The leading bioagricultural products portfolio that Novozymes built through a series of acquisitions over the last seven years is being folded into agribusiness giant Monsanto as part of a global partnership aimed at developing new microbial products that can protect crops and improve crop yields.
This new “BioAg Alliance” announced Tuesday marries the bioagricultural products and expertise of Novozymes with the global commercialization capabilities of Monsanto as the two work to tap into a market opportunity projected to be in the billions of dollars. The companies said that together they can develop new products and reach the market faster than either company could have done separately.
“It’s a tall order but one we think we can deliver on by combining our capabilities,” Novozymes CEO Peder Holk Nielsen said during a conference call Tuesday to discuss the partnership.
The deal includes a $300 million upfront payment from Monsanto to Novozymes.
The Novozymes-Monsanto alliance is not a joint venture operating as a new and separate company. Novozymes and Monsanto will maintain operations and each will take the lead on different pieces of the partnership; Novozymes will lead in fermentation of the microbes, up-scaling and manufacturing while Monsanto will lead on field testing and commercialization. Both companies will work together in discovering microbes.
Microbials a Novozyme focus
Denmark-based Novozymes, which operates its North American headquarters in Franklinton, is known as the global leader in industrial enzymes used in an array of applications such as waste water treatment and biofuel production. But about 10 years ago, the company started work in agricultural biological products.
Microbials are agricultural biological products that are derived from microorganisms, such as bacteria and fungi. They are found naturally in nature and thus are seen as offering a sustainable alternative to products such as pesticides. Novozymes says that microbes could complement or even replace pesticides, are safe for beneficial insects and do not result in any known resistance.
Novozymes fortified its position as the bio-ag leader through a series of acquisitions in recent years. In 2007, Novozymes acquired Pilom Bios in Canada and Turfal in Brazil. Three years later Novozymes acquired EMD/Merck Crop BioScience, the crop bioscience division of Merck, for $275 million. Last year, Novozymes acquired Natural Industries, a Houston company that sells microorganisms that fight diseases in fruits and vegetables. And in June, Novozymes announced it would acquire South Dakota bioagriculture company TJ Innovation, a company whose microbial and micronutrient products are used in seed treatment of crops including corn, soy and wheat.
Novozymes agricultural microbial products generated an estimated $120 million in revenue in 2012. Under the alliance, marketing responsibility for that product portfolio will transfer to Monsanto, along with much of the commercial organization responsible for that work. But Novozymes is set to receive a $300 million upfront, recognizing Novozymes business and microbial capabilities and also as payment to Novozymes for supplying products for the alliance. No other financial details were disclosed, though the companies said that they will share equally in development costs and any profits from products commercialized by the alliance.
More production needed
Novozymes and Monsanto say that the world must increase food production 70 percent by 2050 in order to feed a projected global population of 9.6 billion. That means farmers will have to grow more food using fewer resouces, such as land and water. Microbials are seen as tool to help farmers meet that demand and they represent a big market opportunity. Novozymes says the agricultural biological industry today represents roughly $2.3 billion in annual sales, a figure that has seen percentage growth in the mid-teens in recent years.
Part of the alliance will involve screening microbes for particular agricultural applications, such as protecting plants against weeds, insects and disease and improving a plants’ ability to access nutrients.
The alliance is not expected to have a major impact on Novozymes North Carolina operations, at least initially. A Novozymes spokesman said it’s a little early to speculate on the North Carolina impact. More details will be forthcoming early next year.
Monsanto Chief Technology Officer Robb Fraley said that Monsanto, which operates a lab testing facility in Research Triangle Park, could use that lab as one of the facilities for evaluating microbes for use in improving crop yields.
Novozymes and Monsanto said that deal cementing their new alliance is expected to close in early 2014.
