Wednesday December 4, 7:22 am ET
By Jon Cox
(Adds interview, background)
ZURICH, Dec 4 (Reuters) - Syngenta AG (SYNZn.VX) unveiled a research deal with U.S. drug developer Diversa Corp (NasdaqNM:DVSA - News) on Wednesday, aiming for top spot in the farm biotech market and a foothold in the potentially huge drugs-from-plants business.
The world's biggest agrochemicals firm, which helped develop the genetic map for rice, will fold its genomics activities into Diversa's pharmaceutical business to speed product development under the deal worth an initial $118 million.
The "green" biotech market for food and feed is today worth some $1 billion a year and Syngenta wants to be top player.
"We believe in the future of this and we would not be going into it if we did not expect ultimately to lead this business," David Jones, head of plant science, told Reuters. "We don't expect more than three companies will remain in this business in about 10 years time," he added.
While use of genetically modified crops is now well-established, so-called bio-pharming or "red" biotech, which uses plants to generate therapeutic proteins as drugs, is more controversial but potentially more lucrative.
"We have to see how we go but we have high hopes," Jones said.
A number of companies are currently looking at ways to make drugs in plants, with most attention focused on antibodies -- proteins produced by the body's immune system to fight disease.
Monoclonal antibodies are a fast-growing source of new drugs. There are currently 11 antibody medicines on the market, generating sales of about $3 billion a year, and some analysts think this could rise to $20 billion by 2010.
Syngenta will commit $118 million over seven years, while Diversa will get milestone payments and royalties on any products developed. The Swiss firm will increase its stake in the San Diego-based firm to 18 percent.
Syngenta will relocate its plant genomics programmes, including pioneering rice work, from the Torrey Mesa Research Institute (TMRI) in La Jolla, California, taking a charge of around $30 million on the plant's closure.
However, Syngenta sees cost savings of $200 million over the life of the deal as it trims its own in-house R&D budget.
"But this is not a cost-cutting story," said Jones.
RIGHT STEP
"This is a step in the right direction," said Bank Leu analyst Ulrich Steiner. "Syngenta has to invest in it or lose its competitive advantage."
Monsanto Co (NYSE:MON - News), the world's second-largest agrochemicals group, has been trying to increase its genomics revenues.
Syngenta shares shed 0.2 percent at 82.70 francs, bettering weak Swiss stocks (^SSMI - News) and European chemical rivals (Zurich:^SX4P - News).
"This could be a huge market but there is a question mark about how it will be accepted. Negative sentiment isn't going to go away in the next few months," said Steiner.
Environmental groups have expressed concern that genetically modified plants could contaminate crops grown for human food. In Nebraska, ProdiGene Inc's genetically-modified corn contaminated a soybean field earlier this year.
Syngenta would not be making any imminent announcements about further partnerships in the field, said Jones, but he held open the door for further ventures.
"This is about getting more products quickly into Syngenta's portfolio in biotech and keeping at the cutting edge of the platform technologies that are so important for advancing all biotech, whether it is green or red," he said.
"It is the fastest growing market in our industry. We have reported before that the crop protection business itself is (seeing) flat to very modest growth whereas we have seen spectacular growth in biotechnology products," he added.
The deal is expected to be completed in April 2003 and is subject to regulatory approval and consent from Diversa shareholders. Diversa shareholders holding about 32 percent of the stock have already agreed to vote in favour of the deal.
(Additional reporting by Ben Hirschler in London) |
