Monsanto Splices In Its Competitors' Best Traits

Monsanto (NYSE: MON  ) has been a busy bee lately. In March, Monsanto and DuPont (NYSE: DD  ) settled multiple patent lawsuits against each other, instead agreeing to cross-license some of each other's technology. Last week, Monsanto inked another cross-license deal with Dow Chemical (NYSE: DOW  ) , and finally another with Bayer AG this week.

Hard to tell where one ends and the other begins
Under the DuPont deal, DuPont will now pay Monsanto $1.75 billion over 10 years to use Monsanto's Roundup-ready soybean genes, which are used in about 90% of the soybeans grown in the United States. DuPont will also get to combine these genes with its own genes to create soybeans with multiple traits, which was the basis of Monsanto's initial patent infringement suit. In return, aside from the $1.75 billion, DuPont will drop an antitrust lawsuit it had filed against Monsanto.

As for the Dow Chemical deal, Monsanto will get to license Dow's herbicide-resistant corn, and in return, Dow gets to use Monsanto's newest corn rootworm resistance technology, which is still in the pipeline.

It's a good thing Dow is getting the new version of the technology, because in 2011, researchers began noticing that the rootworms in some fields in Iowa had become resistant to Monsanto's corn, which has a gene that essentially makes the corn a pesticide for that specific pest. The EPA now believes the resistant rootworms have spread to five other states in the Midwest. The EPA also notes that the Monsanto-resistant rootworms are more likely to develop a resistance to SmartStax, a combination herbicide-pesticide-resistant seed. So overall, this is a major headache for Monsanto, and the company has a lot riding on the new third version of its rootworm technology.

Finally, Monsanto agreed to license its Roundup-ready soybean technology to Bayer for use in the U.S. and Canada, as well as insect-repellent soybeans for use in Brazil. Monsanto will gain access to Bayer's weed and insect-control technology, to evaluate for incorporation into future Monsanto products.

Green fields ahead
All these deals mean more companies using Monsanto's traits, but with 90% of the soybean market already, the bigger benefit is Monsanto's access to other companies' technology, which will hopefully help it stay ahead of herbicide and pesticide resistant "superweeds" and "superbugs."

Monsanto also recently raised its full-year earnings guidance for the second quarter in a row, now up to $4.40-$4.50 per share. At around $100 per share, that doesn't make Monsanto's stock particularly cheap, but earnings are growing fast -- net income grew by 22% in the recently ended quarter. This is one company to get on your Watchlist today, and stay updated with future developments as it continues to dominate the seed market.

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  • Report this Comment On April 22, 2013, at 8:17 AM, funfundvierzig wrote:

    As a consequence of DuPont's extricating itself from the patent litigation disaster in the U. S. District Court of Missouri, Monsanto will be making money on every bag of seeds in many DuPont Pioneer line-ups. The fraud-sanctioned DuPont will be shelling out a minimum of circa $2 billion to Monsanto in license fees over the next few years to put Monsanto's superior GM traits into its otherwise inferior Pioneer seeds.

    Bottom-line, Monsanto's profits are enhanced; DuPont's margins are squeezed.

    ...funfun..

  • Report this Comment On April 22, 2013, at 8:44 AM, alexrey wrote:

    Both of these companies are awful for the environment- just look at Monsanto's track record, like them dumping PCBs in Anniston, AL. Thank goodness the organics movement is about to make GMO extinct, and finally the truth is coming out about how they increase infertility, birth defects, leukemia, parkinson's, autism and adhd- you just have to do a quick search through the NIH database to find out exactly what's going on. In Europe, where Monsanto people arent in government, they already know this and have banned it. As for their new pesticide, it's based on Agent Orange, so you know exactly what's going on there.

    http://​www.ncbi.nlm.nih.gov/pmc/​articles/PMC2952409/

    http://​www.independent.co.uk/​environment/​gm-food-banned-in-monsan...

    http://​topdocumentaryfilms.com/​the-world-according-to-mons​anto/

    http://​www.ncbi.nlm.nih.gov/​pubmed/17356802

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