COMPANY PROFILE Aventis corporate headquarters in Strasbourg France. AVENTIS ndash; A NEW LEADER IN LIFE SCIENCES Brian Hicks editor of the business newsletter Crop Protection Monthly visited Strasbourg recently to find out how Aventis has been faring so far Aventis has a lean and efficient feel about it; not surprising when improvement of profitability was one of the key driving forces behind its formation. There are ten on the supervisory board four on the board of management and an eight-strong executive committee. Competition in the life sciences is not getting any easier and Aventis is currently battling with Monsanto over several patent issues related to agricultural biotechnology. The share of Aventis held by the Kuwait Petroleum Corporation (the largest individual shareholder in Hoechst AG) is expected to be 13ndash;14 but otherwise there are no large shareholders in the new company.Aventis employees are expected to own 6ndash;8 of the company shares. Introduction From the first public announcement of its conception on 1 December 1998 to its formal creation on 15 December 1999 it took just over a year for Aventis to be born primarily from the life science interests of the French company Rhocirc;ne-Poulenc SA and the German giant Hoechst AG. This was somewhat longer than the nine months it took for Novartis formed 3 years earlier (23 December 1996) from the union of Ciba-Geigy and Sandoz. Aventis has over 90,000 employees in some 120 countries. It had pro-forma sales of EUR20.5 billion in 1999.About 25 of this was derived from agriculture (mostly from pesticides). The merger of the crown jewels of the French chemical industry and one of Germanyrsquo;s three c h e m i c a l supergiants was a politically more delicate manoeuvre than the marriage of the two Swiss neighbours in Basel. The choice of Strasbourg France as the new corporate headquarters of Aventis reflects the main origins of the company and the reconciliation of historic enmities. Perched as it is on the French border with Germany next to the River Rhine it has ldquo;swapped nationalitiesrdquo; on numerous occasions in the past and has a ldquo;hybridrdquo; feel about it reflected in local words and speech. Strasbourg is also the part-time home of the European Parliament. The company language for Aventis is English and the accounts are done in Euros.The brand new headquarters building which houses some 150 staff is situated in a European business park on the outskirts of Strasbourg part of the so-called bio-valleacute;e the concentration of life sciences companies that is developing along the Rhine Valley. Getting the chemistry right Juuml;rgen Dormann chairman of the management board of Aventis expects that it will take two to three years to create a new company culture. Great strides have been made already starting ldquo;from the top downwardrdquo;. Herr Dormann has a visibly good rapport and personal chemistry with the vice-chairman Monsieur Jean-Reneacute; Fourtou and the rest of the top management. The two other management board members are Igor Landau also chairman of the supervisory board of Aventis Pharma AG and Horst Waesche chairman of the supervisory board of Aventis CropScience SA.At the highest management levels there is inevitably a preponderance of Germans and French although the CEO of Aventis Pharma is an American Richard Markham. Some 25,000 employees work in France 12,000 in Germany and 16,000 in the US. The philosophy of the company is to attract the best people regardless of nationality and the best ideas and innovations whether internal or external. Aventis has gone through a careful process to integrate its staff effectively although there have inevitably been major job losses and redundancies as well as closures of prestigious sites such as the crop protection Ramp;D centre at Chesterford Park in the UK.All of the staff went through an application procedure for jobs with the new company and a good balance between the two merging partners looks to have been achieved. Some 160 working groups involving 1600 employees were involved in the process. Some of that philosophy and thinking is contained in a thoughtful new Aventis publication Our Challenge is Life which also muses on the emergence of biological sciences as a more potent force than pure chemistry. Pharmaceuticals accounted for 75 of 1999 pro-forma sales for Aventis and agriculture for 25. In the medium 116 Pest ic ide Outlook ndash; June 2000 Map showing Aventis research sites worldwide term pharma will account for 80 of sales. The US market will become more prominent in the longer term when it is expected to contribute 40 of Aventis sales up from 25 now in line with the US share of the world pharmaceuticals market.For Aventis CropScience also the US will contribute a growing proportion of sales. COMPANY PROFILE l Aventis CropScience (76 owned by Aventis SA 24 by Schering AG) grouping together the crop protection and crop production interests of AgrEvo and Rhocirc;ne-Poulenc Agro l Aventis Animal Nutrition which is expected to be sold off l Merial the animal health joint venture with Merck. Aventis CropScience has three business lines crop protection from which most current sales are derived; seed and crop improvement; and environmental science (principally turf and amenity products).The Stefes and other generic pesticide businesses are being wound up with some Agriculture and crop protection Aventis Agriculture is comprised of three parts Aventis CropScience CEO Alain Godard (left) and Deputy Gerhard Prante (right) Pes tic ide Outlook ndash; June 2000 1 1 7 COMPANY PROFILE Table 1. Leading Aventis CropScience brands by 1998 sales (EUR million) Sales Active Ingredient Brand CSIRO Rhobio (joint venture with Biogemma) Table 2. Major Aventis partnership agreements and alliances in plant biotechnology. Genoplant Gabi Zigia collaborative programs in France and Germany. insect and disease resistance traits cotton fibre quality transformation of crops functional genomics fenoxaprop-ethyl aldicarb bromoxynil various glufosinate deltamethrin iprodione fipronil fosetyl-Al Puma Temik Buctril Betanal Basta/Liberty Decis Rovral Regent Aliette maize genome insect resistance Gene Logic Lynx Institute of Molecular Agrobiology Singapore Celera CNRS CIRAD 20.Some will disappear from the market whilst others could be sold off to third parties. The speed at which this occurs will depend on external factors such as the European pesticide re-registration process. Aventis CropScience currently has 14 new chemical entities at various stages of development and is aiming to bring two new compounds per year to the market with at least one targeted for Europe. Aventis CropScience has the capability of screening 600,000 compounds per annum and aims to take the figure above a million.Ten pesticide brands accounted for some 34 of Aventis CropScience sales in 1998 (Table 1) and will account for more than 40 of sales in 2002. Most of these are tried and tested products that have been on the market for over 15 years but future growth will come mainly from newer products. Sales of new products only made up 15 of sales in 1998 but this proportion should reach 50 by 2005. The three ascendant stars in the Aventis CropScience portfolio are the insecticide Regent (fipronil) the maize herbicide Balance (isoxaflutole) and the herbicide Liberty (glufosinate). Sales of fipronil in particular are growing very strongly and together with sales outside crop protection in applications such as animal health and cockroach control it should soon overtake imidacloprid to become the top-selling insecticide globally.Another insecticide from the fiprole family is also nearing commercialisation. 262 178 159 156 149 144 126 122 101 of the products being integrated into the Aventis Keyline range. Aventis is the crop protection market leader in Europe (where it has about 24 market share) and Latin America (13 market share) number two in Asia-Pacific (11) and number four in North America (12). The company is also the global market leader in insecticides (17 share) second in fungicides (15) and third in herbicides (13). Aventis CropScience has seven Ramp;D sites in France (2) the UK Belgium Germany USA and Japan (see map).It has 21 production sites divided between France (5) USA (5) Germany (5) UK (3) India (2) and China (1). Aventis Crop Science is also the leader in non-agricultural uses of agrochemical products in the areas of public health and hygiene (control of termites cockroaches flies mosquitoes locusts etc.) materials protection and turf amenity care. The Franco-German company origins are reflected at the top of Aventis CropScience. The CEO is Alain Godard (former head of Rhocirc;ne-Poulenc Agro) and his deputy Dr Gerhard Prante (former head of AgrEvo) and they both share the same office. National subsidiaries such as the UK Germany and France have considerable autonomy with Hans von Olfers acting as a European co-ordinator from the Aventis CropScience regional office in Frankfurt.Some 90 of the targeted EUR130 million cost savings or ldquo;synergiesrdquo; in Aventis Agriculture have already been achieved. For Aventis CropScience 1999 was a difficult year with the global market declining by 5. Pro-forma sales fell slightly to EUR4055 million but EBITDA (Earnings before Interest Taxes Depreciation and Amortization) was stable. Aventis expects a recovery in crop science by 2001. It is concentrating on high-return projects to increase gross margins with a target of over 70. The structure of Aventis is such that the agricultural interests could be spun off quite easily but for the time being the companyrsquo;s commitment is very strong. This is not entirely surprising when you consider that it has a global market share of over 15 similar to Novartis.Role of biotechnology The acceptance of genetically modified crops is crucial for the future planning and investment strategies of companies such as Aventis CropScience. It sees its long-term future in biotechnology-based seed and crop improvement and is already the leading breeder of oilseed rape varieties globally. Of its EUR460 million Ramp;D spend in 2000 some 15ndash;20 will be devoted to plant biotechnology. In addition to its own internal research Aventis has set up several partnership agreements and alliances in plant biotechnology (Table 2). However seeds and biotechnology are only a very small part of current Aventis CropScience sales some 6 in 1999 but this should grow to 15 by 2005. For further information on Aventis CropScience see http://www2.aventis.com/cropsc/cro_main.htm. Broad crop science portfolio One of the strengths of Aventis CropScience is its wide range of products although there are too many brands to manage effectively in the long term. The company has decided to reduce the 64 active ingredients in its portfolio by some 118 Pestic ide Outl ook ndash; June 2000
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