Agrow Report on agrochemicals

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Agr Agr owow s Completes CompleteGuide to GenericGuide to GenericPesticides:Pesticides:

V V olume III olume III Business StrategiesBusiness Strategies(2007 Edition)(2007 Edition)

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Executive Summary Generic Pesticides: Volume III Business Strategies



EXECUTIVE SUMMARY

This report is the third in a set of three investigating the current state of thegeneric pesticide industry and market.

This first report contains profiles of 100 of the most important genericpesticide companies in the world today. The second report contains profilesof 100 of the most important generic pesticide ais. The third report providesa detailed analysis of the generic pesticide market and industry, andexplores the forces that will drive the development of the generic pesticideindustry over the next few years. These three reports are updated editionsof reports on the generic pesticide industry that Agrow published first in1998 and then, as new editions, in 2001 and 2005.

This third report contains an analysis of the generic pesticide market andindustry, building on the information presented in the first two reports. Itincludes a complete update on significant changes in the global market sincethe previous publication in 2005. It provides a review of the major nationalgeneric pesticide markets and a discussion of the various business strategiesadopted by generic pesticide companies, both in terms of competing witheach other and with the major R&D-based agrochemical companies. Thereport also contains an analysis of the ways in which the major agrochemicalcompanies try to maintain their market share after an ai has come off-patent, including finding ways to delay the manufacture of the ai by genericpesticide companies. The report also contains a review of future genericpesticide targets.

The report explores the current and future forces driving the development ofthe generic pesticide industry. Such forces include: the consolidation of theagrochemical industry and the associated divestment of pesticide productsand businesses; patent issues, especially data protection; ai re-registrationinitiatives in the EU and US, and the forced withdrawal of certain generic aisin these markets; and the efforts of industry associations.


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Executive Summary Generic Pesticides: Volume III Business Strategies




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Table of Contents Generic Pesticides: Volume III Business Strategies

Informa UK Ltd, December 2007 1 www.agrowreports.com


CONTENTS

CHAPTER 1 OVERVIEW 7

1.1 Background to reports 7 1.2 Outline of Companies report 7 1.3 Outline of Products and Markets report 9 1.4 Outline of Market and Industry Analysis report 10 1.5 Information sources 10 1.6 Introduction to Market and Industry Analysis report 11 1.7 Current state of the global generic pesticide market and industry 12 1.8 Future prospects for the generic pesticide industry 13

CHAPTER 2 INDUSTRY DEVELOPMENTS 200507 15

2.1 Pesticide markets 15 2.2 Mergers & acquisitions 16 2.3 New products 19 2.4 Regulatory issues 20

CHAPTER 3 GENERIC PESTICIDE COMPANIES 27

3.1 Origins of generic companies 27 3.2 Development and growth of generic companies 30

3.2.1 Generic company business strategies 31 3.3 R&D-based company business strategies 38 3.4 Strategies to counter generic competition 38

3.4.1 Patents 38 3.4.2 Legal challenges 40 3.4.3 Price reductions 40 3.4.4 New formulations and mixtures 41 3.4.5 New ais and single isomers 42 3.4.6 Manufacturing processes 43 3.4.7 Controlling raw material supplies 43 3.4.8 Acquiring or forming generic businesses 44 3.4.9 Selling off-patent products 44 3.4.10 Regulatory restrictions 44

3.5 Competition between generic and R&D-based manufacturers 45 3.6 Competition between generic companies 46

CHAPTER 4 GLOBAL GENERIC AGROCHEMICAL MARKET 51

4.1 North America 54 4.1.1 United States 54 4.1.2 Canada 56

4.2 Europe 56 4.2.1 France 59 4.2.2 Germany 60 4.2.3 Italy 60 4.2.4 Spain 60 4.2.5 UK 60 4.2.6 Eastern Europe 61

4.3 Asia-Pacific 61 4.3.1 Japan 61 4.3.2 China 63 4.3.3 India 68


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Table of Contents Generic Pesticides: Volume III Business Strategies



4.4 4.4 South America 71 4.4.1 Brazil 72

CHAPTER 5 FUTURE GENERIC PESTICIDE TARGETS 75

5.1.1 Future herbicide targets 75 5.1.2 Future insecticide targets 77 5.1.3 Future fungicide targets 79

CHAPTER 6 ROLE OF INDUSTRY ASSOCIATIONS 83

6.1.1 ECCA 84 6.1.2 CPDA 86 6.1.3 PMFAI 87 6.1.4 CCPIA 88 6.1.5 AENDA 89


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List of Tables Generic Pesticides: Volume III Business Strategies



LIST OF TABLES

Table 1.1 List of profiled generic pesticide companies 8 Table 1.2 List of 100 generic pesticide ais 9

Table 2.1 Country pesticide markets by value ($ million) 15 Table 2.2 Company acquisitions made by generic pesticide companies since 2000 17 Table 2.3 Number of producers in 2005 and 2007 20 Table 2.4 Generic ais approved by European Commission 22 Table 2.5 Generic ais withdrawn by European Commission 23

Table 3.1 Origins of the 100 companies profiled in the first report 28 Table 3.2 Main business strategies adopted by 100 companies profiled in the first

report 32 Table 3.3 Pesticide businesses acquired by generic pesticide companies from R&D-

based agrochemical companies since 2000 36 Table 3.4 Most popular post-patent ais by number of generic manufacturers 48

Table 4.1 Global pesticide sales by region, 2006 ($ million) 51 Table 4.2 Geographical spread of companies profiled in the first report 52 Table 4.3 Top 50 generic pesticide companies by sales 52 Table 4.4 US pesticide sales by crop, 2006 ($ million) 55 Table 4.5 List of European manufacturers profiled in Volume 1 by country 57 Table 4.6 List of Asia-Pacific manufacturers profiled in Volume 1 by country (not

including China and India) 61 Table 4.7 Japanese agrochemical sales by crop, 200506 62 Table 4.8 Pesticide usage in China, 2002 64 Table 4.9 List of Chinese manufacturers profiled in Volume 1 65 Table 4.10 Top five Chinese and foreign pesticide manufacturers by sales ($ million) 66 Table 4.11 List of Indian manufacturers profiled in Volume 1 69 Table 4.12 Top five Indian pesticide producers 70 Table 4.13 List of South American manufacturers profiled in Volume 1 71

Table 5.1 Significant new herbicides reported and commercialised, 19952006 76 Table 5.2 Significant new insecticides reported and commercialised, 19952006 79 Table 5.3 Significant new fungicides reported and commercialised, 19952006 81

Table 6.1 ECCA member companies 84 Table 6.2 List of companies profiled in Volume 1 that are members of the PMFAI 88


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List of Tables Generic Pesticides: Volume III Business Strategies




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Abbreviations Generic Pesticides: Volume III Business Strategies



ABBREVIATIONS

ai active ingredient

BCPC British Crop Protection Council

CFL Coromandel Fertilisers

CPT Chemical Products Technologies

DPPQS Directorate of Plant Protection, Quarantine and Storage (India)

ECCA European Crop Care Association

ECPA European Crop Protection Association

EFSA European Food Safety Authority

EPA US Environmental Protection Agency

FAO UN Food and Agriculture Organization

FIFRA Federal Insecticide, Fungicide and Rodenticide Act

FQPA Food Quality Protection Act

GLP Good Laboratory Practice

GM Genetically modified

ICAMA Institute for the Control of Agrochemicals (China)

ISI Isagro Sipcam International

OECD Organisation for Economic Co-operation and Development

OPP EPAs Office of Pesticide Programs

PMFAI Pesticides Manufacturers and Formulators Association of India

SCFCAH European Commissions Standing Committee on the Food Chain and Animal Health

TRIPs Trade-Related aspects of Intellectual Property rights

UPL United Phosphorus

WTO World Trade Organization


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Abbreviations Generic Pesticides: Volume III Business Strategies




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Chapter 1: Overview Generic Pesticides: Volume III Business Strategies



CHAPTER 1 OVERVIEW

1.1 Background to reports

Generic pesticides and the companies that produce them are becoming anincreasingly important part of the agrochemical industry. A combination ofthe general decline in the discovery of new pesticide active ingredients (ais)and the steady loss of patent protection on existing ais means that thegeneric pesticide industry is growing faster than the R&D-basedagrochemical industry.

This growth is in terms of both numbers of available ais and total sales.There are no authoritative figures available for the size of the genericpesticide industry, but in 1996 it was estimated to account for around 10%of the global agrochemical industry. Now it is likely to account for 2030%of the global agrochemical industry, which means that it generates annual

sales of $6,400$9,600 million.

This report is the first in a set of three investigating the current state of thegeneric pesticide industry and market. This first report contains profiles of100 of the most important generic pesticide companies in the world today.The second report contains profiles of 100 of the most important genericpesticide ais. The third report provides a detailed analysis of the genericpesticide market and industry, and explores the forces that will drive thedevelopment of the generic pesticide industry over the next few years.These three reports are updated editions of similar reports on the genericpesticide industry that Agrow published first in 1998 and then, as neweditions, in 2001 and 2005.

In this current edition, a generic pesticide company is defined as a company,or a division of a company, that undertakes as part of its business themanufacture of pesticide ais for which the patents have expired. In the lastedition of this report, this definition was extended to cover Monsanto, as itgenerates the majority of its pesticide sales from post-patent ais, albeit onesthat it developed. However, as almost all the major R&D-based cropprotection companies now generate a great deal of their sales from post-patent ais, in this edition only pesticide companies producing post-patent aisthat they did not originally develop are included.

1.2 Outline of Companies report

The 100 companies profiled in the first volume are listed in Table 1.1. Indeciding which generic pesticide companies to profile, the main criterionused was generic pesticide sales, and for the top 50 companies this provedto be the only necessary criterion.

However, less than 20 generic pesticide companies currently generateannual sales of over $100 million, while hundreds of companies generatesales under $100 million (most have sales below $20 million). Decidingwhich of these companies to profile proved much more difficult, especially assales figures for many of these companies were unavailable. The authorchose the bottom 50 companies based on criteria such as strength of acompanys product portfolio, number of employees, production capacity and

the quality and quantity of information available. Information was obtainedfrom company web sites, stories that have appeared in Agrow and by


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contacting companies directly. As such, the author is confident that the 100profiled companies provide an accurate picture of the current state of thegeneric pesticide industry

Table 1.1: List of profiled generic pesticide companies

Company name Country Company name Country

AgriGuard Ireland Isagro Italy Agripec Brazil Jiangshan Agrochemical China Agro-Chemie Hungary Jiangsu Suhua Group China AgroDragon China Jiangsu Yangnong Chemical China AH Marks UK Jingma Chemicals China Aimco Pesticides India Kangmei Chemical China Albaugh US Kenso Malaysia Amvac US Lanxi Agrochemical China Atabay Turkey LG Life Sciences South Korea Atul India Limin Chemical ChinaBaocheng Chemical

Industry

China Luxembourg Industries Israel

Baoling Chemical China Makhteshim-Agan IsraelBarclay Chemicals Ireland Meghmani Organics IndiaBharat Group India Nagarjuna IndiaCAC China Nanjing Agrochemical ChinaCCI Group China Nufarm AustraliaCequisa Spain Nutrichem Laboratory ChinaCerexagri US Oltchim RomaniaChangqing Agrochemical China Organika-Sarzyna PolandChangxing Zhongshan China PI Industries IndiaChemet Chemicals India Pilarquim CanadaChemia Italy Pinus SloveniaCheminova Denmark PT Petrosida Gresik IndonesiaCoromandel Fertilisers India Punjab Chemicals IndiaDacheng Pesticide China Qingfeng Agrochemical ChinaDhanuka Pesticides India Quimica Lucava MexicoDongbu Fine Chemicals South Korea Rallis IndiaExcel Crop Care India Red Sun ChinaFeixiang Chemical China Reposo ArgentinaFersol Brazil Rotam Hong KongFujian Sannong China Sabero Organics IndiaGharda Chemicals India Sanonda ChinaGood Harvest China Shandon Qiaochang

ChemicalChina

Green Agrosino China Shandong Vicome Greenland ChinaGreenchem Industries China Shenghua Biok ChinaHeben Pesticide China Sinochem Ningbo China

Hektas Turkey Sinon TaiwanHenglong Pesticide China Sipcam-Oxon ItalyHeranba India Suzhou Worldbest ChinaHerbos Croatia Taminco BelgiumHikal India Tecnomyl ParaguayHindustan Insecticides India Tekchem MexicoHisun Chemical China Tide Group ChinaHuaxing Chemical China United Phosphorus IndiaHui Kwang Taiwan Wangs ChinaIndia Pesticides India Xinan Chemical ChinaIndofil India Yancheng Limin ChinaInquiport Venezuela Yongnong Chemical ChinaIprochem China Zagro SingaporeIQV Spain Zibo Nab Agrochemicals China

Note: Country refers to location of headquarters of main pesticide business.


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Each company profile contains contact details for the company, followed bya one paragraph overview of the company and its activities. The profile thenconsists of: a more detailed description of the company and its background;a figure for its annual pesticide sales; a list of the main generic pesticide aisthat it manufactures; details on its manufacturing and R&D facilities; a list ofits major joint ventures and agreements with other companies; and a shortsection on the companys strategy and outlook. Not all of these sections willappear in every company profile.

1.3 Outline of Products and Markets report

The 100 ais profiled in the second volume are listed in Table 1.2. The criteriafor selecting these included the number of generic companies manufacturingeach ai, annual sales and usage figures, and how recently the ai lost itspatent protection.

Table 1.2: List of 100 generic pesticide ais

Active ingredient Activity Active ingredient Activity

2,4-D Herbicide ioxynil Herbicideabamectin Insecticide isoproturon Herbicideacephate Insecticide kresoxim-methyl Fungicideacetamiprid Insecticide lambda-cyhalothrin Insecticideacetochlor Herbicide linuron Herbicidealachlor Herbicide malathion Insecticideametryn Herbicide mancozeb Fungicideamitraz Insecticide maneb Fungicideatrazine Herbicide MCPA Herbicidebenomyl Fungicide metalaxyl Fungicidebensulfuron-methyl Herbicide metamitron Herbicide

bentazone Herbicide methamidophos Insecticidebifenthrin Insecticide methomyl Insecticidebromoxynil Herbicide metolachlor Herbicidebuprofezin Insecticide metribuzin Herbicidebutachlor Herbicide metsulfuron-methyl Herbicidecaptan Fungicide molinate Herbicidecarbendazim Fungicide monocrotophos Insecticidecarbofuran Insecticide myclobutanil Fungicidecarbosulfan Insecticide nicosulfuron Herbicidechlorothalonil Fungicide oxyfluorfen Herbicidechlorpyrifos Insecticide paraquat Herbicidechlorsulfuron Herbicide parathion-methyl Insecticideclomazone Herbicide pendimethalin Herbicidecyfluthrin Insecticide permethrin Insecticidecyhexatin Insecticide phorate Insecticidecymoxanil Fungicide phosphamidon Insecticidecypermethrin (andalpha-cypermethrin)

Insecticide pretilachlor Herbicide

deltamethrin Insecticide prochloraz Fungicidedicamba Herbicide profenofos Insecticidedichlorvos Insecticide prometryn Herbicidediclofop-methyl Herbicide propamocarb Fungicidedicofol Insecticide propanil Herbicidedimethoate Insecticide propargite Insecticidediuron Herbicide propiconazole Fungicideemamectin Insecticide pyrazosulfuron ethyl Herbicideendosulfan Insecticide pyridaben Insecticideepoxiconazole Fungicide quinalphos Insecticideethion Insecticide quinclorac Herbicidefenoxaprop-P-ethyl Herbicide quizalofop-P Herbicide


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1.6 Introduction to Market and Industry Analysis report

This report contains an analysis of the global generic pesticide market andindustry, including detailed descriptions of the current state of the industry,the major regional markets and potential future trends and developments.

Chapter 2 contains a review of the important developments that haveoccurred in the generic pesticide sector since the last edition of this reportwas published in 2005. It also tries to predict what changes anddevelopments might occur over the next few years. The changes aregrouped into four sections Pesticide markets, Mergers & acquisitions, Newproducts and Regulatory issues and include topics such as the rise ofUnited Phosphorus, the generic ais that have received the most interestfrom manufacturers over the past two years and the proposed amendmentsto the EU pesticide registration directive.

Chapter 3 contains an analysis of the global industry. It starts with anexplanation of the different ways in which generic pesticide companies are

established and then continues with a description of the similar ways inwhich they subsequently develop. This tends to involve the companiesgradually evolving from producing bulk technical ais to selling own-brandformulated products, some of which contain proprietary ais. This is followedby a detailed discussion of the various business strategies adopted bygeneric pesticide companies and also of the various strategies adopted bythe R&D-based agrochemical companies to try to prevent generic companiesfrom entering the market for a specific ai.

Chapter 4 contains detailed profiles of the major country and regionalpesticide markets, including the US, the EU, China and India. These profilescontain information on: the size of the pesticide market, including the

market share taken by generic producers; the growth prospects for themarket; the major crops grown and pesticide products used; the majorpesticide companies, both domestic and foreign, that operate in the market;how pesticide products are marketed and sold in the market; and theregulatory environment.

Chapter 5 contains details of ais due to come off-patent over the next fewyears, including lists of those ais that should prove of most interest to thegeneric pesticide industry. These lists were taken from Agrows NewGenerics 2007 , but they are not identical because some of the ais identifiedas new generics were profiled in Volume 1 of this report. This is becausecertain fairly new ais are already being manufactured by more than onegeneric producer, even though their patents remain in force in most majormarkets.

Chapter 6 provides an overview of the main industry associations for genericpesticide manufacturers, including their structure, membership and mainfunctions. These comprise: the European Crop Care Association; the USChemical Producers and Distributors Association; the PesticideManufacturers and Formulators Association of India; the China CropProtection Industry Association; and the Brazilian generic agrochemicalindustry association.


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1.7 Current state of the global generic pesticide market andindustry

The global pesticide market is essentially made up of sales of two types ofpesticide ais proprietary pesticides and off-patent pesticides. Proprietarypesticides are those that still have patent protection and so are only sold bythe developing company or approved licensees. Off-patent pesticides arethose that have lost their patent protection and can be sub-divided into twoclasses: proprietary off-patent pesticides, which are produced and sold bythe original developing company; and generic pesticides, which are off-patent pesticides that are produced and sold by companies other than theoriginal developing company.

Although off-patent products account for the majority of global pesticidesales (6070%), in many countries, especially developed ones, the R&D-based agrochemical companies still dominate the market for off-patentpesticides. This means that generic pesticide producers probably generate2030% of global pesticide sales, valuing the global generic pesticide market

at $6,400$9,600 million.

However, this share of the global pesticide market, although still minor, hasgrown over the past decade, mainly as a result of the generic section of thepesticide market growing faster than the proprietary section, especially incountries such as India and China. Indeed, the generic pesticide market ishighly skewed around the world, accounting for a much greater share of thetotal pesticide market in developing countries than in developed countries.For instance, pesticide products manufactured by generic companiesaccount for around 75% of all pesticide sales in China, but have practicallyno market share in Japan.

Markets for both off-patent and proprietary pesticides are also growingfaster in developing countries than in developed ones. This is both becauseagricultural practices in developing countries are becoming more advanced,with growers demanding more and newer pesticides, and becausedeveloped world countries are trying to limit pesticide use, due to increasingconcerns about the effect of pesticides on human health and theenvironment. The worlds largest country markets for pesticides, in order ofsize, are the US, Brazil, Japan, China and France, with China having recentlyovertaken France and, at current growth rates, set to pass Japan within thenext few years.

The largest generic pesticide companies are still mainly based in thedeveloped world. The one exception is United Phosphorus, which has grownvery rapidly over the past couple of years, mainly as a result of acquisitions,and is now the worlds fifth largest generic pesticide company based onsales. It should now rise even further up the list of top generic pesticidecompanies as a result of its purchase of Cerexagri in February 2007.

Numerous other companies based in the developing world are alsobeginning to take their place among the largest generic pesticide companies.Both Agripec (Brazil) and Red Sun (China) have recently broken into the top10 generic pesticide companies by sales, while eight of the 10 companiestaking the places from 11 to 20 are from either India or China. Indeed, aChinese company could soon find itself in second position on the list, ifChina National Chemical Corporation (ChinaChem) succeeds in its bid toacquire Nufarm.


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Nevertheless, even the largest generic pesticide companies are still muchsmaller than the major R&D-based agrochemical companies. For instance,the top two generic pesticide companies MAI and Nufarm each have aless than 5% share of the global agrochemical market, while the top twomajor R&D-based agrochemical companies Bayer CropScience andSyngenta each have 1520% shares.

Glyphosate remains by far the largest selling pesticide ai in the world, withannual sales of around $5,000 million, and is manufactured by a largenumber of generic companies. Nevertheless, of the top 10 mostmanufactured ais, five of them are insecticides. This reflects the fact that alarge number of generic pesticide producers are based in countries with hotregions, such as India, where insects are the main crop pest and thedemand for insecticides is great. The other herbicides in the top 10 are 2,4-D and paraquat, which are both widely used throughout the world, and thetop 10 also contains two of the largest selling fungicides, carbendazim andmancozeb.

1.8 Future prospects for the generic pesticide industryEven though it has been an eventful couple of years for the generic pesticidesector, none of the developments have come completely out of the blue.Indeed, the major development has simply been a continuation ofsomething that has been happening for the past few years: the gradual shiftin the focus of the generic pesticide sector away from the developed worldtowards the developing world, especially India and China.

This is clearly evident in terms of the generic pesticide industry, with therapid rise of United Phosphorus and the bid made by ChinaChem forNufarm. But it is increasingly also the case for the generic pesticide market,

which is growing much faster in developing world countries than in thedeveloped world. Part of this growth is being driven by the fact that many ofthese pesticide markets are modernising, with products based on older,cheaper ais being replaced by those based on newer, more expensive ais.

Much of this modernisation is being driven by the regulatory authorities inthese countries, which are banning or restricting the use of many olderpesticide ais. These moves are likely to have a dramatic impact on the globalgeneric pesticide industry and on the products that they sell. For many ofthese older ais had already been banned in Western markets and sodeveloping world markets were their only remaining outlets. Now that theseoutlets are disappearing, generic pesticide companies in both Western anddeveloping countries are going to have to make major changes to theirproduct portfolios.

For instance, Cheminova used to be a major Western producer oforganophosphorus insecticides, but has recently stopped producing many ofthese ais. As such, in January 2007, it submitted a plan to the UN Food and

Agriculture Organization proposing to wind down the sale of parathion-methyl and monocrotophos in developing countries between 2007 and 2010.Meanwhile, the organophosphorus insecticides methamidophos,monocrotophos, parathion-ethyl and parathion-methyl accounted for 18% ofthe Chinese pesticide market in 2004, but this proportion had fallen to 3%by 2006 in anticipation of the phase-out of these ais in 2007.

Over the past 10 years, there have been numerous waves of consolidationwithin the top tier of the R&D-based agrochemical industry. This has


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resulted in a number of pesticide products being divested, many of whichwere acquired by generic pesticide companies. There is not much scope forany further consolidation at the top end of the pesticide industry, but thereis scope for further consolidation in the generic pesticide industry, wherethere are a lot of small and medium-sized companies.

Up until 2007, this consolidation had mostly involved the larger, developedworld generic companies, such as MAI and Nufarm, acquiring smallercompetitors from around the world. But this consolidation process has nowled to the acquisition of some of the larger generic pesticide companies, withUnited Phosphorus purchasing Cerexagri and ChinaChem making a bid forNufarm.

Furthermore, consolidation is also beginning to impact the highlyfragmented Indian and Chinese pesticide industries, with the largercompanies just beginning to make moves on some of the smaller ones. Inboth India and China, this consolidation is being partially driven by the movefrom older ais to newer ones making life difficult for those smaller

companies that specialised in producing the older ais. But in China thisprocess is also being driven by the state, which is actively trying to createlarge pesticide champions.

So although the future looks fairly healthy for the generic pesticide sector,with a number of big-selling ais such as kresoxim-methyl and thiamethoxam

just beginning to lose their patent protection, the precise make-up of thesector looks like it might be changing. More and more developing worldcompanies are becoming major players, at the same time that developingworld markets are becoming increasingly important. As such, over the nextfew years, the generic pesticide industry as a whole will probably start toplace greater emphasis on developing world markets and the kind ofproducts they demand.

However, with the modernisation of these developing world markets, thesepesticide products could well turn out to be very similar to those that arealready popular in developed world markets.


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Chapter 2: Industry Developments 2005-2007 Generic Pesticides: Volume III Business Strategies



CHAPTER 2 INDUSTRY DEVELOPMENTS 200507

Two years may not seem like a long period of time, but it has still been aneventful one for the global generic pesticide industry. Since the last edition

of this report was published in 2005, the industry has seen: the first genericpesticide company from the developing world to be included in Agrow sannual list of the top 20 global agrochemical companies; a number ofimportant pesticide ais, such as the insecticide imidacloprid, lose their patentprotection in major markets; and the introduction or revision of pesticideregulations in a whole host of countries and regions, including the EU, theUS, China, India and Brazil.

All of these changes are creating both opportunities and dangers for genericpesticide companies. This chapter will therefore highlight the most importantchanges that have occurred over the past two years and assess theirimplications for the generic pesticide industry. It will also try to predict what

changes and developments might occur over the next few years. Thechanges will be grouped into four sections: Pesticide markets; Mergers &acquisitions; New products; and Regulatory issues.

2.1 Pesticide markets

Global, regional and country pesticide markets are discussed in detail inChapter 4, but this section will look specifically at how the major countrymarkets have changed over the past two years. The most obvious change isthat China has now overtaken France to become the worlds fourth largestpesticide market (see Table 2.1).

Table 2.1: Country pesticide markets by value ($ million) 1

Country Market value Year 2

US 6,026 2006Brazil 3,912 2006Japan 2,850 2006China 2,421 2006France 2,305 2006Germany 1,373 2005Canada 1,184 2006Italy 922 2005India 880 2006UK 720 2004Spain 443 2006

Sources: Various (see Chapter 4).

Note: 1. Only comprises those countries profiled in Chapter 4; 2. Refers to year in whichcompanys fiscal year ended.

That Chinas pesticide market would overtake that of France has long beenpredicted, based on the fact that Chinas pesticide market was growing at arate of 79% a year, while Frances has been gradually declining over thepast decade. If Chinas pesticide market continues this growth rate, it looksset to overtake Japans within the next few years.

In actual fact, the growth rate of Chinas pesticide market could wellincrease over the next few years, as a result of the Chinese governments


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Meanwhile, Nufarm acquired the Colombian agrochemical company Agroquimicos Genericos in 2005 and the Italian agrochemical company Agrosol in 2006, in order to increase its presence in these countries. Then, inMay 2007, it gained complete control of Agripec, by acquiring the 50.1%stake that it didnt already own.

Table 2.2: Company acquisitions made by generic pesticidecompanies since 2000

Company Year Acquisition Country

Albaugh 2004 Atanor ArgentinaCheminova 2001 Headland Agrochemicals UKCheminova 2001 Servicios Qumicos Integrales MexicoCheminova 2003 Flexagri (from Bayer

CropScience)France

Cheminova 2006 CropTech ColombiaCheminova 2006 Ospray AustraliaCheminova 2007 Kerolagro HungaryCFL 2006 Ficom Organics IndiaIsagro 2001 Caffaro ItalyIsagro 2001 RPG Life Sciences IndiaISI 2006 Barpen International (75%) ColombiaISI 2006 AgroMax (51%) ArgentinaMAI 2002 Feinchemie Schwebda GermanyMAI 2004 Control Solutions (60%) USMAI 2004 FarmSaver.com USMAI 2004 Farmoz AustraliaMAI 2005 Mabeno (49%) NetherlandsMAI 2005 Biomark Tradinghouse

(70%)Hungary

MAI 2006 Agrovita (75%) Czech

RepublicMAI 2006 Alligare (30%) USMAI 2006 Kollant (60%) ItalyNufarm 2001 Agtrol International USNufarm 2001 Davison Industries AustraliaNufarm 2002 Crop Care Australasia AustraliaNufarm 2002 Agro Permutadora PortugalNufarm 2004 Agripec (49.9%) BrazilNufarm 2005 Agroquimicos Genericos ColombiaNufarm 2006 Agrosol ItalyNufarm 2007 Agripec (100%) BrazilUPL 2004 AgValue USUPL 2005 Cequisa SpainUPL 2005 SWAL Corporation India

UPL 2005 Reposo ArgentinaUPL 2006 Cropserve South AfricaUPL 2006 Advanta NetherlandsUPL 2007 Cerexagri US

Note: Acquisitions since 2005 in bold.

Cheminova has been continuing its efforts to expand its overseas sales byboth establishing foreign subsidiaries and acquiring foreign companies. In2006, it acquired major stakes in two pesticide distribution and marketingcompanies: CropTech in Colombia and Ospray in Australia. Most recently, in

April 2007, it acquired a controlling interest in Kerolagro, a Hungarian plant

protection and nutrition company.


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Isagro and Sipcam-Oxon are also looking to expand their overseas sales,specifically by acquiring distribution networks in South America. To this end,through their Isagro Sipcam International (ISI) joint venture, they recentlyacquired a 75% stake in Barpen International, a Colombian agrochemicaldistributor, and a 51% stake in AgroMax, an Argentine pesticide distributor.

But one of the two major developments to have occurred in the genericpesticide industry over the past two years has been the rapid growth ofUnited Phosphorus (UPL). Since 2005, it has acquired: the Spanish producerCequisa for Euro 11.5 million; the Argentine producer Reposo for $11million; the Indian agrochemical company SWAL Corporation for $5 million;the South African agrochemical distributor Cropserve for $3 million; and theDutch seed company Advanta. Most recently, in February 2007, it made itsbiggest ever acquisition by purchasing the US company Cerexagri, whichwas the pesticide business of the French chemical company Arkema, forEuro 111 million. A few of these companies, such as SWAL, have beendirectly absorbed into UPL, but most of them, including Cequisa, Reposo andCerexagri, still operate as separate entities.

These acquisitions resulted in massive sales growth for UPL, such that acompany that recorded revenues of $140 million for the year ending March2002 had increased its sales to $350 million just four years later. This wassufficient to see UPL become the first developing world pesticide company toenter Agrow s list of the top 20 agrochemical companies in 2006 (at number18). For the year ending March 2007, it recorded sales of $477 million,pushing it up to 13 th place in the Agrow top 20. For the year ending March2008, UPL will be able to include sales from Cerexagri for the first time,which should give its revenues another substantial boost.

Other Indian companies are now beginning to follow UPLs lead. Forexample, Coromandel Fertilisers (CFL) acquired a majority stake in FicomOrganics, an Indian producer of technical pesticide ais, in 2006. Thisindicates that not only are Indian generic companies beginning to step uponto the world stage, but that the Indian generic pesticide industry, whichcurrently comprises around 600 companies, may be starting to consolidate.

Not to be left behind, the Chinese industry, which comprises around 2,500companies, is also starting to consolidate. At the moment, however, thisconsolidation is being almost entirely driven by the Chinese government,which is concerned that the domestic pesticide industry suffers from toomany companies, production overcapacity and outdated technologies andproducts. As a result, the government fears that the domestic industry couldbegin to lose out to more innovative Western companies both at home andabroad. It has therefore launched a five-year development plan (200610)to reduce the total number of pesticide companies, create a few large

national champions with assets of Yuan 5,00010,000 million andencourage a greater focus on developing novel products.

This transformation of the pesticide industry forms part of a larger effort tomodernise the whole Chinese chemical sector. In May 2004, the Chinesegovernment formed the China National Chemical Corporation (ChemChina)to drive this modernisation. In March 2005, ChemChina announced that overthe next five years it would build up a giant state-owned pesticide groupwith annual sales of over Yuan 10,000 million (almost 10 times larger thanthe annual sales of Red Sun, which is currently Chinas largest pesticide

company). As a first step, in June 2005 it took control of Sanonda and then


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in October 2006 took a 30% stake in the Chinese company ShandongDacheng Pesticides.

But its most radical move came in November 2007 and is the second majordevelopment to have occurred in the generic pesticide industry over the pasttwo years. In conjunction with the US private equity firms Fox PaineManagement III and the Blackstone Group, it made a Aus$3,000 million($2,760 million) bid for Nufarm, which is the second largest generic pesticidecompany in the world.

Prior to this move, in August 2007, rumours had abounded that MAI wasinterested in acquiring Nufarm, but nothing came of it. The Nufarm boardhas recommended acceptance of ChemChinas bid, which, if successful,would result in the first Chinese ownership of a leading agrochemicalmultinational.

2.3 New products

Nine of the ten new ais profiled in Volume 2 of this report have only become generic within the past two years: the fungicides epoxinconaole andkresoxim-methyl; the herbicides fenoxaprop-P-ethyl, nicosulfuron,pretilachlor and quizalofop; and the insecticides and acaricides emamectin,fipronil and thiamethoxam. The exception is the herbicide glufosinate, whichis rather older than the other ais and seems to have become more popularwith generic manufacturers mainly because of the uptake of glufosinate-tolerant GM crops in an increasing number of countries.

In this case, generic means that they are either beginning to lose theirpatent protection or are being produced by generic manufacturers based incountries where the ai is not protected. Indeed, for ais such as the fungicide

kresoxim-methyl and the insecticide thiamethoxam, the originatingcompanies are still actively enforcing their patents in most markets. Forexample, in June 2004, Syngenta launched a lawsuit against two Chinesecompanies, Yancheng Lvye Chemical Co and its subsidiary Yancheng YongliChemical Co, for illegally producing and selling thiamethoxam. Meanwhile,both Syngenta and BASF have launched injunctions against genericcompanies offering thiamethoxam and kresoxim-methyl, respectively, duringrecent British Crop Protection Council (BCPC) conferences.

All of these ais generate substantial sales, which explains why genericmanufacturers are keen to start producing and selling them as soon aspossible. Indeed, the insecticides fipronil and thiamethoxam and thefungicide kresoxim-methyl have all crashed into the top 10 best sellinggeneric ais, at numbers three, five and eight respectively. Meanwhile, theherbicides nicosulfuron and fenoxaprop-P-ethyl and the fungicideepoxiconazole all generate annual sales of over $200 million.

Meanwhile, the number of generic companies producing certain other fairlynew ais has increased substantially over the past two years, as the ais havelost their patent protection in more and more markets and genericcompanies have developed the necessary production technologies. Forexample, the number of generic companies profiled in Volume 1 of thisreport that manufacture the insecticide imidacloprid doubled between 2005and 2007 (from 20 to 40). Other ais that are now manufactured by morecompanies include the herbicide imazethapyr, the fungicides propincazole

and tebuconazole, and the insecticides abamectin, acetamiprid andbifenthrin (see Table 2.3).


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Table 2.3: Number of producers in 2005 and 2007

Activeingredient

Category No. of producers 2005

No. of producers 2007

Imazethapyr Herbicide 7 11

Propiconazole Fungicide 11 23Tebuconazole Fungicide 5 23 Abamectin Insecticide 7 23 Acetamiprid Insecticide 9 23Bifenthrin Insecticide 7 12Imidacloprid Insecticide 20 40

Note: Number of producers taken from the 2005 and 2007 editions of Agrows Complete Guideto Generic Pesticides.

The trend for some of the larger generic pesticide companies to purchaselicences to certain proprietary ais or to acquire rights to ais that will soonlose their patent protection has continued to strengthen over the past fewyears. For instance, MAI and Nufarm have both acquired licences to the

insecticide imidacloprid from Bayer CropScience, while MAI has also acquireda license to the fungicide tebuconazole.

Entering into this kind of licensing deal ensures that a generic companydoesnt fall foul of any patents that remain in force. It also often allows thecompany either to gain access to the original developers proprietarymanufacturing technology, rather than have to re-engineer the technologyfrom scratch, or to get the original developer to manufacture the ai for it.

Since 2005, the larger generic pesticide companies have acquired the rightsto a number of ais. For instance, Amvac acquired three pesticide businessesfrom BASF: the cereal herbicide Avenge (difenzoquat) and BASFs global

phorate insecticide business in 2005, and its global Counter (terbufos)insecticide/nematicide business in 2006. These last two acquisitions werethe largest ever made by Amvac. Nufarm acquired BASFs imazamethabenzherbicide business outside of Europe in 2005, while Cheminova acquired theremaining global rights to Bayer CropSciences pyrethroidacaricide/insecticide acrinathrin in 2007 (it had acquired the European rightsin 2003).

But, once again, it is UPL that has been the most extravagant purchaserover the past couple of years. Since 2005, it has acquired: the systemiccarbamate herbicide asulam and the insecticides oxydemeton-methyl andtrichlorfon from Bayer CropScience for a total of Euro 43.5 million; rights toDuPonts sulfonylurea rice and aquatic weed herbicide bensulfuron-methyl inall markets except Asia/Pacific; Dow AgroSciences global propanil herbicidebusiness for $25 million; and DuPonts fenbutatin-oxide miticide andtriphenyl hydroxide fungicide businesses. These product acquisitions haveclearly helped to fuel its impressive sales growth over the past couple ofyears.

2.4 Regulatory issues

As usual, the most important regulatory developments to have occurred overthe past two years have involved the registration of new pesticides and theongoing reviews of existing pesticides. In important Western markets suchas the EU and the US the current review programmes are drawing to a closeand regulatory authorities are busy finalising the details of theirreplacements. In the developing world, some countries, such as Brazil, have


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introduced brand new pesticide registration regulations, which companieshave been trying to get to grips with. In others, such as India and China, theregulatory authorities have introduced new review programmes underexisting regulations, with the aim of encouraging growers in their countriesto switch from older, toxic pesticides to newer, safer ones.

In the EU, the review programme instigated by the adoption of the pesticideregistration directive (91/414/EEC) in 1991 is still ongoing. This programmehas involved reviewing the registrations for over 800 ais then being sold inpesticide products throughout Europe, which were divided into four lists, andwas initially meant to have been completed by 2003. But delays andgenerally slow progress meant that the deadline for completion had to beextended to 2008. Even this date may be tricky to meet, seeing as theEuropean Commission has not yet started making decisions on the ais thatcomprise the third and fourth lists.

Of the 100 ais profiled in Volume 2 of this report, 38 have been approved(not including alpha-cypermethrin and S-metolachlor), 31 have had their

registrations withdrawn and 31 still await decisions (see Table 2.4 and Table2.5). For 16 of the ais, this exclusion happened after they had been throughthe entire review process, because the Commission judged that they posedtoo large a risk to human health or the environment. The other 15 ais wereexcluded because the sole notifying company decided to stop supporting theai. These ais were withdrawn in two tranches: 225 ais from the third list hadtheir registrations withdrawn on July 2003; and a further 106 ais had theirregistrations withdrawn in March 2004.


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Table 2.4: Generic ais approved by European Commission 1

Active ingredient Activity Date approved 2

2,4-D Herbicide October 2002 Acetamiprid Insecticide January 2005 Alpha-cypermethrin Insecticide March 2005Bentazone Herbicide August 2001Bromoxynil Herbicide March 2005Captan Fungicide October 2007Carbendazim Fungicide January 2007Chlorothalonil Fungicide March 2006Chlorpyrifos Insecticide July 2006Cyfluthrin Insecticide January 2004Cymoxanil Fungicide March 2005Cypermethrin Insecticide March 2006Deltamethrin Insecticide November 2003Dichlorvos Insecticide June 2007Dimethoate Insecticide October 2007

Fipronil Insecticide October 2007Fluroxypyr Herbicide December 2000Glufosinate Herbicide October 2007Glyphosate Herbicide July 2002Ioxynil Herbicide March 2005Isoproturon Herbicide January 2003Kresoxim-methyl Fungicide February 1999Lambda-cyfluthrin Insecticide January 2002Linuron Herbicide January 2004Mancozeb Fungicide July 2006Maneb Fungicide July 2006MCPA Herbicide May 2006Methamidophos Insecticide January 2007Metribuzin Herbicide October 2007

Metsulfuron-methyl Herbicide July 2001Molinate Herbicide August 2004Paraquat Herbicide November 2004Pendimethalin Herbicide January 2004Propamocarb Fungicide October 2007Propiconazole Fungicide June 2004S-metolachlor Herbicide April 2005Thiamethoxam Fungicide March 2006Thiophanate-methyl Fungicide March 2006Thiram Fungicide August 2004Ziram Fungicide August 2004

Notes: 1. Limited to those generic ais profiled in Volume 2; 2. Date that ai was formallyincluded in Annex 1 of Directive 91/414/EEC.

The European crop protection industry has raised concerns about thenumber of ais that have had their registrations withdrawn, claiming thatsome farmers, especially in the Mediterranean area, are being left withoutadequate protection against pests. This loss is being exacerbated by effortsto speed up the approval process, which some claim is leading to ais beingexcluded rather than properly assessed. Hans Mattaar, European regulatorystrategy manager for Bayer CropScience, has warned that the current reviewprogramme could end up removing 7080 per cent of pesticide productsfrom the European market.


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Table 2.5: Generic ais withdrawn by European Commission 1

Active ingredient Activity Date withdrawn 2

Acephate Insecticide March 2003 Alachlor Herbicide December 2006

Ametryn Herbicide July 2003 Amitraz Insecticide February 2004 Atrazine Herbicide March 2004Benomyl Fungicide November 2002Butachlor Herbicide July 2003Carbofuran Insecticide June 2007Carbosulfan Insecticide June 2007Diuron Herbicide January 2007Endosulfan Insecticide December 2005Ethion Insecticide July 2003Fenthion Insecticide February 2004Hexaconazole Fungicide November 2006Imazethapyr Herbicide March 2004Malathion Insecticide June 2007Metalaxyl Fungicide May 2003Methomyl Insecticide September 2007Metolachlor Herbicide July 2003Monocrotophos Insecticide July 2003Parathion-methyl Insecticide March 2003Permethrin Insecticide December 2000Phosphamidon Insecticide July 2003Profenofos Insecticide July 2003Prometryn Herbicide July 2003Quinalphos Insecticide July 2003Quinclorac Herbicide March 2004Simazine Herbicide March 2004Terbufos Insecticide July 2003Triadimefon Fungicide March 2004Trichlorphon Insecticide May 2007

Notes: 1. Limited to those generic ais profiled in the second report; 2. Date that Annex 1 non- inclusion came into force.

In addition to the ongoing pesticide review programme, the Commission hasbeen busy drawing up proposed amendments to 91/414. These include:implementing a scheme to ban ais based on hazard criteria, which meansthat if an ai exceeds just one hazard cut-off value than it would be excluded;removing any protection for new data generated for the review of existingais and products; approving pesticide products for geographical zones ratherthan individual countries; and introducing measures to speed up the

approval process.The Commission produced the final version of its proposed amendments inJuly 2006 and this was then debated by the European Parliament at the endof October 2007. The Parliament approved the data protection and hazard-based criteria proposals but rejected the zonal approval system. Theamendments will now progress to the EU Council of Ministers forconsideration and should come into force in 2008 after the current reviewprogramme for existing ais has been completed.

In the US, pesticides are registered under the Federal Insecticide, Fungicideand Rodenticide Act (FIFRA), which was amended in 1988. This amendmentinstigated a programme requiring all ais registered before November 1984 tohave their registrations reviewed. This applied to 1,150 ais in 45,000formulated products, with the review programme to be carried out by the


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Office of Pesticide Programs, which is part of the US EnvironmentalProtection Agency (EPA).

In 1996, the Food Quality Protection Act (FQPA) came into force; thiswidened the scope and considerations that needed to be applied regardingpesticide safety. As part of the FQPA, the EPA now has to assess thecumulative risks of certain pesticide groups with a common mechanism oftoxicity, such as organophosphorous insecticides.

This review programme was essentially completed in 2006 and did not resultin as many generic ais being removed from the market as in the EU.However, in 2007, the OPP started a new 15-year review programme, whichaims to review pesticide registrations every 15 years. The OPP has alreadydetailed which ais it plans to review from 2007 to 2010 and has alsoreleased work dockets for the first nine ais entering the programme.

This review programme is already troubling the US crop protection industry,with the US industry association CropLife America particularly concerned

about the EPAs plans to incorporate new requirements, includingendangered species assessments, into the registration review programme indue course. This means that different risk assessment criteria could beapplied to pesticides reviewed later in the 15-year cycle than to those earlierin the cycle. It thinks, instead, that the review programme should functionsolely as a safety net to resolve issues overlooked by the originalregistration and re-registration processes.

In China and India, the regulatory authorities have recently begun to reviewthe registrations of some older, more toxic ais, such as organophosphorusinsecticides, leading to a certain number of restrictions and withdrawals.This forms part of efforts to encourage Chinese and Indian growers toswitch to pesticide products based on newer and safer ais, such aspyrethroid and neonicotinoid insecticides.

For example, the Chinese Ministry of Agriculture banned the use of theinsecticides methamidophos, monocrotophos, parathion-ethyl, parathion-methyl and phosphamidon from 1 January 2007. In addition, the MinistrysInstitute for the Control of Agrochemicals (ICAMA) is reviewing 379 pesticideais that received a provisional registration before 23 July 1999, whichincludes a large number of generic pesticide ais. The ICAMA has split the aisinto four groups and is currently working with pesticide manufacturers togenerate the required registration data. It plans to complete this reviewprogramme by the end of 2008. However, the ICAMA has already started tophase out registrations for older pesticide ais such as phorate, carbofuran,aldicarb and methomyl.

In February 2006, the Indian Ministry of Agriculture proposed restricting theuse of 31 pesticide ais, all of which were sold in India before 1971 when theInsecticides Act came into force, and to cancel the registrations for sevenais, including the herbicide simazine.

At the same time, the Ministry's Directorate of Plant Protection, Quarantineand Storage (DPPQS) initiated a review of the toxicity, persistence, safety inuse and availability of alternatives for 37 ais, all of which had been restrictedin some other countries. These included: the insecticides acephate,bifenthrin, carbosulfan, deltamethrin, dichlorvos fenthion, monocrotophos,

propargite, quinalphos and trichlorfon; the fungicides chlorothalonil,mancozeb and thiophanate-methyl; and the herbicides atrazine, butachlor,


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linuron, pendimethalin and trifluralin. The review will be used to makerecommendations for continued use, restricted use or phase-out of the ais.

The first of these recommendations came in February 2007, when theMinistry called on pesticide registrants to amend labels and provide certainstudy data for 10 ais. These included: the insecticides dichlorvos,monocrotophos and quinalphos; the fungicides carbendazim and mancozeb;and the herbicides atrazine, butachlor, and pendimethalin (see individual aiprofiles in Volume 1 for details of the required amendments and study data).Then, in August 2007, the Ministry banned all agricultural uses of theinsecticide fenthion, except locust control in desert areas and public health.

In Brazil, the problems caused by the introduction of new registrationregulations for generic pesticide ais in 2002 seem to be resolved, with theMinistry of Agriculture finally approving the first generic ai under the newregulations in September 2005 and the first formulated product in June2006.

The new regulations were supposed to make it easier to register genericpesticide products, but there was general confusion over exactly what datawere required for generic products and how they should be obtained. Thismeant that no generic registrations were granted for three years, producinga backlog of around 350 applications.

To help clear this backlog, the Brazilian government passed a Decree inDecember 2006 to speed up the registration of generic pesticides. This newDecree removed the need for certain unnecessary tests and studies andspecified that the registration process should take a maximum of 150 days.By June 2007, 17 pesticide ais, including the herbicides glyphosate andparaquat and the fungicide tebuconazole, and 20 formulated products hadreceived generic registrations.


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Chapter 3: Generic Pesticide Companies Generic Pesticides: Volume III Business Strategies



CHAPTER 3 GENERIC PESTICIDE COMPANIES

Generic pesticide companies have numerous different origins, but oncetrading they tend to develop in similar ways. This usually involves gradually

progressing from producing bulk technical ais to selling own-brandformulated products, some of which contain proprietary ais. As genericproducers grow, the business strategies they adopt and the way in whichthey compete necessarily change. They also begin to come up against themajor R&D-based agrochemical companies; sometimes this interaction canbe beneficial, but in other cases it can create a number of problems andchallenges.

3.1 Origins of generic companies

There are numerous routes by which a generic pesticide company can comeinto existence (see Table 3.1), with certain routes more likely in certain

areas of the world.The simplest route is for a company to be established specifically as ageneric pesticide producer. This route is currently most likely in developingworld companies, especially China and India. This is because the barriers toentering the pesticide market in these countries can be fairly low, especiallyif the protection of intellectual property has historically been fairly lax.

However, the accession of China and India to the World Trade Organization(WTO) and their subsequent adoption of the TRIPs (Trade-Related aspectsof Intellectual Property rights) agreement have enhanced the level of patentprotection in these countries. This was demonstrated by Syngentassuccessful lawsuit against two Chinese companies that were manufacturingthe patent-protected neonictinoid insecticide thiamethoxam (see Chapter 2).This development should make it more costly to establish small genericpesticide producers in these countries.

Some of the generic companies in developing countries, especially the largercompanies, were either established by the state or protected in thebeginning by tariffs on imported pesticides, as part of the governmentsdesire to encourage the development of a home-grown pesticide industry.For example, Red Sun was established, and is still owned, by the Chinesegovernment, while Punjab Chemicals was established as a public/privateinitiative between the Punjab State Industrial Development Corporation andExcel Industries. However, the accession of some of these countries to theWTO is now stimulating more competition in their domestic pesticidemarkets, as foreign companies begin to gain more of a foothold.Nevertheless, the state can still play a large role in the development of acountrys pesticide industry, as exemplified by the Chinese governmentsefforts to build national chemical champions, including within the pesticidesector (see Chapter 4).

Many of the generic producers based in the Western world, which tend to belarger and older than those in the developing world, have different origins.They tend to have developed from earlier, less specialised incarnations,which were either suppliers of broad agricultural equipment or generalchemical manufacturers. In some cases, the generic businesses are still part

of a larger company. Alternatively, they may have been spun-off from the


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Jiangsu Yangnong China Established as a generic pesticide producerJingma Chemicals China Established as a generic pesticide producer

Kangmei Chemical China Established as a generic pesticide producer (but diversified intoother chemicals)

Lanxi Agrochemical China Generic business developed as part of larger industrialconglomerate

Limin Chemical China Established as a generic pesticide producerNanjing Agrochemical China Established as a generic pesticide producerNutrichem Laboratory China Established as a generic pesticide producerQinfeng Agrochemical China Established as a generic pesticide producerRed Sun China Generic business developed as part of larger industrial

conglomerateSanonda China Generic business developed as part of larger chemical companyShandong QiaochangChemical

China Established as a generic pesticide producer

Shandong VicomeGreenland

China Established as a generic pesticide producer

Sinochem Ningbo China Generic business developed as part of larger chemical companyShenghua Biok China Generic business developed as part of larger chemical company

Suzhou Worldbest China Generic business developed as part of larger chemical companyTide Group China Established as a generic pesticide producer (but diversified intoother chemicals)

Wangs China Generic business developed as part of larger chemical companyXinan Chemical Generic business developed as part of larger chemical companyXinyi Pesticide China Established as a generic pesticide producer

Yancheng Limin China Established as a generic pesticide producer Yongnong Chemical China Established as a generic pesticide producerZibo Nab

Agrochemicals ChinaEstablished as a generic pesticide producer

Rotam Hong Kong Generic business developed as part of larger chemical company Aimco Pesticides India Established as a generic pesticide producer Atul India Generic business developed as part of larger industrial

conglomerateBharat Group India Established as a generic pesticide producerChemet Chemicals India Established as a generic pesticide producerCoromandel Fertilisers India Generic business developed from general agricultural supplierDhanuka Pesticides India Established as generic pesticide producerExcel Crop Care India Generic business spun-off from larger chemical companyGharda Chemicals India Generic business developed as part of larger chemical companyHeranba India Established as a generic pesticide producerHikal India Generic business developed as part of larger chemical companyHindustan Insecticides India Established as a generic pesticide producerIndia Pesticides India Established as a generic pesticide producer (but diversified into

other chemicals and now part of larger industrial conglomerate)Indofil India Generic business developed as part of larger chemical companyMeghmani Organics India Generic business developed as part of larger chemical companyNagarjuna India Generic business developed from general agricultural supplier

(now part of larger industrial conglomerate)PI Industries India Generic business developed as part of larger chemical companyPunjab Chemicals India Generic business developed as part of larger chemical companyRallis India India Generic business developed as part of larger industrial

conglomerate (now main business)Sabero Organics India Generic business developed as part of larger chemical company

United Phosphorus India Generic business developed as part of larger chemical company(now main business)

PT Petrosida Gresik Indonesia Generic business developed from general agricultural supplierKenso Malaysia Established as a generic pesticide producerZagro Singapore Generic business spun-off from larger chemical companyDongbu FineChemicals

SouthKorea

Generic business developed as part of larger industrialconglomerate

LG Life Sciences SouthKorea

Generic business developed as part of larger chemical company


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Hui Kwang Taiwan Established as a generic pesticide producer (but diversified intoother chemicals)

Pilarquim Taiwan Established as a generic pesticide producerSinon Taiwan Established as a generic pesticide producer (but diversified into

other chemicals)

South America

Reposo Argentina Generic business developed as part of larger chemical company(now main business)

Agripec Brazil Established as a generic pesticide producerFersol Brazil Established as a generic pesticide producer (but diversified into

other chemicals)Quimica Lucava Mexico Established as a generic pesticide producerTekchem Mexico Established as a generic pesticide producerTecnomyl Paraguay Established as a generic pesticide producerInquiport Venezuela Established as a generic pesticide producer

Indeed, the larger generic pesticide businesses do in general seem to havetheir origins in chemical companies or industrial conglomerates, rather thanbeing specifically established as generic pesticide producers. This may bebecause these diversified companies have had access to the funds requiredto grow their generic pesticide businesses, or it could just be that thesegeneric businesses are often older and therefore have had more time togrow.

In any case, there are numerous companies that go against this broadtrend. Two generic companies in the US Amvac and Albaugh werespecifically established as pesticide companies, while a number of Chineseand Indian generic businesses such as Lanxi Agrochemical, Xinan Chemicaland Indofil were developed from larger companies.

Perhaps most interesting are those companies that began as genericpesticide companies and have since diversified into other areas. Forinstance, Cheminova has expanded into food preservatives, flotation agentsand insulation products, while Fujian Sannong now also manufacturespharmaceuticals and other fine chemicals. This demonstrates that operatinga generic pesticide business can provide the basis both by generatingfunds and providing general chemical expertise for expanding into other,usually related, business areas.

Also interesting are those companies that started off as general chemicalcompanies, but over the years have increasingly focused on genericpesticides, such that pesticides now form the largest part of their business.This has happened with some of the largest companies in the industry, suchas Nufarm and United Phosphorus, as well as smaller operations, such asReposo.

The generic pesticide business is generally considered fairly staid andunexciting. However, it is still capable of generating substantial revenues forsuccessful companies and has offered better growth prospects than manyother areas of the chemical industry over the past few years, including theR&D-based agrochemical industry. This growth looks set to continue for atleast the next few years.

3.2 Development and growth of generic companies

The growth of the generic pesticide industry over the past few years has, toa large extent, been driven by factors outside of the industrys control. As


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Table 3.2: Main business strategies adopted by 100 companies profiled in the first report

Company Country Main business strategy

North America Albaugh US Selling technical ais and branded formulated products Amvac US Selling both generic and proprietary pesticide productsCerexagri US Selling mainly branded formulated products and

developing novel mixtures and formulations

EuropeTaminco Belgium Selling technical ais and branded formulated productsCheminova Denmark Selling mainly branded formulated products and

developing novel mixtures and formulations Agro-Chemie Hungary Selling both generic and proprietary pesticide products AgriGuard Ireland Selling mainly branded formulated products and

developing novel mixtures and formulationsBarclay Chemicals Ireland Selling mainly branded formulated products and

developing novel mixtures and formulationsLuxembourg Industries Israel Selling mainly branded formulated products and

developing novel mixtures and formulationsMAI Israel Selling both generic and proprietary pesticide productsChemia Italy Selling mainly branded formulated products and

developing novel mixtures and formulationsIsagro Italy Selling mainly branded formulated products and

developing novel mixtures and formulationsSipcam-Oxon Italy Selling mainly branded formulated products and

developing novel mixtures and formulationsOrganika-Sarzyna Poland Selling technical ais and branded formulated productsOltchim Romania Selling technical ais and branded formulated productsPinus Slovenia Selling mainly branded formulated products and

developing novel mixtures and formulations

Cequisa Spain Selling technical ais and formulated productsIQV Spain Selling mainly branded formulated products anddeveloping novel mixtures and formulations

Atabay Turkey Selling technical ais and formulated productsHektas Turkey Selling technical ais and formulated products

AH Marks UK Selling mainly branded formulated products anddeveloping novel mixtures and formulations

Asia-PacificNufarm Australia Selling both generic and proprietary pesticide products

AgroDragon China Selling technical ais and formulated productsBaocheng Chemical China Selling technical ais and formulated productsBaoling Chemical China Selling technical ais and formulated productsCAC China Selling technical ais and formulated productsCCI Group China Selling technical aisChangqing Agrochemical China Selling technical ais and formulated productsChangxing Zhongshan China Selling technical ais and formulated productsDacheng Pesticide China Selling technical ais and formulated productsFeixiang Chemical China Selling technical ais and formulated productsFujian Sannong China Selling technical ais and formulated productsGood Harvest China Selling technical ais and formulated productsGreen Agrosino China Selling technical ais and formulated productsGreenchem Industries China Selling technical ais and formulated productsHeben Pesticide China Selling technical ais and formulated productsHenglong Pesticide China Selling technical ais and formulated productsHisun Chemical China Selling technical ais and formulated productsHuaxing Chemical China Selling technical ais and formulated productsIprochem China Selling technical ais

Jiangshan Agrochemical China Selling technical ais and formulated productsJiangsu Suhua Group China Selling technical ais and formulated products


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Many of the generic pesticide companies in developing countries are happyto stick with this business strategy because their sales are currently underno real threat. This is due to both the high rates of growth in the pesticidemarkets in many developing countries, especially China and South Americancountries, and by the fact that these companies can still produce technicalais and formulated products cheaper than companies based in thedeveloped world.

Developed world companies, on the other hand, usually have to find ways tocompete other than price. Most of the generic pesticide companies indeveloped countries have therefore progressed to producing brandedpesticide products, which they usually market directly to the end-user. Theytry to build up a reputation for these products and their brands, and areusually engaged in developing novel formulations and ai mixtures to try toenhance the efficacy of their products.

These companies tend to develop their products for the more affluentpesticide markets in the developed world, where effectiveness, rather than

price, is often the most important consideration for the end-user. Growers inthese countries, where regulations on pesticide residues are usually quitestrict, tend to prefer pesticide products that are convenient to apply andspecifically target the disease or pest in question. As such, they are willing topay more to purchase more effective mixtures and formulations, such asmicro-encapsulation.

Some developing world companies have also begun to produce their own-brand pesticide products, which are often for sale only in their domesticmarket, while still selling technical grade ais into foreign markets. However,these companies still tend to compete mainly on price and therefore focuson selling the standard formulations. Some of the larger developed worldcompanies, such as Dhanuka Pesticides and Gharda Chemicals, have movedon to developing their own ai mixtures and formulations, and have stoppedselling technical grade ais. As such, they can now compete on reputationand effectiveness, rather than price. This allows them to charge more fortheir products and provides a more stable business platform from which tooperate.

Many of the companies that sell branded products also run schemesproviding assistance to growers. These schemes may involve advisinggrowers on the best combination of products to use and training them in thebest way to use the products.

Some of the largest generic pesticide companies in both the developed anddeveloping worlds have moved beyond the confines of the generic pesticideindustry by acquiring and developing proprietary products. This process hasbeen fuelled in recent years by the general consolidation of the globalagrochemical industry, which has caused many of the merged companies tosell some of their proprietary products and businesses, or the rights to thoseproducts in certain regions. This is either because the products no longer fitin with the rest of the merged portfolio or because selling the product was arequirement of the merger being approved by anti-trust authorities.

In addition, the major R&D companies are increasingly selling rights to aisthat are either no longer big sellers or are about to lose their patentprotection. Many of these products and businesses, which also include some

generic products, were acquired by some of the largest generic pesticidecompanies, such as MAI, Nufarm and United Phosphorus (see Table 3.3).


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Table 3.3: Pesticide businesses acquired by generic pesticidecompanies from R&D-based agrochemical companies since 2000

Genericcompany

R&D-basedcompany

Year Product/business 1

Amvac Zeneca Agrochemical(now Syngenta) 2000 Dacthal (chlorthal-dimethyl)

Amvac BASF 2001 Phosdrin (mevinphos) Amvac Bayer CropScience 2002 Folex (tribufos) Amvac Syngenta 2002 US rights to Ambush (permethrin) Amvac Syngenta 2003 US rights to Evital (norflurazon) Amvac BASF 2005 North American rights to Avenge (difenzoquat) Amvac BASF 2005 Phorate insecticide business Amvac BASF 2006 Counter (terbufos)Cheminova Syngenta 2001 Flutriafol cereal fungicide businessCheminova Bayer CropScience 2003 European rights to acrinathrinCheminova Bayer CropScience 2003 European rights to phosaloneCheminova Bayer CropScience 2007 Global rights to acrinathrinMAI Syngenta 2000 Agil (propaquizafop)MAI Syngenta 2000 Mavrik (tau-fluvalinate)MAI Syngenta 2000 Nimrod (bupirimate)MAI Syngenta 2001 Scandinavian cereal fungicides business

(fenpropimorph, fenpropidin, propiconazole)MAI Aventis CropScience

(now BayerCropScienece)

2001 Panoctine (guazatine)

MAI Aventis CropScience(now BayerCropScienece)

2001 Apollo (clofentezine)

MAI Syngenta 2002 Racer (flurochloridone)MAI Bayer CropScience 2002 Goltix (metamitron)

MAI

Bayer CropScience 2002 German and Belgian rights to Herold (flufenacet +

difluenican)MAI Bayer CropScience 2002 UK rights to Bayton (triadimenol + fuberidazole)MAI Bayer CropScience 2002 Greek and Portuguese rights to Thiodan

(endosulfan)MAI Bayer CropScience 2002 Non-exclusive German rights to Folicur

(tebuconazole)MAI Bayer CropScience 2002 European rights to Gusathion (azinphos-methyl)MAI Bayer CropScience 2002 Afalon (linuron)MAI Bayer CropScience 2002 European rights to Bulldock (beta-cyfluthrin) and

Baythroid (cyfluthrin)MAI Bayer CropScience 2002 European rights to Metasystox (oxydemeton-

methyl)

MAI Bayer CropScience 2002 European rights to Nemacur (fenamiphos)Nufarm Monsanto 2002 Australasian selective herbicide business, including

Monza (sulfosulfuron) and Ramrod (propachlor)Nufarm BASF 2002 Phenoxy herbicide business (2,4-D, MCPA,

mecoprop, mecoprop-P, dichlorprop anddichlorprop-P)

Nufarm Bayer CropScience 2002 German and Belgian rights to two fenoxaprop-based herbicides

Nufarm BASF 2005 Imazamethabenz herbicide business outside ofEurope

UnitedPhosphorus

Dow AgroSciences 2003 Non-EU rights to Surflan (oryzalin)

UnitedPhosphorus

BASF 2003 Ultra Blazer, Storm and Volt (acifluorfen)

UnitedPhosphorus Bayer CropScience 2006 Asulox and Asilan (asulam)


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UnitedPhosphorus

Bayer CropScience 2006 Metasystox (oxydemeton-methyl)

UnitedPhosphorus

Bayer CropScience 2006 Trichlorfon insecticide business

UnitedPhosphorus

DuPont 2006 Londax and Mariner (bensulfuron-methyl) allmarkets except Asia/Pacific

UnitedPhosphorus

Dow AgroSciences 2006 Propanil herbicide business

UnitedPhosphorus

DuPont 2007 Fenbutatin-oxide miticide and triphenyl hydroxidefungicide businesses

Note: 1. Global rights unless otherwise specified.

This strategy could be viewed as evidence that some of the larger genericpesticide companies want to leave the generic pesticide industry behind andtransform themselves into R&D-based companies. However, with certainexceptions (such as Amvac, which considers itself a proprietary pesticidecompany that happens to sell some generics), these larger companies planto continue focusing on generic pesticides. They have tended to buy only

those proprietary pesticides that fit in with their generic product portfolioand most have no plans to start developing their own proprietary ais.

A related strategy adopted by some generic producers, both large and small,is to enter into deals with the major R&D-based agrochemical companies todistribute their products in the country where the generic company is based.For example, Rallis India sells certain pesticide products produced by BayerCropScience, FMC, Nihon Nohyaku and Syngenta in India, and Herbos sellsproducts produced by various R&D-based companies, including Dow

AgroSciences, Isagro and Sygnenta, in Croatia. Some of the largest genericcompanies have even negotiated exclusive distribution agreements in certainregions. For example, in 2002 Monsanto appointed Nufarm as the exclusivedistributor for its Roundup (glyphosate) herbicide in Australia and NewZealand, and in 2004 BASF appointed Nufarm as the exclusive distributor forall its agricultural pesticide products in Australia.

Many companies move through these different strategies as they develop,although progressing from one strategy to the next usually requires that thecompany has developed to a certain size and is therefore able to fund thedevelopment. Each successive business strategy offers more scope forgrowth, but is also more expensive to implement, because of the ancillarycosts of developing new mixtures and formulations and setting up adistribution network for branded products.

Lots of generic pesticide companies conduct some form of research activity.

Initially, this is often focused on developing production processes for specificgeneric ais, but as the companies progress to producing branded productsthey often also start to develop new ai mixtures and formulations. Thisallows them to start competing on factors such as effectiveness andreputation, with the associated business benefits.

Developing a distribution network, especially a global one, can be even moreexpensive, although there are a numbers of ways that this can beaccompli

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