On Monday, reports surfaced that Brazil's Industrial Property Office and Monsanto competitor Nortex claimed that Monsanto's 20-year patent on Roundup Ready genetically modified (GM) soybeans had expired in August. For its part, Monsanto confidently responded that one of its patents is valid until August 2007 and that it has additional patents on the GM product until 2011. The agricultural products outfit is currently consulting with the Brazilian government to confirm the expiration dates of its patents. The market evidently bought Monsanto's side of the story.
The whole episode, though, suggests that investors need to pay close attention to Monsanto's pipeline, just as they would when analyzing drug companies such as Motley Fool Inside Value pick Pfizer
Just to put things in perspective, Brazil is the world's second-largest soybean producer after the U.S. Monsanto has only recently been able to capture revenue from Roundup Ready soybeans in Brazil after years of illegal trade. But with at most five years of protection left on these seeds, it has its work cut out for it if wants to keep Brazilian farmers as paying customers.
Fortunately, the firm is managing its pipeline well. In soybeans alone, it is likely to market new varieties with higher protein and/or oil content within three years. These properties make soybeans more attractive to processors, and hence these new soybeans are sure to be a hit with farmers. Farther back in development -- approximately five years away -- the company is testing a soybean with improved taste and feel properties. As for other crops, Monsanto has improved corn and cotton seeds in advanced development.
Also on the plus side, the regulatory environment in Brazil is evolving such that Monsanto should be able to more easily capture revenue from GM seeds going forward. With a healthy pipeline and regulatory trends on its side, Monsanto looks extremely well-positioned for the future.
For more cultivated Foolishness on Monsanto:
- Monsanto's Brazil Benefit
- Feast or Famine at Monsanto
- Monsanto's Risk Relief
- Monsanto Sows the Seeds of Growth
Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.