R&D Investor Day 2015 Discover more
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Our claims today Continued grower demand for innovation: long term scope for value creation through technology Syngenta R&D is the most innovative and productive in the industry Rate of innovation accelerating and productivity improving R&D as percent of sales expected ~9% Leverage opportunity at three levels: platforms, technologies, crops 3
Continuing grower demand for innovation Current needs Future needs Yield ~$300bn ~$600bn Biotic stress – Weeds, insects, disease – Resistance management – Regulatory changes Abiotic stress – Climate change – Constrained natural resources – Change in input factors Major pest shifts ~$900bn Estimated total economic value Source: Syngenta estimates 4
Biotic stress and resistance management 2014 estimated area Global lepidoptera Insect resistance Glyphosate resistance affected by glyphosate (chewing pest) market in Brazil increasing resistance 21 >$2bn Up 20% year on year – Bt resistance results in to ~1/3 of total US tripling of lep control market resistant weeds market value crop area – Viptera the only trait to globally control Fall armyworm Mha $m 58% 40 35 78 30 US farmers 25 Sucking affected in 2014 20 Chewing 88 15 122 10 5 33 Pluesia Helicoverpa 0 2013 2014 Brazil Argentina USA Spodoptera Other Source: Company information, Phillips McDougall 5
Regulatory change: Syngenta capability creates competitive advantage Time and cost of innovation increasing Some key products no longer available to growers Example: neonicotinoid seed treatment – Additional study requirements – Protracted regulatory approval timelines – Application of cut-off criteria 4:1 EU product withdrawals outpacing new product introductions Cabbage stem flea beetle damage in oilseed rape in UK and Germany due to suspension of neonicotinoid seed treatments 6
Yield improvement remains an imperative Rolling 10 World Agricultural “ Up to 25 percent of the world’s food production may be lost by 2050 due to year average population land use climate change, land degradation, growth in cropland losses, water scarcity and crop yields Billions of people Billion hectares infestations. ” Achim Steiner UN Under-Secretary General and UNEP Executive 4.9 3.3 Director at the GFFA 4.0% 8 3.0% 6 3.0 Potential area Total planted area for agricultural 2.0% 4 ~1.6 billion ha expansion 0.14 0.3 1.0% 2 1.2 0.3 0.0% 0 Agricultural Permanent Permanent Major Undefined 0.3 1970 1980 1990 2000 2010 land meadows crops crops Source: USDA (corn, soybean, rice, wheat), FAO Sources: FAO, World Bank, WWF Syngenta analysis 7
Innovation lifecycle Chemistry Breeding GM Traits Revenue Time Cost • 20 leads in early Research • 12 leads with late Research 8 major crops potential* • 5 leads in late Research • 4 leads in Development • 10 leads in late Research >500 launches per year • We maintain and register • We maintain and register 60 AIs¹ 8 traits Varieties replaced every • ~ 600 projects currently 3.5 years³ • Introgressed into 3 crops in PLCM² • ~ 20 years of experience • ~ 80 years of experience ¹Active ingredient ²Product Life Cycle Management ³Average time in market is 3.5 years. * In next 12 months 50% don’t make it past 2 years – those 8 that do succeed last for many years.
Evolution of R&D spend by capability – Sustained investment in chemistry R&D investment $m – Registration of full GM trait portfolio – Global development platform in Seeds 1600 New Technology – Investment in new capabilities 1400 1200 1000 CAGR 2001-2014 800 R&D Breeding +5% 600 +7% 400 GM Traits Chemistry 200 +8% +3% 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 % of sales 11.4% 11.2% 11.1% 11.1% 10.1% 10.5% 9.6% 8.9% 9.3% 9.4% 9.0% 8.9% 9.4% 9.4% 9
Syngenta R&D is the most productive in the industry Cumulated Cumulated R&D Sales/R&D Sales $bn expenses $bn 2005-2014 2005–2014 117 11.0 10.7 – Period of investment in 51 4.8 10.5 Seeds platform – Early investment in new 95 9.7 9.8 technologies 113 11.8 9.6 – Sustained returns on Crop Protection R&D 80 8.3 9.6 54 7.0 7.7 Source: Phillips McDougall, Syngenta estimates 10
New launches and lifecycle management bring share gain 2008–2014 2005 2014 Crop Protection market share Average 1 new AI per year 18% 20% Focus on blockbuster opportunities 18% 18% Formulation 13% 13% and lifecycle management 9% 10% excellence 9% 9% ~600 7% 7% New product launches per year* Others 26% 23% * Launch defined as new Syngenta products (incl. formulations) marketed in specific countries Source: Phillips McDougall. Excluding professional products 11
Seeds: leading innovator in trait technology Corn trait revenue and royalty income – cash basis Traits $m Complete independent corn 1'000 2.5X trait platform 900 800 Comprehensive insect control 700 including Refuge In a Bag 600 500 400 MIR604: Pioneer enabled for Access to market 300 dual CRW control in USA 200 100 Access independent seed MIR162 licensed to Monsanto, - companies 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 DuPont Pioneer, Dow: most SYT Brands GLG licensees Direct licensees efficacious broad lep trait, Direct licensing to other majors leading in Fall armyworm Revenue stream to double in next 5 years following control in Brazil China approval of MIR162 Branded business enablement 12
Crop Protection: R&D productivity increasing Post merger Building SYT pipeline Globalization of R&D Period 2000–2004 2005–2009 2010–2014 Total # of launches 4 3 4 Productivity Annual peak sales $bn 1.0 1.6 2.0 Average sales per launch $bn 0.2 0.5 0.5 Effectiveness Higher sales per launch than competitors 13
Rate of innovation accelerating Enhancing R&D Productivity Period 2015-2020 2021–2022 Total # of launches 4 6 Productivity Annual peak sales $bn 1.8 2.5 Average sales per launch $bn 0.5 0.4 Effectiveness Innovation across all product lines 14
Innovation overview Fungicides Seguris Elatus Lead 3 Orondis Adepidyn Insecticides Lead 1 Lead 4 >$500m Herbicides Lead 2 Acuron >$200m Seedcare Lead 7 Lead 5 >$100m Vibrance Fortenza Clariva Lead 6 Peak sales Year of launch 2012 2017 2022 potential 15
ADEPIDYN TM : the next SDHI blockbuster – Time to peak sales often 1. Sales by Region 2. Sales by Crop at peak 3-5 years Peak sales $m >$750 m – Chemistry design ensures Vegetables 750 Cereals full registrability across regions 500 >$750m Specialty Corn – Focus on Fusarium: broad 250 crop applicability DFC - 0 Soybean – Low cost to manufacture 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 with COGS optimization North America Latin America EAME APAC 5 years from launch 3. Economies of scale in COGS 4. Free cash flow contribution – Free cash flow break even 3 years from registration AI Volume AI COGS $m ‘000 kg $/kg 300 200 2'000 NPV @ 8% 100 ~$1.2 bn 1'000 0 -100 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 16
Track record of delivering GM traits Post merger Building SYT pipeline Globalization of R&D Period 2000–2004 2005–2009 2010–2014 Total # of launches 1 3 5 Productivity Annual peak sales $bn 0.1 0.4 0.9 Average sales per launch $bn 0.1 0.1 0.2 Effectiveness – Rich early GM pipeline – Enhanced trait development – Leadership in above and below with no route to market capabilities: successful launches ground insect control of proprietary traits – Multiple modes of action to manage insect resistance Industry faces lower rate of innovation over the next decade Focus on upgrades, stacks 17
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