monsanto r_dpipelinereview

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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


5M - 20M acresTOTAL ACRE OPPORTUNITY:


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


6M

ARGENTINA



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 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


6M

ARGENTINA



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




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


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


6M

ARGENTINA



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


> 20M acresTOTAL ACRE OPPORTUNITY:


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


24M

EUROPE



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


> 20M acresTOTAL ACRE OPPORTUNITY:


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


7-10M

ARGENTINA

20-25M15-20MAVAILABLE MARKET


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



<$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.

monsanto r_dpipelinereview

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