Abstract
Bayer Seeking to Acquire Monsanto
On May 23, 2016, Bayer AG made public the terms of a $62 billion offer to acquire Monsanto Co. If Bayer were to acquire Monsanto, Bayer would then have the world's largest seed and pesticide business: the goal, according to Bayer, is to create a “truly global agriculture leader” by combining Monsanto's world leading position in crop genetics and seeds with Bayer's powerful pesticide operations. As of the writing of this article (May 28, 2016), Monsanto had rejected the offer, calling it “incomplete and financially inadequate”—a rejection that leaves the door open for further discussion, since Monsanto also indicated that it is “open to continued and constructive conversations” and that a combination of the two entities could have “substantial benefits.”
The stock market is overall ambivalent about the deal: when the offer was announced, Monsanto's shares rose 4.4% on the anticipated upside to that company from the deal, but Bayer's shares declined 5.7% amid concerns about the costs and financing of the deal and the resulting (if it were to go through) integration. The results therefore were a mixed bag; the share price decline for Bayer was not a dramatic one, showing that analysts and investors recognize potential synergy in the deal, but have concerns about the costs and complexities of a combination of two such mammoth organizations and their disparate corporate cultures.
India Nearly Restricts Biotechnology Firms’ Rights, Royalties
On May 18, 2016, India's government promulgated an order that would restrict royalty rates for genetically engineered seeds, like Monsanto's B. thuringiensis (Bt) cotton, capping royalties at 10% for five years then decreasing them annually after that. The order would also compel seed manufacturers to grant licenses to any eligible seed makers who want access to the technology. The ostensible goal is to help Indian farmers who have suffered through two cycles of droughts.
However, the goal of helping farmers is in opposition to India's other, and often stated, goal, of increasing agricultural production. The heavily populated nation needs its agricultural sector to be as efficient as possible; however, since one of the key drivers of agricultural efficiency is genetically modified (GM) seeds engineered for higher yields, greater pest or disease resistance, and/or drought tolerance, anything which disincentivizes biotechnology companies from developing new seeds or selling them in India will make increasing agricultural production more difficult. And the disincentivizing effect was seen immediately: e.g., Monsanto India's share declined 8.5% after the order was announced.
That is likely why—or at least a component of why—the government then backed off from its own proposal a few days later. It did so after Monsanto diplomatically threatened to “quit India”: for example, Monsanto India Region Chief Executive Officer (CEO) Shilpa Divekar had previously warned that if there were “a sharp, mandatory cut in the trait fees paid on BT-cotton seeds,” the company would have to “re-evaluate every aspect of our position in India.” Someone in India's government evidently took that threat—that faced with a sufficient reduction in profitability, Monsanto (and potentially other companies like it) would reduce or potentially even ultimately eliminate its India presence—seriously enough that the implementation of the order has been put on hold for now.
Santa Cruz Biotechnology to Pay Record Animal Welfare Act Fine and Get Out of Antibody Business
Santa Cruz Biotechnology has been dogged by allegations and government investigations of animal cruelty for over a decade, beginning in 2005. Allegations include that its animals were “willfully” denied proper medical care and/or suffered significant delays in receiving medical care, and that dying animals were summarily shot rather than properly and humanely euthanized. The allegations took on an even darker hue when it was discovered in February 2016 that thousands of Santa Cruz animals have simply disappeared. What happened to them remains unclear to this day.
Santa Cruz neither officially admits nor denies any wrongdoing. But as part of the settlement of the allegations against it, Santa Cruz has agreed to surrender its license as a dealer of antibodies and to also give up its registration as an animal research facility. This effectively takes Santa Cruz out of the antibody business it had dominated: in 2012, for example, more than half of all labs using antibodies obtained them from Santa Cruz. The company also agreed to pay a record-setting $3.5 million fine—the largest ever under the Animal Welfare Act. So while Santa Cruz may not explicitly admit any wrongdoing, in this author's experience, 1 companies do not pay multi-million dollar fines and give up businesses if they did nothing wrong.
Biotech Sector Performs Better in March and April 2016, but Its Recovery Still Lags Broader Market
The S&P500 and Nasdaq experienced significant corrections several months ago, experiencing, respectively, 15% and 20% declines. Biotech, however, at least as measured by an Exchange-traded fund (ETF) which tracks the Nasdaq's Biotech Index, declined 40%. That steep decline makes the recent (March and April 2016) gains welcome: the ETF gained 21% over those two months, cutting the decline approximately in half. That said, even with this gain, the biotech sector is still lagging the broader market. Biotech, as a capital-intensive field, is more vulnerable than many other market sectors to vagaries of funding and access to capital; problems with capital availability in 2015 drove biotech down further than other market segments.
Reanimator, Anyone?
Ever since Mary Shelley's Frankenstein, conquering death has been the ultimate goal of much medical and biotechnology research. While immortality is still a long way off—if possible at all—if U.S.-based Bioquark has its way, we'll be taking another step on that road. The biotech company has received approval to test techniques designed to regenerate neurons on brain-dead human subjects. Bioquark researchers will inject the “dead” brains with stem cells while simultaneously using lasers and nerve-stimulation techniques in a multi-modal effort to spur regeneration of nerve tissue.
According to Bioquark CEO Dr. Ira Pastor, “This represents the first trial of its kind and another step towards the eventual reversal of death in our lifetime. We just received approval for our first 20 subjects and we hope to start recruiting patients immediately … To undertake such a complex initiative, we are combining biologic regenerative medicine tools with other existing medical devices typically used for stimulation of the central nervous system, in patients with other severe disorders of consciousness.”
Dr. Pastor hopes to “see results within the first two to three months.”
Regenerating dead brains … science fiction? Maybe yes, maybe no—many things formerly only the province of yesterday's science fiction are today's science fact, and if there's a more worthy goal for biotechnology than pushing back the frontiers of death, it's difficult to conceive of it. Let's be grateful, though, that the good doctor's name is not Herbert West.