Agence France Presse
LONDON, Life sciences, the fusion of agriculture and pharmaceuticals heralded as the future of food in the mid-1990s, is on the verge of becoming extinct.
One by one, the world's pharmaceutical titans have backed away from the life science concept, shedding their agrochemicals interests to focus instead on 'pure' pharmaceuticals.
So what went wrong?
Firstly, the cost savings promised to shareholders when drugs companies unveiled the life science concept have been slow to materialise.
"The synergies that the life science companies talked about in the past between crop science and pharmaceutical drug development doesn't seem to be there," Merrill Lynch analyst Owen Dwyer said.
And while cost savings have been disappointing, sales growth has proven even more elusive.
Aventis, the Franco-German pharmaceutical group created last year by the merger of the life science activities of Hoechst of Germany and Rhone Poulenc of France, saw its pharmaceutical sales jump 16.2 percent in the first nine months of the year.
But Aventis CropScience, its agrochemical venture in which German drug giant Schering also owns 24 percent, was hit by a 1.8-percent drop in sales.
"In agrochemicals there is little growth... any growth that people were expecting, they were expecting it from the biotech and genetically modified food areas," Dwyer said.
It was perhaps not surprising, therefore, that Aventis announced on Wednesday it was looking to sell the business. Equally unsurprising was the response of Schering when asked if it was interested in buying out Aventis: thanks, but no thanks.
Only Bayer, the German chemical and pharmaceutical group, has shown any real interest in Aventis CropScience.
Aventis is only the latest in a long list of pharmaceutical companies that have begun to re-think their love affair with life sciences and the agrochemicals sector.
Swiss drug giant Novartis and Anglo-Swedish counterpart AstraZeneca have spun off their combined agrochemicals interests, Syngenta, which made an unimpressive debut on the Zurich stock market Monday.
US groups Pharmacia and Upjohn and Monsanto decided to spin off their agrochemicals interests under the Monsanto name after their tie-up earlier this year.
American Home Products also off-loaded its agrochemical operations, Cyanamid, to German chemicals giant BASF this year. BASF is bucking the trend by selling its Kroll pharmaceuticals business to focus on agrochemicals.
"Companies are making the business decision that they need to concentrate on pharmaceuticals, and as a consequence they're shedding this life science branding and are clearly getting rid of the agrochemical businesses," said one London-based pharmaceuticals analyst.
So why have the returns on the agrochemicals business been disappointing?
Firstly, a series of bumper harvests have led to low crop prices and have depressed demand for fungicides, an important product for agrochemical companies.
Secondly, a backlash of public hostility towards genetically modified (GM) food has left companies fighting an uphill battle to gain regulatory approval for GM food.
Consumers, meanwhile, are becoming increasingly suspicious about what they eat, in no small part due to the increasing number of deaths from Creutzfeldt-Jakob disease, the human form of madcow disease, or bovine spongiform encephalopathy (BSE).
In reponse, the British arm of McDonald's, the world's biggest fast food chain, announced Thursday it would no longer use animal feed containing GM ingredients.
Dwyer said companies were caught a little bit by surprise by the degree of public hostility to GM food.
"It's difficult to see any short-term acceptance by consumers, particularly in Europe, on genetically modified foods," he added.
Agrochemical companies moreover face huge compensation claims if GM food is found to be potentially damaging to health, a claim made by environmentalists.
But those companies that do try to weather the storm in the long run could reap an agrochemical windfall, analysts say.
"If they could get those types of products accepted, then there is potentially massive growth opportunities," said Dwyer. "However, that's a very big if."
In the meantime, pure agrochemical companies will be left alone to sink or swim.
As one analyst noted, companies such as Syngenta and Monsanto "have no choice -- they've got to concentrate on agrochemicals because that's what they are."
** NOTICE: In accordance with Title 17 U.S.C. Section 107, this material is distributed for research and educational purposes only. **
Last Updated on 11/21/00