SUPPORT OUR
SPONSORS

Organic Valley

Dr. Bronner's
Magic Soaps

Botani Organic

Aloha Bay

Eden Foods

Ode Magazine

Mountain
Rose Herbs

The Green Guide

Pharma-Gedon: Monsanto Merges with Pharmacia-Upjohn Geno-Types

21 December 1999

What do you get when you make a GM cross of Pharmacia-Upjohn and
Monsanto? Pharma-gedon*

Monsanto terminates itself. No surprises in No-Name $27 billion
merger. Move heralds pharmaceutical industry strategy to distance
itself from GM food flop.

SHOTGUN MARRIAGE?
Monsanto's Sunday night announcement that it will merge with
Pharmacia-Upjohn ends 20 months of speculation that the agbiotech
monolith would either be broken up or married off. Faced with a huge
debt load following $8.5 billion in agricultural input acquisitions;
endless lawsuits claiming damages from its genetically-modified seeds;
and plummeting share value and seed sales as producers and consumers
back away from GM products, Monsanto had no choice but to seek
protection in a larger enterprise. Further evidence of its crumbling
agbiotech future, Monsanto announced yesterday that it would drop its
ill-fated bid to acquire Delta & Pine Land Co. (D), the world's largest
cotton seed company and the co-owner (with the US Department of
Agriculture) of the prototype Terminator patent. Jilted after 18
months, D is now threatening to sue Monsanto for using regulatory
hurdles as an excuse to drop the acquisition and to avoid paying a $81
million break-up fee (the penalty fee if Monsanto failed to acquire D
by the end of 1999).

There is a good possibility that the Pharmacia-Upjohn and Monsanto deal
will itself fall through. In June 1998, American Home Products agreed to
hitch up with Monsanto but the deal went sour during that summer. Since
then, the St. Louis, Missouri company has been seen stepping out with
almost every eligible Life Industry Major including Du Pont (Wilmington,
USA) and Novartis (Basel, Switzerland). According to press reports,
Pharmacia-Upjohn will likely attract competing bids from other suitors.

When Novartis announced last month that it would spin-off its huge
agbiotech division in a new venture with most (but not all) of
Astra-Zeneca's (Sweden/UK) agchemical and seeds activities, Monsanto's
options narrowed. Although DuPont was obviously interested, most believed
a company created by a marriage with Monsanto would be too much even for the
jaundiced U.S. Justice Department. With Novartis and DuPont out,
Hoechst (Germany) and Rhone-Poulenc (France) newly united as Aventis,
and Pfizer and American Home Products competing for Warner Lambert Co.,
Monsanto was obliged to rummage through the Gene Giants' "B" team.

UPJOHN DOE?
Although the soon-to-be-weds have yet to decide on a name for their
venture, they will retain the name "Monsanto" for their agricultural
activities -which will become a separate legal entity with 80% of the
stock still held by the fused enterprise. The most surprising aspect of
the deal is the decision to keep the Monsanto name. Tainted by
Terminator, blighted by biotech backlash, and drowning in a rising tide
of consumer opposition to genetically engineered crops and foods, it's
hard to imagine a less popular corporate identity in 1999. The Monsanto
name is clearly a liability, so it's difficult to understand why
Pharmacia-Upjohn didn't insist on elimination of the Monsanto monniker
as a pre-condition for the merger. Indeed, shares of both companies
fell after the announced merger, and industry analysts attribute the
slide to investor disappointment that the company would preserve the
flagging agbiotech business.

Perhaps the new entity shouldn't be overhasty in adopting a new name.
Until they can figure out what to do about the lawsuits, Terminator and
Traitor technologies, and the vestiges of the first generation of GM
crops, the best strategy may be to adopt a low profile. RAFI suggests
that a subtle, no-frills name such as "Upjohn Doe" with 'no fixed
address' might best serve company shareholders.

SUISIDEKICK?
When Novartis and AstraZeneca united their agricultural programs a few
weeks ago, they decided to call it Syngenta. If Pharmacia-Upjohn
shoulders Monsanto's Traitor Tech and $6 billion debt burden, they could
be known as SuiSidekicks or maybe Pharma-gedon is closer to the mark.
SuiSidekicks reflects the company's notoriety for developing suicide
seeds, and plants whose genetic traits can be turned on and off with a
shower of proprietary chemicals (Traitor Tech). But Pharma-gedon
captures the real essence of the merger. After all, it's the drug
companies that are the dominant force in the colossal consolidation
trends. The pharma titans clearly want to distance themselves from the
less profitable and extremely controversial ag biotech scene.

GM OUTS?
This time last year, RAFI would have predicted that the Gene Giants
would continue to integrate human health care and agricultural
industries into a common Life Industry. The technology and the patent
control mechanisms are very close and the long-term market opportunity
for "nutriceuticals" and "functional foods" seemed to guarantee the
unification of the two industrial segments. But now that the
producer/consumer rebellion has crossed the Atlantic, the
pharmaceutical industry wants to distance itself from the first
generation of agricultural biotech products. Understandably, they are
afraid that their own GM drugs will be tarred with the same brush if
they have to defend GM foods.

IMPLAUSIBLE DENIAL:
Does this represent a major strategic shift and a collapse of the life
industry model? Not likely. It's a tactical adjustment and recognition
that the first generation GMOs were scientifically sloppy and introduced
ineptly. Producers and consumers see that the products have little to
offer for the risks they require. It is impossible to make the
marketing of seeds that can survive your own herbicides seem anything
but self-serving. The second generation looks no more likely to win
favor. Biotech companies are moving from input traits (like
herbicide-tolerance)to output traits such as dry matter content and
transportability. The second generation traits may reduce costs for
food processors but, again, offer little or nothing to farmers o or
consumers. RAFI predicts that generation two GMOs will also flop.
Pharmaceutical companies are looking up the pipeline and have concluded
that the next half-decade or so of agricultural biotechnology is fraught
with far too much risk.

Accordingly, they'll keep the ag side of their interests at arm's
length. In the long run, they won't drop agbiotech altogether because
the synergies are just too lucrative to abandon. The recent moves by
Novartis, AstraZeneca, and Pharmacia-Upjohn are belated - but
implausible - attempts to give the Gene Giants safe shelter as the roof
caves in on the GM food market.


* In 1999, Brewster Kneen, a well-known and much-respected Canadian
author and agricultural activist wrote Farmagedon, a brilliant and
thoughtful analysis of the impact of biotechnology on agriculture. We
happily acknowledge that his title is the inspiration for our
suggestion for a new name for Pharmacia-Upjohn/Monsanto and we commend
his book to readers. The book can be obtained from The Rams Horn, S-6,
C-27 Rural Route 1, Sorrento, BC, V0E 2W0 Canada. Email:
ramshorn@ramshorn.bc.ca