Trish Malarkey Opening plenary script R&D Investor Day, Stein, Switzerland September 16, 2015

Transcription

1 Trish Malarkey Opening plenary script R&D Investor Day, Stein, Switzerland September 16, 2015 Good morning and welcome to Stein. My colleagues and I are looking forward to sharing the vibrancy of our pipeline and demonstrating the health and productivity of Syngenta s innovation engine. Over 17 years in many roles in R&D, I have had the chance to participate and shape many of the opportunities we will share with you today. From the groundbreaking use of toxicology to design molecules with the best chance of success exemplified by our new fungicide ADEPIDYN, which we will talk to you about in detail today for the first time. Slide 3 Our claims today Today we will assure you that growers continue to need new technologies, creating long term scope for value creation. And we will also demonstrate that not only is Syngenta s R&D the most productive in the industry but our rate of innovation is accelerating and productivity is improving. This underpins our intent of keeping R&D at around 9 percent of sales. We are achieving this through the leverage of platforms and technologies across crops. Slide 4 Continuing grower demand for innovation Let me start with grower demand for innovation. There is $900bn worth of economic value in solving the problems growers have. Today s solutions are largely in the area of biotic stress controlling weeds, insects and disease and while many problems have been solved, we still need to find new ways to tackle them. There are two key reasons for that resistance and increased regulation and I ll explain more about those in a moment. The remaining $600bn of economic value is emerging from abiotic pressure associated with climate change, and the need to increase yield in a context of constrained natural resources. This value can only be unlocked if we find yield solutions that use fewer inputs such as water and nutrients. Major pest shifts may also occur, demanding new technologies to address them.

2 Slide 5 Biotic stress and resistance management Coming back now to resistance, which is a normal biological process a species selfpreservation mechanism. The left hand side of the chart relates to weed control, where for example the effectiveness of glyphosate is increasingly compromised through the continued development of weed resistance, which is now affecting 1/3 of the total crop area in the US and is recorded in 21 species globally. Our technology platforms enabled us to predict this some 10 years ago, and we have been steadily leveraging our portfolio and our pipeline in response most recently with the launch of ACURON. ACURON not only provides a solution that combats resistant weeds because it combines multiple modes of action, it also delays the development of further weed resistance. On the right hand side you can see that the market for controlling caterpillars, or lepidopteran pests, is worth more than $2bn. Here resistance to Bt traits is a significant problem. Look at Brazil, where the failure of Bt traits has led to a tripling of the lepidoptera control market. This has proven to be a major opportunity for our VIPTERA trait, which is active on a particularly problematic pest in Brazil: fall army worm. Slide 6 Regulatory change: Syngenta capability creates competitive advantage Increased regulation is seen as a challenge for our industry. At Syngenta, we are using our regulatory capabilities to create competitive advantage, and you ll be hearing more about that later. The additional study requirements and protracted regulatory approval timelines mean that the cost of innovation, and the cost of keeping existing products on the market, is increasing. This, together with the application of non-science based cut-off criteria, has resulted in product withdrawals in the EU outpacing new product introductions by 4:1. As a result, some key products are no longer available to growers. The photo shows you how oilseed rape crops in the UK and Germany have been devastated by beetles following the withdrawal of neonicotinoids, forcing growers to replant. The opportunity for us is to introduce alternative solutions that can prevent these crop losses. 2

3 Slide 7 Yield improvement remains an imperative You re already familiar with the data on the left hand chart: world population is growing, to 9 billion people in 2050, and yield growth has slowed considerably over the last forty years. The right hand chart shows you that only a small amount of global agricultural land remains available for cultivation. And the existing crop areas are increasingly threatened by factors such as climate change and land degradation, which pose a major threat to future output. Therefore yield improvement on already cultivated land is an imperative and technology is the only solution. This leaves me with no doubt there is a healthy demand for innovation. Slide 8 Innovation lifecycle We are successfully meeting that demand with our three technology pipelines chemistry, breeding and GM traits which guarantee that we will sustain the broadest portfolio in the industry. The crop protection model is relatively slow to maturity but offers a long and lucrative product lifecycle management opportunity. We currently have 20 leads in early research and are maintaining a current portfolio of 60 active ingredients. The breeding lifecycle, shown in the middle column, is very different. It is rapid and demands a high number of launches every year. We accomplish this in 8 major crops with more than 500 launches every year. In GM traits, shown on the right, there is some uncertainty relating to market growth short term, given trait saturation in some markets and crops, and the technology acceptance challenges in others. Longer term this market continues to offer significant opportunity, and we have 22 leads either in late research or with late research potential. These three technology pipelines together ensure the flow of innovation to the market for many years to come. 3

4 Slide 9 Evolution of R&D spend by capability There are 3 important things on this slide: We have steadily invested in our three pipelines even through difficult market conditions. And we have achieved a lot with this investment. Our chemistry pipeline has been maintained and, in recent years, substantially rejuvenated. In GM traits, we have built development capability that has translated a strong trait research pipeline into registrations and a trait product portfolio. We have also built a global breeding platform in seeds. Latterly we have dedicated a small proportion of total R&D spend specifically to new technologies. And while doing all of that, we have been working to keep total R&D as a percentage of sales below 10 percent. Slide 10 Syngenta R&D is the most productive in the industry Over the last 10 years, Syngenta has emerged as an effective leader in terms of R&D investment. The left hand column on the chart shows cumulated sales for crop protection and seeds combined. The middle column shows cumulated R&D expenses over the same period. The third column divides the sales number by the R&D number and shows that Syngenta has outperformed the peer group, generating 10 dollars and 70 cents for every dollar invested in R&D. Slide 11 New launches and lifecycle management bring share gain Between 2008 and 2014 in Crop Protection we launched on average one new active ingredient a year with a focus on blockbuster opportunities. At the same time, our excellence in formulation and lifecycle management enabled us to launch more than 600 new products globally. This, together with our expansion in emerging markets, has helped us lead the ranks in terms of market share gained in Crop Protection over the last 10 years, while our major competitors remained essentially flat. 4

5 Slide 12 Seeds: leading innovator in trait technology Turning now to seeds. In Corn, we are one of only two companies to have developed a complete independent trait platform including comprehensive above and below ground insect control, herbicide tolerance and Refuge-in-a-bag. We have already demonstrated our ability to license our technology to other seeds majors and will continue to seek licensing opportunities, through our Greenleaf Genetics subsidiary; and of course through our branded seeds business. With Chinese approval opening the way for an expansion of VIPTERA, we expect corn trait revenue and royalty income to more than double between 2015 and With these proof points I put it to you that we are the most innovative R&D engine in the industry. But what about R&D productivity? Slide 13 Crop Protection: R&D productivity increasing Let s start with crop protection. The chart shows the three phases we have been through since Syngenta s formation. In the post-merger period, although we were busy realizing synergies, we still brought 4 new AIs to market. The average size though, expressed as sales per launch, was relatively small. What we stand proud of is the subsequent two phases, which show us not only broadly sustaining the pace of introductions, but also increasing the quality of those launches: more sales per launch. This has resulted in a two fold increase in sales potential, from one to two billion dollars. You will hear more about our blockbuster strategy later. Slide 14 Rate of innovation accelerating And the rate of innovation is increasing. Our short term pipeline to 2020 shows us sustaining the level of innovation in terms of both number of launches and the focus on blockbusters. Then looking ahead to 2021 and 2022, we have six launches scheduled in just two years, still maintaining a high level of sales per launch. 5

6 Slide 15 Innovation overview With several launches successfully accomplished over the last four years, our pipeline going forward is well positioned for share gain. SOLATENOL, the active ingredient for ELATUS is the most effective SDHI chemistry in the market today. And our global market leadership in Fungicides will be further reinforced with introduction just announced of ORONDIS and, most importantly, the forthcoming launch of ADEPIDYN, another blockbuster. ELATUS in 2014, ACURON in 2015 and ADEPIDYN in 2016 that s three blockbuster launches in three years, with very substantial sales potential for the rest of the decade. Looking further ahead, Lead 1 is an insecticide that will set a new standard for insect control. And our lead 2 herbicide will ensure that we maintain our leadership in corn herbicides following the launch of ACURON this year. Multiple Seedcare launches across crops will further strengthen our position in this high margin business. Slide 16 ADEPIDYN: the next SDHI blockbuster I d now like to talk about ADEPIDYN in a bit more detail and to outline the reasons for our confidence in its peak sales potential of over 750 million dollars. This really is the Swiss army knife of fungicides. Using our understanding of mode of action, structure activity and our foresight of regulations we have very purposefully designed a chemical which will meet the criteria of full registrability across all four regions as shown on the chart. Our standard practice for forecasting is to assume 10 years to peak sales, but the time is frequently shorter at 3 to 5 years. Because the disease spectrum and potency of ADEPIDYN are broad, including fusarium, we can guarantee its applicability across multiple crops. And it has been designed to be manufactured at low cost, with COGS optimization five years from launch. This contributes to forecast free cash flow break even three years from registration and a net present value of around 1.2 billion dollars. 6

7 Slide 17 Track record of delivering GM traits Turning now to our productivity in GM traits. In the post-merger years, we had a rich pipeline but lacked a route to market. From 2005 we built the development and regulatory capability that successfully delivered AGRISURE RW, VIPTERA, DURACADE and ENOGEN to market. The number of traits launched per year as well as the average size has increased, and over the last seven years, our rate of innovation has surpassed any competitor. The industry is about to experience a pipeline gap in R&D with the next significant new technical solutions likely to come to market in the next decade. When the next phase of trait innovation commences, we will be at the forefront, as the next slide shows. Slide 18 Rich early pipeline and strong biotechnology platform There are several areas of value opportunity. The first goes back to resistance and the consequent need to replace traits. Our pipeline includes new traits for corn rootworm and broad lepidoptera, as well as a new herbicide tolerance trait. We have the capability to extend herbicide tolerance and insect control traits to additional crops such as sugar cane. We also plan to bring to market new traits for sucking insects not currently controlled by GM technology, and to introduce a solution for soybean rust. This will be a major breakthrough as currently there are no scalable disease control traits on the market. Abiotic traits are also an important focus, with our primary targets being yield increase and drought tolerance in corn and soybean. 7

8 Slide 19 More than 20 Corn trait leads in research: 10 already in late research Here you see a description of some of our key pipeline traits. Ten are already in late research, and a further 12 have late research potential with advancement due in the next 12 months. I m not going to go into the detail now, but there are a number of my colleagues here today who will be more than happy to answer your questions. As I said, the industry s next wave of traits is some years out, but I am confident that Syngenta has the platform and the capabilities to continue delivering leading trait innovation to market. Slide 20 Hybrid wheat: game-changing non-gm technology with peak sales potential >$3bn Now to our breeding pipeline and Hybrid wheat. Wheat is the largest crop in the world and hybridization will revolutionize the way it is grown without the need for GM technology, opening up a huge market opportunity. Our key claims in wheat: We have the strongest germplasm in the industry because we have leading expertise in breeding. We have demonstrated the yield performance of hybrid wheat. And the robustness of the sterility system. And very importantly we will apply our experience in hybrid barley to these proof points and develop and scale our seed production capability. We expect to launch the first products at the end of this decade with a rapid ramp up in sales from 2025 onwards. 8

9 Slide 21 Leverage in R&D: platforms enable flexible use of expertise and resources Turning now to leverage in R&D. You are all familiar with Syngenta s Accelerating Operational Leverage program, and I d like to give you 3 examples of how implementation is improving productivity and innovation in R&D. The first example is leverage through platforms: What does this mean? Instead of having 2 Portfolio management teams, 2 Product Safety and Regulatory teams and 2 Field biology assessment teams, we have created one platform from each to serve the R&D of our 3 pipelines. You will hear from my colleagues about how this improves Syngenta s innovation and delivery potential but I want to just share a few examples of the cost benefits this platform leverage has driven. In portfolio management, we have combined the crop protection and seeds teams resulting in a 20% reduction in employees. In Product safety and regulatory, we are outsourcing more than 50 percent of re-registration activities, and we have achieved a product safety cost per active ingredient that is 33% below the industry average. And in biological assessment, the consolidation of sites across crops has resulted in a 40 million dollar cost saving. Slide 22 Leveraging technology in genetics, chemistry and computational science The second example is leveraging our technologies. As a result of integrating our Breeding, Traits and Chemical Innovation engines into One R&D organization we have also unlocked a way to innovate better by using genetics, chemistry and computational science to design better molecules as well as to identify gene targets. We can use chemistry to design a molecule that fits exactly into receptors: to target the mode of action. But to do this you need really good understanding of the receptor and the genes code for the proteins that make the receptors. Using computational modelling we can see the way that the protein gets folded and design the right molecular key that will activate a target. The example I show here is how we use this approach to design resistance breaking chemicals. When weeds become resistant to existing chemistry, the chemical key the herbicide no longer fits the target lock the resistant weed because the shape of the target has changed. We can use our knowledge to design a new herbicide that does fit and knowledge about mode of action is also used to design safer molecules and to identify drought-tolerant genes that can be expressed in plants. 9

10 Slide 23 Leveraging our breadth and global crop presence In seed breeding we have turned our crop breadth and global presence into an advantage. There are five categories of attributes in seed breeding: product quality, pest and pathogen resistance, yield potential or heterosis, yield stability, and hybrid seed production. We can leverage cross-crop platforms to benefit multiple crops. For corn, for example, hybrid seed production and yield potential and stability are the dominant dimensions, and we have applied the breeding methodology and approaches developed principally for corn in North America more broadly and successfully across crops and across geographies. You will hear more about that later. Slide 24 Our claims today Let me summarize our claims today. There is continued grower demand for innovation and long term scope for value creation through technology. Syngenta R&D is the most innovative and productive in the industry, as evidenced by our chemistry pipeline of nine new active ingredients and a corn trait pipeline with multiple early and late research leads. We are accelerating the rate of innovation while improving productivity. And we have many opportunities to leverage platforms, technologies and our breadth to ensure we continue to be the most productive innovation engine in the industry Syngenta AG, Basel, Switzerland. All rights reserved. The SYNGENTA Wordmark and products in uppercase are trademarks or registered trademarks of a Syngenta Group Company 10