What to Expect

2. What to Expect • Historical Overview • Financial Overview • Mergers and Acquisitions • GM products • Corn Modifications • EPA’s Opinion • Pharmacorn • Conclusion

3. History • In 1901 J.F. Queeny, longtime employee in the pharmaceutical industry, started a company to produce for the food and pharmaceutical industry. The company was named after his wife, whose maiden name was Monsanto. It was located in St. Louis. • (Queeny had previously run a refining company, which burned down on its first day of operations) • In the beginning, the company produced saccharin. In 1905 it turned its first profit. • Interestingly, the entire product of 1903 and 1905 was shipped to a small company called Coca Cola.

4. In 1904 Monsanto added Caffeine and Vanillin to its list of products. • In 1913 Monsanto opened offices in New York. World War One forced them to stop importing raw materials and start making their own, leading to massive expansion. • In 1915 Sales passed One Million Dollars. • In 1917 Monsanto begins aspirin production. Largest producer until 1980. Also in 1917 was the first test case against saccharin (according to the Monsanto website, “the suit was dismissed in 1925, ending the government's unsuccessful attempts then to prove saccharin harmful.” • In 1918 Monsanto made its first acquisition of another company, Commercial Acid Company of Illinois. Monsanto now had two plants.

5. In 1928 Queeny’s son Edgar took over. • In 1929 expansion moved into other industries with the acquisition of a rubber chemical company and a textile, leather, and paper chemical company. • On October 10, 1929 the Monsanto Chemical Company was listed on the NYSE. 19 days later the market crashed. Monsanto continued to expand throughout the depression, acquiring new companies and in 1931 moving into Canada. • In WWII Monsanto’s Dayton Laboratories were heavily involved with the Manhattan Project, working on Uranium. Monsanto continued to do government nuclear work until the 1980s. Monsanto was also heavily involved with synthetic rubber production, another strategic product.

6. Monsanto entered the agrochemical business as a result of producing DDT during WWII. By the end of the war they were also making products to control bacteria, fungi, insects, weeds and rodents. By 1950 Monsanto had a de-facto agrochemical business, and in 1951 it formed a research division to create proprietary pesticides. Further research and developments, as well as acquisitions, led to the formation of the Agricultural Division in 1960.

7. Expansion Continues • In the late 40’s and early 50’s, Monsanto opens opens offices in India, Brazil, and Japan. They also became involved with joint projects to produce Nylon, pain pills, and Corvettes. • In the 50’s Monsanto moved into the oil and fertilizer business (via an acquisition). Also several of its herbicides are approved. • In 1955 Monsanto installed the first IBM data processing computer (the IBM 702, now housed at the Smithsonian institute). In 1959 Monsanto opened a silicon production facility. • In 1962 Monsanto sales exceeded one billion dollars. A European headquarters was established in Brussels.

8. In 1964 Monsanto Chemical Company drops the ‘Chemical’ from its name. • In 1966 Astroturf is introduced, based on a Monsanto technology. • In 1970 a molecule that will become known as glyphosate, the active ingredient in Roundup herbicide, is synthesized. • In the mid-1970’s, a third of Monsanto’s sales are outside the US. Several chemical and plastics ventures were introduced, including a bottle which was “banned as posing a cancer risk by the U.S. Food and Drug Administration in 1977,”

9. 1981 - Monsanto entered into its first collaborative research agreement - with Washington University in St. Louis to pursue biomedical research. • 1981 - DuPont’s purchase of the other half of Monsanto’s petrochemical venture forces Monsanto out of oil and leads to a refocusing on high-value proprietary products. • Biotechnology is firmly established as the strategic research focus. By the mid-1980s several products were underway, including bovine somatotropin (bST) • Approved in 1993 after considerable controversy, and sold under the trade name of Posilac. As of 1999 Monsanto was still the only producer. • 1981 - Nutrasweet was approved for use in the US. In 1985 Monsanto bought the company (GD Searle).

10. In the late 80’s and early 90’s Monsanto did a major restructuring which included the sale of “non-strategic businesses” such as “AstroTurf stadium surface and related businesses, polyethylene film, sorbate food preservatives, Fome-Cor foam board, Fisher Controls International, and others.” • Monsanto consolidated businesses around high-value-added proprietary products. Emphasis was increasingly on life sciences' agriculture, pharmaceuticals and food. • The early 1990s saw several new products including GM potatoes (protected from insects), insomnia and arthritis medication, as well as the bovine sematropin mentioned earlier.

11. Monsanto’s Worldwide Locations

12. Patent Expiration Leads to Lower Sales • According to Monsanto’s financial statement, one of the causes of lower income in 2003 was lower sales of Roundup Herbicide. • Glyphosate, the basic ingredient in Monsanto’s Roundup herbicide, became widely available through various generic labels soon after Monsanto’s glyphosate patent expired in 2000. Monsanto responded to increased competition by lowering the price of its Roundup products. • But the company may also have sought to maintain customers by requiring farmers to use its brand of glyphosate on crops grown with Monsanto’s Roundup Ready seed. Using an off-brand of glyphosate on a Roundup Ready crop could void certain warranty protections from the company. • Currently this issue is in the courts.

13. Financial Overview

14. When Large Corporations Get Hungry • In 2000 Monsanto merged with Pharmacia & Upjohn • Pharmacia merged with Upjohn (of Kalamazoo, Michigan) in mid-1990s. • Merger of Monsanto leads to stripping of pharmaceutical elements followed by an IPO of Monsanto later in the year. Final spinoff occurs in 2002. • Later that year PNU was gobbled up by Pfizer.

15. Economic weakness and political unrest in Brazil and Argentina severely weakened those currencies and caused defaults on payments owed to Monsanto by growers in South America to skyrocket. • Analysts and investors say Monsanto's weak stock price and management turmoil may put the company in play. • The most suitable candidate is BASF, • large size of the deal in this uncertain economy • Monsanto's potential legal liability at its former Solutia subsidiary would be hurdles that any buyer would have to overcome.

16. DuPont and Syngenta would likely face antitrust barriers because of their strong position in seeds and herbicides • Bayer is in the process of integrating its recent purchase of Aventis CropScience and is unlikely to attempt a major deal • Dow would "love" to buy Monsanto given its stated desire to become a top-tier ag player, but given Dow's own weakened financial position and management turmoil, such a deal is unlikely.

17. Other Recent Monsanto Actions: • Monsanto has announced that it plans to transfer some of its new genetically-enhancing cotton technology to Cotton Incorporated, the company funded by American cotton growers and importers, to increase demand for and profitability of cotton. • According to Monsanto, this underscores the company's commitment to growers, consumers and the ag industry, outlined in the Monsanto Pledge. • The Pledge is a series of commitments that describe the company's policies for the products developed through biotechnology - including sharing knowledge and technology to improve agriculture and the environment.

18. Monsanto and GM • Organic Farmers in Canada filed a class action lawsuit against Monsanto and Aventis, saying GM canola had infiltrated their crops. • The Farmers say this makes them vulnerable to suits from GM crop producers, due to a case last year where a farmer had to pay Monsanto $15,000 after GM corn was found on his fields, despite his protests it had blown in from elsewhere. • Monsanto's patent for the gene inserted to make Roundup Ready seeds mandates that every purchaser of the seed sign a Grower's Agreement and a Technology Use Agreement • The farmer can use the seed for one-time planting and may only sell it to a commercial purchaser authorized by Monsanto for consumption.

19. The farmer may not sell or give the seed to anyone else, and he is prohibited from saving the seed for replanting the following year • The Technology Use Agreement also authorizes Monsanto to enter the contracting farmer's land to verify compliance with the agreement • Accordingly, the court reasoned, if any person knowingly "uses" a plant containing the patented gene without having paid for the seed or having signed the requisite agreements, he has violated the terms of Monsanto's patent • No determinative inquiry into how that farmer came to be in possession of the patented seed is necessary

20. A Little More History • The mid 1990’s introduced a host of new GM products, as well as the creation of a joint venture which became the world’s largest producer of Rubber chemicals. Six biotech and agricultural companies were acquired. • In 1997 Monsanto spun off the straight chemical businesses to focus on ‘life sciences’. • The current decade has shown Monsanto to be focusing on GM products and bioenergy, as well as expanding into foreign markets with GM products.

21. GM Products introduced in the 1990s: • Roundup Ready® glyphosate-tolerant soybeans, • NewLeaf insect-protected potatoes • Bollgard® insect-protected cotton • Delayed-ripening tomato approved but not commercialized. • Asgrow® and Stine Seed acquired by purchase • YieldGard® corn • Bollgard® cotton • New Leaf potatoes • New Leaf Plus potatoes • Roundup Ready® canola • Roundup Ready® cotton • Roundup Ready® soybeans

22. Focus: GM Corn

23. Monsanto Protein Technologies • Overview • 20 years experience in plant biotechnology • Leader in plant biotechnology and recombinant protein technology • Planted on over 90% of all biotechnology acres • Why corn: • Company’s vast knowledge genetic structure of corn and corn production. • Experience allows it to create a development process that adheres to pharmaceutical and regulatory standards. • Pharmaceutical proteins are stable in maize. • Large amounts of proteins can be extracted.

24. Maize Production • Total world maize production for 1999/2000 exceeded 604 million tons. • 11.5% was traded internationally • US dominates world’s maize production and is largest exporter. • European Union maize purchased from US is less than 1% of total US export. • World markets will be effected by: • Technical change - genetically modified maize and value-enhanced maize • Reason for no differentiation between gm and conventional corn data: • “Even non-gmo crop likely isn’t completely free of gmo germaplasm.”

25. GM Breakdown

26. Genetic Modifications Not Approved in EU

27. Corn Modification: Why? • Two of the main reasons: • Resistance to European Corn Borer • Tolerance to the herbicide glufosinate • Bt Corn = Bacillus thuringeinsis: • Soil bacteria that creates the insecticide when the corn pollen is released. • Can also release smell that attracts feeding insects. • Toxin produced is depended on target insect, ie moths or butterflies • Toxin ingested by larva, toxin paralysis mouth and stomach • Resistance is slow to build up. • In 1998 ~ 20% of total corn acreage planted was Bt Corn.

28. Negative Effects of Bt Corn • Destruction of bystander species: • Monarch butterflies killed • Fed on the milkweed that was contaminated by Bt corn pollen. • Green lacewings died • Ingested European corn borers that had eaten Bt corn. • Their death is counter productive since they are insect predators • Soil contamination: • Toxin produced by genetically modified corn can remain in soil for up to 234 days.

29. Conventional Corn Growers Legal Response • Conventional corn growers must state: • that no seed represented by the seed company as GMO seed was planted. • that seed represented by the seed company as non-GMO seed was planted. • that care was taken in avoiding contamination in bins, augers, and in the combine. • In no uncertain terms should they state: • that the crop in question has no GMO germplasm. • that no contamination has occurred from mechanical handling and storage of the crop. • that no contamination has occurred from pollen drift.

30. Monsanto’s Newest GM Corn • Corn was designed to resist rootworm. • Approved by the EPA in February. • Also a Bt variety. • Sold as YieldGard Rootworm corn. • EPA requires Monsanto to ensure that 20% of the acreage where the seeds are planted is kept as a buffer zone. • Reason: to reduce the risk of the rootworm developing a tolerance to the corn’s pesticide.

31. EPA’s Take on GM • EPA is “confident that it does not pose risks to human health and environment” – Stephen L. Johnson, Assistant Administrator of EPA’s Office of Prevention, Pesticides, and Toxic Substances – “these corn varieties show no signs of adverse effects to human health.” • Therefore, the EPA approved Bt corn sales until 2008. • It does require insect resistance management (IRM) and grower education. Monsanto is also required to provide a validated analytical method for detection of the Bt protein in corn. • Test kits are available to test corn quickly for modifications – can be used on the corn itself or on the corn plant.

32. EPA’s Opinion of Bt Corn • no adverse human health effects • no insect resistance after five years of commercialization • no adverse effect to non-target wildlife, plant or beneficial invertebrates under typical agricultural conditions • have provided significant benefits to growers, the public and the environment

33. EPA’s Requirement of Monsanto • collect data on soil retention of the Bt protein • conduct studies on the long-term effects of Bt corn on the Monarch butterfly population • conduct studies on the effects of Bt corn on birds and other insects • file annual reports on insect resistance plans, and any signs of insect resistance development • prepare remedial action plans to use if insect resistance occurs

34. Quality Protein Maize • Created to provide the nutritional needs (amino acids) • Particularly children being weaned • QPM is created for both human and animal consumption • Highest impact areas would be Africa, but also important in Central America and some South American countries. • Production and distribution concerns: • Must be grown in areas where other QPM is grown. • Due to recessive gene requiring activation during pollination

35. Plant-Made Pharmaceuticals • Corn Modification • Goal is to maximize therapeutic protein in corn • Therapeutic proteins are used as pharmaceutical antibodies to treat viral infection, cancer, heart disease, etc. • Additional benefits: • Lower capital investment • Process is environmentally sustainable • Plants are natural and processes and wastes are minimized. • Plants are isolated and after harvest, the proteins are extracted • Proteins are delivered to pharmaceutical companies

36. Monsanto’s Commitment to Plant-Made Pharmaceuticals • Full compliance to all applicable laws, regulations, and guidelines. • Food and Drug Administration, Health Canada, US Department of Agriculture, and Canadian Food Inspection Agency • Grow and process these plants separately from food and feed • All corn is grown west of the Rocky Mountains - away from the Midwest Corn Belt • Protect people, food, and feed, and the environment • Conduct internal audits of their processes regarding their confinement procedures.

37. Conclusion Monsanto has remade itself repeatedly in its 102 year history. Although its current focus is on Transgenic agricultural products, it clearly has the assets and know-how to accommodate the ‘next big thing’ in any of the fields they currently work in (and probably many of the ones they do not).