Scott Kilman and Thomas M. Burton
Monsanto Co. Chief Executive Robert B. Shapiro gazed into the future four years ago and envisioned his company as a biotechnology factory on the cutting edge, churning out novel foods and medicines.
Monsanto could invent crops to lower people's cholesterol and prevent nightblindness in India. It could alter food crops' characteristics based on science's growing understanding of human nutritional needs. It could help nourish the poor in developing nations. And it could modify plants to produce medicines such as blood substitutes, promising disease-free supplies.
He saw this project as environmentally enlightened, using terms like "sustainable agriculture" and "holistic solutions." Also, not incidentally, as one that would serve shareholders well in the age of technology.
Billions of dollars later, that concept of a unified "life sciences" company - using technology to improve both medicines and foods - has become an affliction itself for Monsanto. The crop-biotechnology half of the program has grown so controversial that Monsanto has agreed to a deal that is likely not only to push biotech to the back burner, but also to cost Monsanto its independence. And investors are reacting harshly.
Monsanto's agreement to combine with Pharmacia & Upjohn Inc. is billed as a merger of equals, but it leaves the Pharmacia side with the upper hand. Pharmacia's 54-year-old chief executive, Fred Hassan, is to run the combined company. He plans to operate from Pharmacia's headquarters in Peapack, N.J., not from Monsanto's base in St. Louis. Mr. Shapiro, 61, is expected to become nonexecutive chairman and retire after 18 months.
That agricultural business that Mr. Shapiro has championed will become a separate business, and as much as 19.9% of it will be sold off. While many projects will continue, and Mr. Hassan has expressed support for the business, it isn't likely to have anywhere near the priority it had. Mr. Hassan's chief focus is Monsanto's drug business, G.D. Searle, whose Celebrex arthritis medicine is the hottest-selling new drug in the U.S. this year.
In retrospect, some former colleagues say Mr. Shapiro was so taken with his vision of a biological revolution that he ignored the paramount issue of consumer attitudes. Surrounded by a handful of like-minded biotechnology enthusiasts within the company, known as Friends of Bob, he had few voices in his inner circle providing a reality check.
Mr. Shapiro had huddled with environmentalists to plan his program, and he saw the results it would produce as an environmental good: less need for pesticides, weed control without disturbing the soil so much, and greater food production from less land. Yet it is environmentalists, fearful of unintended ecological consequences, who have organized this year's fierce opposition to genetically modified food.
And for all of Mr. Shapiro's futuristic thinking about genetic engineering of plants, he overlooked a vital issue: Crop biotechnology would trust Monsanto's fortunes to customers the company knew little about: grocery shoppers.
"We did proceed on the basis of our confidence in the technology," Mr. Shapiro says. "And we saw our products as great boons both to farmers and to the environment. I guess we naively thought that the rest of the world would look at the information and come to the same conclusion."
Monsanto initially had much success with biotechnology. American farmers embraced its new seeds, sowing vast reaches of the Midwest to crops made hardier through genetics. But another Monsanto invention almost ready for marketing - soybean and canola modified to make healthier cooking oil - isn't generating as much excitement from food companies.
And recently two Monsanto competitors in Europe decided they are getting out. Swiss pharmaceutical giant Novartis AG and Anglo-Swiss drug maker AstraZeneca PLC plan to combine their agricultural units into one business and spin it off, effectively washing their hands of crop biotechnology.
They say farms and pharma turn out to have less in common than hoped. The lab equipment for reading genes of humans and crops is largely the same, but the marketing issues are far different.
The public accepts biotechnology in medicine because it sees a clear benefit: saving lives. But about all crop biotechnology can do for now is make plants that are easier and cheaper for farmers to grow. While that's great for farmers, it's hardly an appeal to middle-class consumers, particularly when they are being cautioned by opponents that the foods' safety hasn't been proved.
Before crop biotech became so controversial, Mr. Shapiro could make a better deal for Monsanto in the merger game. American Home Products Corp., though roughly twice Monsanto's size in revenue and market value, offered 18 months ago to make Mr. Shapiro co-CEO in a merger. The deal, finally doomed by personality conflicts, would have valued the company at $35.1 billion, far more than the deal with Pharmacia does.
Mr. Shapiro took over at Monsanto four years ago, and few chief executives have changed an old industrial company more quickly, on the force of an idea, than he did. Arriving via Monsanto's 1985 acquisition of Searle, where he headed the NutraSweet artificial-sweetener business, he became head of the agricultural unit and then CEO in 1995.
Mr. Shapiro represented a major change - from old school to New Age. He succeeded Richard J. Mahoney, who had run the 95-year-old commodity-chemicals company almost as if it were reform school. When senior staffers made presentations before Mr. Mahoney, they were sometimes timed by green, yellow and red lights, and expected to stop in midsentence when the red light flashed.
Mr. Shapiro (who is trained as a lawyer, not a scientist) was professorial and informal, wearing vivid sweaters and baggy corduroys to work, and often no tie. "I'm Bob Shapiro, and I'm in charge of the dress code," he joked at an early meeting with employees. Initially he turned down the offer of a company chauffeur, saying, "I learned how to drive a long time ago."
The new CEO convened a forum of 500 Monsanto people from around the world, where, clad in a sweater-vest decorated with little quilted cats, he laid out his vision of the future. He had assembled not just senior managers but also representatives from production plants, clerks and bosses alike. Environmentalists such as Peter Raven, director of the Missouri Botanical Garden, spoke. So did Ken Dychtwald, a guru of the "Age Wave" movement who focuses on how the growing size of the elderly population affects society.
Copies of Mr. Shapiro's remarks aren't available, but he retraced them in a later interview in the Harvard Business Review. "Without radical change," he said, the impending doubling of global population would someday mean an "unthinkable" world of "mass migrations and environmental degradation on an unimaginable scale." His remedy: designer crops that need less land and yield more - and more-nutritious - food. "The market is going to want sustainable systems," he said, "and if Monsanto provides them, we will do quite well for ourselves and our shareowners."
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Last Updated on 12/21/99
By Karen Lutz