Here's an FT review on MTC (which mentions some of the acquisitions:
MONSANTO/AHP: From corn to cancer
Clive Cookson and Nikki Tait ask whether the merger of Monsanto with American Home Products marks a new phase for the life sciences sector
The buzz about "life sciences" in the chemical and pharmaceutical industries rose to a new pitch yesterday, when Monsanto and American Home Products announced a proposed merger.
The combined group would have world-wide sales of about $23bn (œ14bn) a year, ranging from human health to agriculture, drugs to seeds. It would lead a growing pack of global companies that have pinned their colours to the banner of life sciences, which apply biology to a wide variety of businesses. Others include DuPont of the US, Novartis of Switzerland, Hoechst and Bayer of Germany, Rh“ne-Poulenc of France and Zeneca of the UK.
They are approaching from different directions. Some are moving away from the low earnings and poor growth prospects of heavy chemicals, while others are looking for non-medical applications of biotechnology. All subscribe to the strategy that a research base in the biological sciences can best be exploited by running a range of businesses covering the health and well-being of humans, animals and plants.
As John Stafford, AHP chairman, said yesterday: "It is becoming more and more costly to take advantage of the new technologies, the new biology that is available in both the medical and agricultural field. [The merger] will enable us to have the resources to be able to pursue these new technologies and turn them into products that will be helpful to the medical profession, consumers, agricultural research and other constituents."
This "life sciences" strategy contrasts with the policy of many mainstream pharmaceutical companies, such as Glaxo Wellcome, SmithKline Beecham and Merck. They have chosen to concentrate on human health.
Views differ as to which is the better approach. "The so-called synergies claimed by life sciences companies are a fantasy," said one drug company executive who did not want to be named. "We don't want to be distracted by farming at the research or the management level."
Sir David Barnes, chairman of Zeneca, believes that to be an outdated view. "The agricultural and medical market places are very different but at the research level there is growing commonality," he says. "Technologies such as gene sequencing, combinatorial chemistry and high- throughput screening are as relevant to the agricultural as to the human health sector."
Of all the companies involved in life sciences, Monsanto has made the most aggressive push into plant genetics - changing crops to make them resistant to diseases or pests or taste better or last longer on shop shelves.
Once viewed as a rather stodgy chemicals business based in St Louis, the group split off its chemicals interests as an independent company, called Solutia, last year to concentrate on the life sciences. Its sales ex-Solutia stand at around $6bn a year, with roughly half coming from agricultural products and the remainder from the Searle pharmaceuticals unit and from food ingredients.
Both before and after the Solutia disposal, Monsanto had been ploughing billions of dollars into life sciences. In 1997, it spent about $1.3bn on "growth-related" expenditures, such as research and product development. Last month alone, it agreed to spend about $4bn to take control of DeKalb Genetics and Delta & Pine, two US companies in which it already held minority interests. It had been working with these companies to commercialise various genetically engineered products such as insect-resistant cotton and herbicide-tolerant soya beans.
Several of Monsanto's competitors said they could not have justified paying so much for the two seed companies. But Henrick Verfaillie, the company's president, defended the scale of investment in a recent interview, talking about the need for a radical shift in world farming techniques.
"We clearly have moved faster and more aggressively than any other company because we believe in the concept of life sciences," Mr Verfaillie said. "It is clear that food production needs to become more efficient, because of population growth and because, especially in the developing countries, people are starting to change their diets. If you travel in China, people are eating chicken or meat where before they were eating rice and vegetables. And immediately you need a much higher production of grains.
"We believe that over the next 20 or 30 years, we need to double the amount of grains produced world-wide to keep track of the population and the change of diet."
The world's farmers are expected to sow more than 30m acres this year with genetically engineered seeds - particularly cotton, soya beans and maize. They are spreading through all the main food-producing regions except Europe, where a strong consumer resistance movement is holding up regulatory approval of transgenic crops.
Add to this the need for more food a growing obsession with "healthy eating" as the baby boomer generation ages, and concerns over sustainability.
This underlying belief in the need to increase world food production is only part of the argument for crop engineering. One of Monsanto's biggest revenue sources has been its extremely successful Round-up herbicide, which is due to move out of patent protection in the US soon.
Although the company plays down the potential revenue threat, it has put considerable effort into the sale of "Round-up Ready" tolerant seeds to help secure future sales. In effect it has converted Round-up from a broad-spectrum to a crop-specific herbicide: when the farmer sprays the field with Round-up, all the weeds die, but the crop itself thrives.
Mr Verfaillie made clear that the company saw itself as racing both to take advantage of the rapidly shifting technology and to get products into the marketplace. The rationale for taking full ownership of DeKalb and D&P was simply "speed", he said.
Yesterday, Robert Shapiro, Monsanto's chairman, made the same point. "All this is being driven by the unprecedented discoveries going on in the biotechnology field," he said. "To make sure you have a lead, you have to a lot of cashflow and organisation."
The competitors agree. Pioneer Hi-Bred, the Iowa corn seed company in which DuPont bought a 20 per cent interest for $1.7bn last year as part of its push into life sciences, says the farm sector is increasingly producing not just commodity goods, but products tailored to end-users' demands. Agricultural genetics is making it possible to develop specialised crops such as grains enriched in particular nutrients for the food-processing industry.
Even so, Charles Johnson, Pioneer's chairman, warns that some developments that are becoming technically possible are not necessarily of immediate commercial value - making it essential for companies playing in this field to have deep pockets.
Producing vitamin-enriched bananas, for example, may not necessarily be the most efficient way to deliver dietary supplements to children. "How much extra are you going to pay for that? Is it the best way to get vitamins to children?" Mr Johnson asks. "I think there are real values in all of this, but the whole question requires much more attention."
AHP too has been a life sciences company since 1994, when its acquisition of American Cyanamid brought it a substantial business in animal health and crop protection products. But this has focused on more traditional agrochemicals, rather than on the biotechnology-driven areas such as crop engineering.
To some extent, the rationale behind the AHP/Monsanto deal may be similar to that of the last great life sciences merger - the coming together of Ciba and Sandoz to create Novartis in 1996. In both cases, a company that was relatively weak in pharmaceuticals and strong in agricultural products (Ciba and Monsanto) found a partner that was strong in drugs and weak in agrochemicals (Sandoz and AHP).
Everyone expects corporate consolidation in the life sciences business to continue. Most speculation involves DuPont, which spent $2.6bn last month buying out Merck's 50 per cent stake in the two companies' pharmaceutical joint venture.
DuPont plans to sell off Conoco, its oil division, raising around $20bn which will be used to expand its life sciences interests. Chad Holliday, DuPont's chief executive, wants to increase life sciences from 20 per cent of group sales today to 35 per cent by 2002.
Monsanto had been seen as a potential take-over target for DuPont - and DuPont could yet make a counter-proposal to the AHP merger. Or, analysts say, it may bid for a second-tier US pharmaceutical company such as Schering-Plough.
Zeneca is another potential target for merger or acquisition. The UK company's drugs business has been performing very well but it has not been investing as much in agricultural biotechnology as most of its competitors.
Even Dow Chemical, a US chemical company without a pharmaceutical business, is moving cautiously into biotechnology. It is working on insect-resistant plants and sees a role for itself in the genetic engineering of crops to produce industrial materials such as plastics.
In Germany, observers say consolidation is inevitable - perhaps extending as far as a merger between the two German giants, Hoechst and Bayer. At the least, Hoechst and Schering will have to sort out the future ownership of their agrochemicals joint venture, AgrEvo.
The range of possible alliances is long. Life sciences will remain a buzz phrase in financial circles for years to come.
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