FOOL PLATE SPECIAL
After investing tens of billions, big diversified life-sciences companies turn their backs on agricultural biotechnology. Aventis is the latest, showing its agricultural operations to the door, hoping to raise $6.86 billion and focusing on its remaining drug operations. Pharmacia, AstraZeneca, and Novartis have done the same. Newly orphaned ag biotechs such as Monsanto and Snygenta are worth further consideration.
 |
|
|||||||
|
||||||||
|
||||||||
By
Yet another big drug and chemical power is booting ag biotech. Aventis (NYSE: AVE), reeling from the StarLink genetically-modified corn controversy, announced plans to spin off its agricultural crop protection business for up to $6.86 billion, pending 24% shareholder Schering AG (not Schering-Plough (NYSE: SGP)) approval. Aventis is hardly original. Pharmacia (NYSE: PHA) purchased Monsanto (NYSE: MON), only to spin off its agricultural operations for $700 million last month, and drug giants Novartis (NYSE: NVS) and AstraZeneca (NYSE: AZN) merged their agricultural operations into Syngenta (NYSE: SYT), which debuted on the NYSE Monday. Success has many parents, but ag biotech failure is an orphan. Why? The multi-billion dollar bet Huge diversified chemical concerns saw growth in genetically modified disease-resistant crops as a hedge against the decline in their traditional herbicide and pesticide businesses. And multinational drug makers found synergy between their existing drug and chemical biotechnology and new agriculture. Public rejects "Frankenfoods" So now the big guns jettison their agricultural businesses and grasp their drug-making tightly. AstraZeneca and Novartis' Syngenta began trading Monday on the NYSE , while Monsanto IPOed as a pure-play ag biotech last month. With Aventis' plans, only DuPont (NYSE: DD), whose 1997 and 1999 purchases of Pioneer Hi-Bred for $9.4 billion remain unspun, hasn't sold the farm to focus on its pharmaceutical and other businesses. Ag biotech a long-term survivor Do you think there's gold in them thar biotech fields? You'll find the conversation lively on the Biotechnology discussion board!
Throughout the 1990s, big diversified life-sciences and drug makers like DuPont (NYSE: DD), Dow (NYSE: DOW), Monsanto, Aventis, Novartis, and AstraZeneca placed seemingly sure multi-billion dollar bets on ag biotech. Who could argue against seeds for disease-resistant crops that could mean cheaper food for more people, as well as huge reductions in the herbicides reviled as destroyers of the environment?
But nobody counted on the northern industrial economy's rejection of genetically modified food. Despite a strong cost-benefit analysis and no evidence that current regulation is inadequate to prevent detrimental effects on human health, surveys reported by Red Herring show widespread distrust in the U.S. and Europe of so-called "Frankenfoods." Now that food processing plants reportedly pay premiums to farmers for non-modified crops, economics stands against the new products. Farmers' cost savings from growing the crops may be more than cancelled out by increased prices for non-modified crops.
It's hard to imagine that countries that show the world unparalleled starvation will care whether there's a little StarLink in their tacos. I'm sure some of you, like me, have even lived a few years in Africa or elsewhere and seen it first hand. Though these are not the lucrative markets of the northern industrial economics, they may still provide the impetus for biotechnology to succeed in agriculture. Newly orphaned agricultural biotechnology companies may be enduring short-term pain, but could provide long-term gain.
RSS Headlines
Fool UK
