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7-Business: Syngenta signs deal with rival DuPont

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TITLE:  Syngenta signs deal with rival DuPont
SOURCE: The Business Journal, USA, Matt Evans
DATE:   03 Mar 2006

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Syngenta signs deal with rival DuPont

Syngenta and DuPont, competitors in the specialty agricultural chemical
industry, have signed an agreement that will see the firms swap licenses
to key crop protection products, allowing each to use the other's
technology to grow their markets.

Activity spawned by the deal will lead to the addition of about 20
science and marketing positions at Syngenta Crop Protection's North
American headquarters in Greensboro over an undetermined period of time,
according to Rob Neill, the division's vice president of professional

There are about 700 people employed at Syngenta's campus on Swing Road
just off Interstate 40.

Some analysts say the deal is also a sign that, after a period of
consolidation in the industry, global players such as Syngenta are
looking for ways to grow their businesses. Ag chemical concerns have been
hit by increased costs, advances in genetically modified seeds and other
factors changing the landscape of the crop protection industry.

If regulators approve the new agreement, Syngenta will acquire an
exclusive worldwide license to a new DuPont insecticide called Rynaxypyr,
which would be used in mixtures with its own insect control products.
DuPont, meanwhile, will acquire worldwide rights to Syngenta's fungicide
picoxystrobin, sold under the name Acanto.

The two firms did not disclose the financial terms of the deal. Both the
global insecticide and the global fungicide markets are estimated to be
worth about $7 billion per year, the companies said.

Being cost efficient

Neill said Syngenta's deal with its competitor DuPont is not unusual in
today's marketplace. The classes of chemicals being developed for
agricultural use today are highly advanced and likely to be extremely
effective for farmers, and as the science progresses it sometimes becomes
necessary to bridge the competitive divide to put it to the best use.

"You can't determine what research gives you; you have to take what
research gives you," Neill said. "Sometimes we'll find that we've got
something here, and if we could just marry it up with something over
there, we'd have a great deal."

Such technology exchanges also help companies like Syngenta and DuPont
share the high costs of putting new products on the market, said Craig
Sandoski, Syngenta's Southern Research and Development Manager in
Memphis, Tenn.

"If we had a brand new chemical that we started testing today, it
wouldn't get to market any faster than seven years, and at a cost of at
least $20 million," Sandoski said. "One advantage of a deal like this
with DuPont is that we'll be able to move more rapidly to get this class
of products labeled."

That $20 million figure, Sandoski said, is a best-case scenario counting
only direct costs. Fred Whitford, coordinator of the Purdue Pesticide
Program at Purdue University in West Lafayette, Ind., said that the cost
more typically will be near $180 million and development takes about nine
years. Also, patent protection expires after 17 years, and newer products
coming on the market will usually force down prices much sooner than that.

All those factors contribute to the manufacturers' need to find the most
efficient route to market, even if that means sharing with competitors.

'A very risky area'

"They've got just a limited amount of time they can sell at a premium
price," Whitford said. "It's a very risky area to be in, trying to plan
on what the market is going to want nine or 10 years down the road."

Other factors are also changing the crop protection market for Syngenta.
Some are straightforward, such as raw materials cost: Higher energy
prices will cause Syngenta to raise prices by about 3 percent for this
growing season. Neill said it's not yet clear whether or to what extent
Syngenta's competitors will follow suit.

One more complex factor impacting Syngenta's crop protection operation is
biotechnology, or genetically modified crops. Biotech seeds are
engineered to resist certain kinds of pests and disease by themselves,
which reduces the demand for chemicals to do the same job.

Most of Syngenta's growth is coming from biotechnology now. Its seed
business grew at three times the rate of the crop protection business in
2005, even discounting the impact of acquisitions on the seed side.
Syngenta's Greensboro division is not involved in biotech research or

While biotechnology reduces demand for some of the chemicals Greensboro
does develop, Neill said it also creates new opportunities. For example,
scientists are noting increasing weed resistance to the popular Monsanto
product Roundup and other glyphosate-based herbicides. Those herbicides
are designed to kill any plant they contact except for those that have
been genetically modified to be immune.

Eyeing the future

Glyphosate and so-called "Roundup Ready" seeds are cheap and easy and
therefore widely used by farmers, but Syngenta and other manufacturers
are now urging them not to rely on that combination as heavily in the
future to reduce the rate at which resistance builds up in the weeds.

That means they'll need an alternative, Neill said, "which means they
have another problem to solve, which is good from the standpoint that
Syngenta is able to help them solve it."

While deals like that with DuPont and other investments will continue to
generate activity and technology jobs, Neill said most of the growth of
Syngenta's Greensboro operation will likely come in the professional
products area, which sells into consumer markets such as residential
construction, lawn care and golf-course management.

Professional products account for about 20 percent of Syngenta revenues
in North America today, Neill said, about twice the share of 10 years
ago. Local employment in that division is growing between 10 and 20
percent per year, and is currently at about 75 people, he said.

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