera, an analyst at Mehta
Partners, pharmaceutical and biotech investment advisers in New York. That means expanding sales in the U.S., the world’s biggest market for prescription drugs. Although Aventis is the sixth-largest drugmaker in the world, with a 4% share of the market, it ranks a mere 12th in the U.S.
Aventis also must bring a steady flow of new drugs to market. And its
recent record is good. Two drugs put on the market four years ago, allergy
medication Allegra and anti-bloodclotting drug Lovenox, are expected to
reach $ 1 billion in annual sales this year. A drug company counting
on drugs, not ag products? That’s what you call focus.
Revamping Aventis AGROCHEMICALS
Maker of the controversial StarLink bioengineered corn, Aventis owns
the second-largest agrochemicals business in the world. But executives
say they’ll spin it off and focus on drugs. U.S.
SALES Ranked 12th in the U.S. by sales, it needs to establish a stronger position in the world’s most lucrative prescription-drug market—and pronto.
PIPELINE Aventis will need to license new drugs from biotechnology
companies or rival drug companies to ensure steady sales growth.
DATA: COMPANY REPORTS, BUSINESS WEEK
URL: http://www.businessweek.com/index.html [Entered November 22, 2000]