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- 17 April 2014 12:48 pm , Vol. 344 , #6181
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Monsanto Merges, Spins Off Agritech
20 December 1999 7:00 pm
Two powerhouses in the life sciences, U.S. Monsanto and U.S.-Swedish Pharmacia & Upjohn, yesterday announced that they plan to merge, creating a new pharmaceutical company with a market capitalization of over $50 billion. The as-yet-unnamed new company plans to separate itself from Monsanto's agricultural division, which has been a leader in the development of genetically modified crops. Investors have been worrying about increasing public opposition to these products.
The new company will have an annual research and development budget of $2 billion and a "strong commitment to research," says Monsanto spokesperson Scarlett Lee Foster. But whether the merger will lead to the consolidation of the two companies' labs or a new scientific focus is not yet clear.
Pharmacia & Upjohn focuses on drugs, selling a variety of products from glaucoma drugs to Rogaine, a hair loss treatment. Over the last decade, St. Louis-based Monsanto has transformed itself from a chemical business into a life sciences company. This year, its pharmaceutical division scored a major hit with the arthritis drug Celebrex, whose launch became the most successful ever. Its agricultural division has also been very profitable, thanks to a best-selling herbicide called Roundup, as well as a range of genetically modified crops that are resistant to Roundup or that produce their own insecticide. But analysts have expressed doubt over the long-term prospects of biotech crops, because of consumer worries over their safety and ecological impact (Science, 26 November, p. 1662).
After the merger, Monsanto's agricultural division will be spun off as a subsidiary with its own board of directors and its own stock, allowing investors to choose between drugs and agriculture. Almost 20% of the division's capital will be raised through an initial public offering. The new parent company may eventually abandon this new division entirely, suspects Charles Benbrook, an independent agricultural consultant in Sand Point, Idaho. "It's clear that Pharmacia has no interest in agriculture whatsoever," he says. With its relatively limited range of products and Monsanto's patent on Roundup ending after 2000, "the division is just not a viable entity on its own," says Benbrook. But Monsanto scoffs at that prediction. The agricultural division, which currently brings in over half of Monsanto's revenues, "is one heck of a profit-generating company," says Foster.