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7
ANNUAL R&D PIPELINE REVIEW
ROBB FRALEY, PH.D.CHIEF TECHNOLOGY OFFICER
FIRST-QUARTER 2007
Jan. 4, 2007
8
OVERVIEW
Annual Pipeline Update Signals Pipeline Momentum Is Accelerating
ANNUAL R&D CYCLE: SEEDS & TRAITS
SOYBEAN BREEDING
2 projects were added to Phase I or later as a result of discovery work or collaborative partnerships
PIPELINE ADDITION
Break-out strategy in soybeans works to continue advanced screening capabilities and molecular-breeding-based selection
More than 49,000 trials establish the yield advantage in our national brands, and we increased our overall advantage in the widely planted 110-day corn to a record 11.7 bushels per acre
PIPELINE PROGRESS IN PHASE All projects that have not advanced phases passed key milestones within phase, maintaining momentum
7 projects either advanced from one phase to another or were added to the pipeline, representing positive movement in >20% of the active R&D pipeline
CORN BREEDINGBREEDING PIPELINE
PIPELINE PROGRESSBIOTECH TRAIT PIPELINEFULL-YEAR PIPELINE UPDATE
Q1 Q4
Q3Q2
JULY-AUGUSTMID-YEAR PIPELINE UPDATE
Project reviews, including data reviews and updates from field research both
inside and outside the U.S.
9
Two-Year View Demonstrates Increased Breadth and Depth of Monsanto’s Pipeline
OVERVIEW
ROUNDUP READY FLEX COTTON
HYBRIDIZATION SYSTEM FOR CORN
DROUGHT-TOLERANT CORN
FARMER BENEFITS
HIGHER-YIELDING SOYBEANS
NITROGEN UTILIZATION CORN
HIGHER-YIELDING CORN
DROUGHT-TOLERANT COTTON
WATER-USE EFFICIENCY SOYBEANS
HIGHER-YIELDING CANOLA
2ND-GEN DROUGHT-TOLERANT CORN
COTTON LYGUS CONTROL
BOLLGARD III
SOYBEAN NEMATODE-RESISTANCE
YIELDGARD ROOTWORM II
INSECT-PROTECTED SOYBEANS
YIELDGARD VT PRO2ND-GEN YIELDGARD CORN BORER
YIELDGARD VT ROOTWORM/RR22ND-GEN YIELDGARD ROOTWORM
DICAMBA-TOLERANT COTTON
DICAMBA-TOLERANT SOYBEANS
ROUNDUP RREADY2YIELD CANOLA
ROUNDUP RREADY2YIELD SOYBEANS
PHASE
4PHASE
3PHASE
2PHASE
1D
PROCESSOR BENEFITS
OMEGA-3 SOYBEANS
VISTIVE III SOYBEANS
VISTIVE II SOYBEANS
IMPROVED-PROTEIN SOYBEANS
CONSUMER BENEFITS
HIGH OIL SOYBEANS FOR PROCESSING1
FEED CORN WITH BALANCED PROTEINS1
2nd-GEN HIGH-VALUE CORN WITH LYSINE1
MAVERA™ II HIGH-VALUE SOYBEANS1
MAVERA™ I HIGH-VALUE SOYBEANS1
MAVERA™ HIGH-VALUE CORN WITH LYSINE1
PHASE
4PHASE
3PHASE
2PHASE
1D
1. These product candidates are in the Renessen pipeline. Renessen is a Monsanto/Cargill joint venture.
2. The colored bar associated with each project indicates which phase that project is in. It is not intended to represent the relative status of the project within a particular stage.
R&D PIPELINE: JANUARY 2007
High Impact Technologies (HIT) project
Jan. 4, 2007 Advancements/AdditionsJan. 4, 2006 Advancements/Additions
10
0%0%0%PERCENT PENETRATED
35M
ARGENTINA
60M70MAVAILABLE MARKET
BRAZILU.S.KEY MARKET ACRES
Roundup RReady2Yield Soybeans Advance to Phase 4, Beginning Pre-Launch Activities
Roundup RReady2YieldSoybeans
PIPELINE UPDATE
P R O J E C T
PROJECT CONCEPT:
Second-generation of Monsanto’s popular herbicide-tolerant platform in soybeans that will provide farmers with soybeans that have enhanced yield, with a target of up to 5 bushel-per-acre yield increase over comparable Roundup Ready soybeans
2006 PERFORMANCE UPDATE:
>20M acresTOTAL ACRE OPPORTUNITY:
$10 - $30/acreRETAIL VALUE/ACRE:
Roundup RReady2Yield Soybeans
2006 STATUS:
VALUE CATEGORIES:
Phase 4
• Performance indicates that the enhanced yields associated with Roundup RReady2Yield are consistent across multiple years and diverse germplasm backgrounds
R&D Pipeline
KE
Y R
ES
ULT
S
2006 TESTING: RELATIVE PERFORMANCE OF ROUNDUP READY AND ROUNDUP RREADY2YIELD EXPERIMENTAL LINES
2006 breeding trials compared Roundup RReady2Yieldexperimental lines with Roundup Ready experimental lines that were in the same stage of development. The Roundup RReady2Yield lines averaged 3 to 5 bushels per acre higher than Roundup Ready experimental lines – shifting the entire yield curve positively and providing further validation for the product concept target of up to a 5 bushel-per-acre yield increase
YIELD DIFFERENCE (BU/AC)
-10 -5 0 5 10 15
ROUNDUP READYEXPERIMENTAL
LINES
ROUNDUP RREADY2YIELDEXPERIMENTAL LINES
PE
RC
EN
T O
F P
OP
ULA
TIO
N
50
40
30
20
10
11
0%PERCENT PENETRATED
12-15M
U.S.
AVAILABLE MARKET
KEY MARKET ACRES
Vistive III Soybeans Continue To Meet or Exceed Commercial Targets
PIPELINE UPDATE
KE
Y R
ES
ULT
S
In 2006 field testing, multiple events met product concept composition of 55-75% oleic and <7% saturates. Selection of leads is actively under way
P R O J E C T
PROJECT CONCEPT:
Combining both breeding and biotechnology, Vistive III is designed to lower linolenic and saturate content while boosting oleic content for a profile similar to olive oil
2006 PERFORMANCE UPDATE:
5M - 20M acresTOTAL ACRE OPPORTUNITY:
$10 - $30/acreRETAIL VALUE/ACRE:
Vistive III Soybeans
2006 STATUS:
VALUE CATEGORIES:
Phase 2
• Phase 2 testing for oil traits focuses on replicating oil-profile targets
• 2006 testing allowed for lead selection with multiple events hitting oil-profile targets
R&D Pipeline2006 TESTING: LEAD EVENTS WITH TARGET OIL COMPOSITION
IDENTIFIED
Vistive III Soybeans
OLEIC AND SATURATED FATTY ACIDS U.S. FIELD DATA 2006 – 6-10 LOCATIONS
0
10
20
30
40
50
60
70
80
CONTROL EVENT 1 EVENT 2 EVENT 3
% F
AT
TY
AC
ID
OLEIC ACID SATURATES
PRODUCT CONCEPT TARGET RANGES
12
0%0%0%PERCENT PENETRATED
6M
ARGENTINA
30M80MAVAILABLE MARKET
BRAZILU.S.KEY MARKET ACRES
First of Drought-Tolerant Corn Traits Continues To Deliver Yield Boost in Third-Year Testing
Drought-Tolerant Corn
PIPELINE UPDATE
KE
Y R
ES
ULT
S
In third year field testing in U.S., drought-tolerant leads are consistently delivering higher yields compared with controls under drought-stressed conditions
P R O J E C T
PROJECT CONCEPT:
First-generation drought tolerance is targeted to minimize uncertainty in farming by buffering against the effects of water limitation, primarily in areas of annual water stress
2006 PERFORMANCE UPDATE:
>20M acresTOTAL ACRE OPPORTUNITY:
$10 - $30/acreRETAIL VALUE/ACRE:
Drought-Tolerant Corn
2006 STATUS:
VALUE CATEGORIES:
Phase 2
• Yield enhancement demonstrated again in 2006 under water-stress conditions in U.S.
• Lead gene chosen • 2007 trials expected to demonstrate
yield enhancement in multiple hybrids under dryland conditions
R&D Pipeline
KE
Y O
PP
OR
TU
INIT
Y
2004 2005 2006Hybrid 1: 2004, 4 locations; 2005 5 locs; 2006, 1 loc (20 reps)Hybrid 2: 2004, not tested; 2005, 5 locs, 2006, 3 locs
0
2
4
6
8
10
12
14
YIE
LD D
IFFE
RE
NC
E
VS
. CO
NT
RO
L (B
U/A
CR
E)
NO
T T
ES
TE
D
Percent yield difference vs. control7.3% 10.5% 10.9% 23.2% 9.0%
2006 TESTING: YIELD IMPROVEMENT OF LEAD EVENT UNDER DROUGHT STRESS
SEGMENTED VALUE OPPORTUNITY ACROSS MARKETS
High annual precipitation
Low annual precipitation
Source: Spatial Climate Analysis Service, Oregon State University
First leads show primary benefit under water-stress conditionsFirst product targeted at western dryland market
IRRIGATED
WESTERN DRYLAND
STABILITY
13
0%0%0%PERCENT PENETRATED
6M
ARGENTINA
30M80MAVAILABLE MARKET
BRAZILU.S.KEY MARKET ACRES
Second-Generation Drought-Tolerant Corn Already Populated with Strong Leads
Second-Generation Drought-Tolerant Corn
PIPELINE UPDATE
KE
Y R
ES
ULT
S
Field screening is used to identify new gene candidates that address water use efficiency for areas of water-stress and in broad-acre applications. In 2006, multi-location testing identified both several leads and several events within those leads with significant yield advantages
PROJECT CONCEPT:
Second-generation products aimed at boosting yield stability for broad-acre applications and reducing water input required in water-limited environments
2006 PERFORMANCE UPDATE:
>20M acresTOTAL ACRE OPPORTUNITY:
$10 - $30/acreRETAIL VALUE/ACRE:
Second-Generation Drought-Tolerant Corn
2006 STATUS:
VALUE CATEGORIES:
Phase 1
• Phase 1 testing focused on field-level proof of concept to identify potential leads for commercial transformations
R&D Pipeline2006 TESTING: YIELD IMPROVEMENT IDENTIFIED IN SECOND-GENERATION
OF GENE CONSTRUCTS
% Y
IELD
IN
CR
EA
SE
LEAD CONSTRUCTS
0%
30%
5%
10%
15%
20%
25%
1 2 3 4 5
Different events for each lead
14
Drought-Tolerance Is a Cross-Crop Platform, Spanning Corn, Soybeans and Cotton
Drought-Tolerant Platform
PIPELINE UPDATE
PLATFORMS:
The platform is targeted to minimize uncertainty in farming by buffering against the effects of water limitation, in environments ranging from consistent water stress to areas that experience sub-optimal rainfall sporadically
Drought-Tolerant Cotton
COTTON
Water-Use Efficiency Soybeans
SOYBEANS
2nd-Gen Drought-Tolerant Corn
Drought-Tolerant Corn
CORN
2D 41 3
PROJECT CONCEPT:
Drought-Tolerant Platform
R&D PipelineDROUGHT-TOLERANT COTTON
In second-year field trials, plants with drought-tolerant genes showed better performance, reflecting a fuller canopy and less wilting than conventional checks
CONTROL
WITH GENE
15
0%0%0%PERCENT PENETRATED
6M
ARGENTINA
30M80MAVAILABLE MARKET
BRAZILU.S.KEY MARKET ACRES
After Three Years of Solid Field Data, Higher-Yielding Corn Enters Phase 2 Development
PIPELINE UPDATE
KE
Y R
ES
ULT
S
In 2006 field testing, lead event shows yield efficacy in different test hybrids. Three years of data demonstrate yield increases in multi-location trials with multiple hybrid combinations
PROJECT CONCEPT:
Higher-yielding corn is aimed at boosting the intrinsic yield potential of corn hybrids through insertion of key genes
2006 PERFORMANCE UPDATE:
> 20M acresTOTAL ACRE OPPORTUNITY:
$10 - $30/acreRETAIL VALUE/ACRE:
Higher-Yielding Corn
2006 STATUS:
VALUE CATEGORIES:
Phase 2
• With 3 years of field data proving efficacy, Higher-Yielding Corn emerged from proof-of-concept testing to Phase 2 development
• Commercial transformations will be made, with further testing to select for lead events
R&D Pipeline2006 TESTING: 2006 FIELD RESULTS INDICATE INCREASED YIELD VERSUS
CONVENTIONAL CHECKS
Higher-Yielding Corn
0
2
4
6
8
10
HYBRID 1 HYBRID 2 HYBRID 3
PE
RC
EN
T Y
IELD
IN
CR
EA
SE
O
VE
R C
HE
CK
12.1BU/AC
13.7BU/AC
15.5BU/AC
PRODUCT CONCEPT TARGET RANGE
16
0%0%0%PERCENT PENETRATED
24M
EUROPE
30M80MAVAILABLE MARKET
BRAZILU.S.KEY MARKET ACRES
2006 Testing Confirmed Leads from 2005 and Identified Stable of New Genes for Nitrogen Efficiency
PIPELINE UPDATE
PROJECT CONCEPT:
Targets ways that corn plants can use nitrogen more efficiently, exploring the potential to boost yield under normal nitrogen conditions or stabilize yield in low nitrogen environments
2006 PERFORMANCE UPDATE:
> 20M acresTOTAL ACRE OPPORTUNITY:
$10 - $30/acreRETAIL VALUE/ACRE:
Nitrogen Utilization Corn
2006 STATUS:
VALUE CATEGORIES:
Phase 1
• Second year proof-of-concept testing confirmed 2005 lead genes across multiple locations and nitrogen rates and added new gene candidates for further testing
R&D Pipeline
KE
Y R
ES
ULT
S
2006 TESTING: 2006 FIELD RESULTS CONFIRM CONTINUED PERFORMANCE OF LEADS IDENTIFIED IN 2005
Nitrogen Utilization Corn
Reading right to left, what scientists will look for to establish proof of concept is when nitrogen application is decreased, the total yield per acre remains stable. In 2006 data, the 2 events show no yield drop off as the nitrogen application levels decrease from 180 lbs/ac to 40 lbs/ac
140
145
150
155
160
165
170
175
0
EVENT 1
EVENT 2
CONTROL
LEAD NITROGEN UTILIZATION GENE(ACROSS 3 LOCATIONS: ILLINOIS AND IOWA)
YIE
LD P
ER
AC
RE
Reduction in Applied Nitrogen
40 80 180
NITROGEN INPUT: LBS/ACRE
17
0%0%0%PERCENT PENETRATED
7-10M
ARGENTINA
20-25M15-20MAVAILABLE MARKET
BRAZILU.S.KEY MARKET ACRES
Renessen™ High-Oil Soybeans Advance to Phase 3 Testing After Strong 2006 Results
PIPELINE UPDATE
KE
Y R
ES
ULT
S
PROJECT CONCEPT:
Targeted to improve oil crushing yield
2006 PERFORMANCE UPDATE:
>20M acresTOTAL ACRE OPPORTUNITY:
<$10/acreRETAIL VALUE/ACRE:
Renessen™ High-Oil Soybeans
2006 STATUS:
VALUE CATEGORIES:
Phase 3
• Phase 2 testing for oil traits focused on replicating oil-profile targets
• 2006 testing demonstrated consistent, significant oil advantage, advancing into Phase 3 for further commercial development
R&D Pipeline2006 TESTING: MULTI-YEAR TESTING FOR HIGHER OIL CONTENT
Renessen™ High-Oil Soybeans
18
19
20
21
22
23
U.S. 2004 ARGENTINA2004
U.S. 2005 U.S. 2006
(6 LOCATIONS) (11 LOCATIONS) (14 LOCATIONS) (19 LOCATIONS)
1.7% 1.4%Percent oil difference vs. control1.6% 1.5%
WITHOUT GENEWITH GENE
In four seasons of testing, significant oil yield advantage has been shown with high-oil gene
OIL
PE
RC
EN
TA
GE
18
Soybean Breeding
PIPELINE UPDATE
Molecular Breeding Increasing Performance Benefit in Soybeans Versus Competitors
PLATFORM CONCEPT:
Monsanto is using the most advanced tools of genomics, molecular markers and IT resources to more efficiently select for the best base germplasm for soybeans2006 PERFORMANCE UPDATE:
Soybean Breeding
• Yield data from 2006 indicates continued yield advantage for national brands versus best-in-class competitors
R&D Pipeline
40
42
44
46
48
50
52
54
56
58
60
RELATIVE MATURITIES
COMPETITORS
ASGROW / DEKALB
BU
SH
ELS
/AC
RE
In 2006, Monsanto demonstrated a yield advantage compared with the best-in-class competitors in all of the major U.S. maturity zones
YIELD ADVANTAGE
SOYBEAN BREEDING: 2006 U.S. COMPETITIVE SOYBEAN YIELD
3 51 0 2 4
19
Corn Breeding
PIPELINE UPDATE
Best-in-Class Corn Breeding Capability Being Leveraged Across Commercial Channels
PLATFORM CONCEPT:
Monsanto is using the most advanced tools of genomics, molecular markers and IT resources to more efficiently select for the best base germplasm for corn2006 PERFORMANCE UPDATE:
Corn Breeding
• Yield data from 2006 indicates continued yield advantage for national brands versus best-in-class competitors
• 2006 represented the fifth straight year of market share gains in Monsanto’s Asgrow and DEKALBnational brands
R&D Pipeline
170
175
180
185
190
195
200
RELATIVE MATURITIES (DAYS)
COMPETITORS
DEKALB
BU
SH
ELS
/AC
RE
110 105 115
In 2006, across the 110-day maturity zone that covers one-third of U.S. corn production, DEKALB outperformed the competition by 11.7 bushels per acre on average
YIELD ADVANTAGE
100 95
CORN BREEDING: 2006 U.S. COMPETITIVE CORN YIELD
20
SUMMARY
Volume and Velocity Accelerates Across Pipeline, Expanding Monsanto’s Leadership Opportunity
ANNUAL R&D CYCLE: SEEDS & TRAITS
SOYBEAN BREEDING
Almost 30% of the pipeline represents additions to Phase I or later as a result of discovery work or collaborative partnerships
PIPELINE ADDITION
Break-out strategy in soybeans unveiled combining advanced screening capabilities and molecular-breeding-based selection
Leadership in corn breeding solidified, and we’ve seen yield gains in national brands, American Seeds, Inc. companies, and in the germplasm for Holden’s licensees
PIPELINE PROGRESS IN PHASE All projects that have not advanced phases passed key milestones within phase, maintaining momentum
More than 70% of the projects advanced from one phase to another with the most significant being our Roundup RReady2Yield HIT project
CORN BREEDINGBREEDING PIPELINE
PIPELINE PROGRESSBIOTECH TRAIT PIPELINETWO-YEAR PIPELINE UPDATE
Q1 Q4
Q3Q2
JULY-AUGUSTMID-YEAR PIPELINE UPDATE
Project reviews, including data reviews and updates from field research both
inside and outside the U.S.