Post-Patent Report
10 December 2008 | Top Post-Patent Companies, 2005 (in US$ millions) |
|||||||
|---|---|---|---|---|---|---|---|
| Rank | Company | 2005 Sales |
2004 Sales |
Growth | |||
| 1 | Makhteshim-Agan Industries | 1,543 | 1,358 | 13.6% | |||
| 2 | Nufarm | 1,189 | 1,170 | 1.6% | |||
| 3 | Cheminova | 596 | 601 | (0.8%) | |||
| 4 | Sipcam | 375 | 348 | 7.8% | |||
| 5 | United Phosphorus Ltd. | 333 | 265 | 25.7% | |||
| 6 | Gowan | 233 | 208 | 12% | |||
| 7 | AMVAC | 189.9 | 151 | 25.7% | |||
| 8 | Atanor | 165 | 160 | 3.1% | |||
| 9 | Rallis | 120 | 133 | 10.8% | |||
| 10 | Sinon | 122 | 134 | (9%) | |||
|
Note: Companies identified as “post-patent” derive the majority of their sales from products developed by another company, rather than internally. Being included on this list is not meant to imply that any companies sell only off-patent products. |
|||||||
The post-patent agrochemical market continued its rationalization process throughout 2005, as the top post-patent companies built gains on product and company acquisitions. The end result of the ongoing flurry of middle-tier consolidation has been an 8.1% growth in sales of the Top 10 generic companies (see chart, p. 14) by the end of 2005. This is significantly higher than the 2% growth of the total market, according to research firm Phillips McDougall.
While acquisitions account for a great deal of the growth of these companies, they coincide with higher sales of generics compared to patented chemistry in the overall market. Since 1995, Phillips McDougall estimates that the share of the global crop protection market held by generics has risen from 18.9% to 26.5% of total industry sales.
In the past three years, this growth combined with major strategic acquisitions has paid off well for the top tier of post-patent companies. For the period of 2002-2005, five of the top six companies by sales growth were post-patent companies, including each of the top four (United Phosphorus Ltd., Nufarm, Makhteshim Agan Industries, and Cheminova; Sipcam was number six). Each of these companies grew by rates at double (or more) than the industry average of 7.4%.
Challenges To Growth
While the success of these companies is clear, the road ahead may not be, as several big challenges still stand between the post-patent companies and continued growth.
Tops among these has been re-registration efforts in major markets such as the US, the EU, and Japan, all of which have eliminated older chemistries in order to promote newer, softer chemicals. With more re-registration moves to be made, these markets are being guided away from several post-patent products.
In addition, 2006 has shown what can happen when market forces in key regions underperform. With sales lukewarm (at best) in key areas of South America (most notably in Brazil and Argentina) as well as in Asia (primarily in China and India), many post-patent companies struggled to keep business coming in. As these areas are among the world’s largest markets for post-patent products, only the more diversified, globalized post-patent companies had continued success this year.
And as always, post-patent companies also have the specter of shrinking margins to deal with. Price wars and value loss for post-patent products are extremely intense, particularly in markets that are relatively easy to access. In South America, for instance, there is very little value left in glyphosate – although several companies are exploring different ways to enhance their glyphosate products in order to differentiate from competition and restore some lost value to the product. On the whole, however, post-patent companies have needed to stay limber and move with the market, and to be ready to make changes when necessary to stay at the forefront of the constantly-changing agricultural market.
The New Big Three
The top post-patent companies continue to be very aggressive in their growth strategies, piling up acquisitions of both products and companies to build their sales and create economies of scale that allow them to diversify in terms of their products offered as well as regions and crops served.
While a number of important moves were made, the following three companies led the pack, and barring any major shake-ups, will reign as the top three post-patent ompanies in 2007.
1. Makhteshim Agan Industries (MAI), Israel
MAI again led all post-patent producers in 2005, with US $1.54 billion in sales. While reports from 2006 reflect the downturn in the total agrochemical market (recent figures show third quarter profit results nearly 50% lower than results from the third quarter of 2005), the company has made some important gains. Sales in the US were up nearly 23% and sales in the EU were up almost 14% which contributed to a slight growth in overall sales, though the soft Brazilian market and rising raw material costs kept profits down.
Keying in on one of these markets, MAI made two moves to further solidify its position in East Europe. Agrovita, a Czech Republic-based distribution company, was purchased by one of MAI’s wholly owned subsidiaries. In addition, MAI recently established its own distribution company in Russia. Along with the 2005 purchase of the Hungarian distributor Biomark, these efforts extend the company’s presence even more deeply into the growing East European ag markets.
Other moves made by MAI include the 2006 purchase of Italy-based Kollant and the taking of a 30% share of US-based company Alligare. These join the 2005 acquisitions of a 49% stake in Mabeno in the Netherlands and a 60% stake in Control Solutions in the US (up from 40% in 2004).
2. Nufarm, Australia
Nufarm, the second billion-dollar post-patent company, notched US $1.19 billion in 2005 sales. Like several of the top post-patent companies, Nufarm was busy on the acquisition front – but the pattern followed by Nufarm was more like the strategies of the Big 6 multinationals than Nufarm’s post-patent peers, as Nufarm’s moves involved becoming more active in seed and biotechnology.
In April, Nufarm expanded its business with the acquisition of two seed companies. Dovuro Seeds, the leading Australian canola production and marketing company, and Nutrihealth Pty. Ltd., a specialty canola seed breeding company, both were bought by Nufarm. These moves helped pave the way for Nufarm’s September acquisition from Monsanto of a license to develop and commercialize Roundup Ready (glyphosate resistant) canola in Australia. The combination of the license for Roundup Ready canola and the seed companies that will speed up the introduction of the variety puts Nufarm in good position to seize the biotech opportunities in Australia.
Apart from seed and Australia, Nufarm also made a move in South America with the purchase of Colombia-based Agroquimicos Genericos (Agrogen). The company also purchased the rights to BASF’s imazamethabenz outside of Europe.
3. United Phosphorus Ltd. (UPL), India
United Phosphorus Ltd. (UPL), which had total sales figures of US $333 million in 2005, has taken a very strong approach to its growth and made several strides throughout 2006.
In just three months toward the end of 2006, UPL purchased two major products and a large crop protection company, helping the company jump from its 2005 rank as the fifth-largest post-patent agrochemical company to the third-largest worldwide.
In September, the company announced the purchase of DuPont Crop Protection’s bensulfuron-methyl business, giving UPL global rights to the rice and aquatic herbicide. Then in the span of less than three weeks in November, UPL bought Dow AgroSciences’ propanil business, adding to its rice portfolio with the selective post-emergence non-residual rice herbicide, and also acquired crop protection company Cerexagri from the French firm Arkema.
Cerexagri, which has a solid footprint in fungicides and post-harvest products for fruits and vegetables, significantly expands UPL’s business in these areas, and leaves UPL’s portfolio without any serious gaps. Through the acquisition, UPL also took control of Cerexagri’s strong distribution in the US and the EU, which account for 80% of its sales. It was the Cerexagri purchase that pushed UPL into the third position among generic crop protection companies.
In total, UPL’s growth strategy included six key purchases in 2006 as of November. Along with bensulfuron-methyl, propanil, and Cerexagri, the company also acquired seed company Advanta BV, African ag-chem firm Cropserve, and products from Bayer CropScience.
All of these follow a busy 2005, which also saw UPL make several important moves. That year’s acquisitions included the Spanish agrochemical company Cequisa, the Argentinian company Reposo, and Indian company SWAL Corp.
Get The Newsletter Today!
