Agrow Report On Agrochemicals

Agrow’s Complete Guide to Generic Pesticides: Volume III – Business Strategies (2007 Edition)

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Agrow’s Complete Guide to Generic Pesticides: Volume III – Business Strategies (2007 Edition)

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Executive Summary

Generic Pesticides: Volume III – Business Strategies

EXECUTIVE SUMMARY This report is the third in a set of three investigating the current state of the generic pesticide industry and market. This first report contains profiles of 100 of the most important generic pesticide companies in the world today. The second report contains profiles of 100 of the most important generic pesticide ais. The third report provides a detailed analysis of the generic pesticide market and industry, and explores the forces that will drive the development of the generic pesticide industry over the next few years. These three reports are updated editions of reports on the generic pesticide industry that Agrow published first in 1998 and then, as new editions, in 2001 and 2005. This third report contains an analysis of the generic pesticide market and industry, building on the information presented in the first two reports. It includes a complete update on significant changes in the global market since the previous publication in 2005. It provides a review of the major national generic pesticide markets and a discussion of the various business strategies adopted by generic pesticide companies, both in terms of competing with each other and with the major R&D-based agrochemical companies. The report also contains an analysis of the ways in which the major agrochemical companies try to maintain their market share after an ai has come offpatent, including finding ways to delay the manufacture of the ai by generic pesticide companies. The report also contains a review of future generic pesticide targets. The report explores the current and future forces driving the development of the generic pesticide industry. Such forces include: the consolidation of the agrochemical industry and the associated divestment of pesticide products and businesses; patent issues, especially data protection; ai re-registration initiatives in the EU and US, and the forced withdrawal of certain generic ais in these markets; and the efforts of industry associations.

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Executive Summary

Generic Pesticides: Volume III – Business Strategies

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Table of Contents

Generic Pesticides: Volume III – Business Strategies

CONTENTS CHAPTER 1

OVERVIEW 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8

CHAPTER 2

CHAPTER 3

Background to reports Outline of Companies report Outline of Products and Markets report Outline of Market and Industry Analysis report Information sources Introduction to Market and Industry Analysis report Current state of the global generic pesticide market and industry Future prospects for the generic pesticide industry

7 7 9 10 10 11 12 13

INDUSTRY DEVELOPMENTS 2005–07

15

2.1 2.2 2.3 2.4

Pesticide markets Mergers & acquisitions New products Regulatory issues

15 16 19 20

GENERIC PESTICIDE COMPANIES

27

3.1 3.2

27 30 31 38 38 38 40 40 41 42 43 43 44 44 44 45 46

3.3 3.4

3.5 3.6 CHAPTER 4

7

Origins of generic companies Development and growth of generic companies 3.2.1 Generic company business strategies R&D-based company business strategies Strategies to counter generic competition 3.4.1 Patents 3.4.2 Legal challenges 3.4.3 Price reductions 3.4.4 New formulations and mixtures 3.4.5 New ais and single isomers 3.4.6 Manufacturing processes 3.4.7 Controlling raw material supplies 3.4.8 Acquiring or forming generic businesses 3.4.9 Selling off-patent products 3.4.10 Regulatory restrictions Competition between generic and R&D-based manufacturers Competition between generic companies

GLOBAL GENERIC AGROCHEMICAL MARKET

51

4.1

54 54 56 56 59 60 60 60 60 61 61 61 63 68

4.2

4.3

North America 4.1.1 United States 4.1.2 Canada Europe 4.2.1 France 4.2.2 Germany 4.2.3 Italy 4.2.4 Spain 4.2.5 UK 4.2.6 Eastern Europe Asia-Pacific 4.3.1 Japan 4.3.2 China 4.3.3 India

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Table of Contents

Generic Pesticides: Volume III – Business Strategies

4.4 CHAPTER 5

4.4 South America 4.4.1 Brazil

FUTURE GENERIC PESTICIDE TARGETS 5.1.1 5.1.2 5.1.3

CHAPTER 6

71 72 75

Future herbicide targets Future insecticide targets Future fungicide targets

75 77 79

ROLE OF INDUSTRY ASSOCIATIONS 6.1.1 6.1.2 6.1.3 6.1.4 6.1.5

83

ECCA CPDA PMFAI CCPIA AENDA

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List of Tables

Generic Pesticides: Volume III – Business Strategies

LIST OF TABLES Table 1.1 Table 1.2

List of profiled generic pesticide companies List of 100 generic pesticide ais

Table Table Table Table Table

Country pesticide markets by value ($ million) Company acquisitions made by generic pesticide companies since 2000 Number of producers in 2005 and 2007 Generic ais approved by European Commission Generic ais withdrawn by European Commission

15 17 20 22 23

Origins of the 100 companies profiled in the first report Main business strategies adopted by 100 companies profiled in the first report Pesticide businesses acquired by generic pesticide companies from R&Dbased agrochemical companies since 2000 Most popular post-patent ais by number of generic manufacturers

28

2.1 2.2 2.3 2.4 2.5

Table 3.1 Table 3.2 Table 3.3 Table 3.4

8 9

32 36 48

Global pesticide sales by region, 2006 ($ million) Geographical spread of companies profiled in the first report Top 50 generic pesticide companies by sales US pesticide sales by crop, 2006 ($ million) List of European manufacturers profiled in Volume 1 by country List of Asia-Pacific manufacturers profiled in Volume 1 by country (not including China and India) Japanese agrochemical sales by crop, 2005–06 Pesticide usage in China, 2002 List of Chinese manufacturers profiled in Volume 1 Top five Chinese and foreign pesticide manufacturers by sales ($ million) List of Indian manufacturers profiled in Volume 1 Top five Indian pesticide producers List of South American manufacturers profiled in Volume 1

61 62 64 65 66 69 70 71

Table 5.1 Table 5.2 Table 5.3

Significant new herbicides reported and commercialised, 1995–2006 Significant new insecticides reported and commercialised, 1995–2006 Significant new fungicides reported and commercialised, 1995–2006

76 79 81

Table 6.1 Table 6.2

ECCA member companies List of companies profiled in Volume 1 that are members of the PMFAI

84 88

Table Table Table Table Table Table

4.1 4.2 4.3 4.4 4.5 4.6

Table Table Table Table Table Table Table

4.7 4.8 4.9 4.10 4.11 4.12 4.13

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List of Tables

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Abbreviations

Generic Pesticides: Volume III – Business Strategies

ABBREVIATIONS ai

active ingredient

BCPC

British Crop Protection Council

CFL

Coromandel Fertilisers

CPT

Chemical Products Technologies

DPPQS

Directorate of Plant Protection, Quarantine and Storage (India)

ECCA

European Crop Care Association

ECPA

European Crop Protection Association

EFSA

European Food Safety Authority

EPA

US Environmental Protection Agency

FAO

UN Food and Agriculture Organization

FIFRA

Federal Insecticide, Fungicide and Rodenticide Act

FQPA

Food Quality Protection Act

GLP

Good Laboratory Practice

GM

Genetically modified

ICAMA

Institute for the Control of Agrochemicals (China)

ISI

Isagro Sipcam International

OECD

Organisation for Economic Co-operation and Development

OPP

EPA’s Office of Pesticide Programs

PMFAI

Pesticides Manufacturers and Formulators Association of India

SCFCAH

European Commission’s Standing Committee on the Food Chain and Animal Health

TRIPs

Trade-Related aspects of Intellectual Property rights

UPL

United Phosphorus

WTO

World Trade Organization

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Abbreviations

Generic Pesticides: Volume III – Business Strategies

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Chapter 1: Overview

Generic Pesticides: Volume III – Business Strategies

CHAPTER 1 OVERVIEW 1.1

Background to reports Generic pesticides and the companies that produce them are becoming an increasingly important part of the agrochemical industry. A combination of the general decline in the discovery of new pesticide active ingredients (ais) and the steady loss of patent protection on existing ais means that the generic pesticide industry is growing faster than the R&D-based agrochemical industry. This growth is in terms of both numbers of available ais and total sales. There are no authoritative figures available for the size of the generic pesticide industry, but in 1996 it was estimated to account for around 10% of the global agrochemical industry. Now it is likely to account for 20–30% of the global agrochemical industry, which means that it generates annual sales of $6,400–$9,600 million. This report is the first in a set of three investigating the current state of the generic pesticide industry and market. This first report contains profiles of 100 of the most important generic pesticide companies in the world today. The second report contains profiles of 100 of the most important generic pesticide ais. The third report provides a detailed analysis of the generic pesticide market and industry, and explores the forces that will drive the development of the generic pesticide industry over the next few years. These three reports are updated editions of similar reports on the generic pesticide industry that Agrow published first in 1998 and then, as new editions, in 2001 and 2005. In this current edition, a generic pesticide company is defined as a company, or a division of a company, that undertakes as part of its business the manufacture of pesticide ais for which the patents have expired. In the last edition of this report, this definition was extended to cover Monsanto, as it generates the majority of its pesticide sales from post-patent ais, albeit ones that it developed. However, as almost all the major R&D-based crop protection companies now generate a great deal of their sales from postpatent ais, in this edition only pesticide companies producing post-patent ais that they did not originally develop are included.

1.2

Outline of Companies report The 100 companies profiled in the first volume are listed in Table 1.1. In deciding which generic pesticide companies to profile, the main criterion used was generic pesticide sales, and for the top 50 companies this proved to be the only necessary criterion. However, less than 20 generic pesticide companies currently generate annual sales of over $100 million, while hundreds of companies generate sales under $100 million (most have sales below $20 million). Deciding which of these companies to profile proved much more difficult, especially as sales figures for many of these companies were unavailable. The author chose the bottom 50 companies based on criteria such as strength of a company’s product portfolio, number of employees, production capacity and the quality and quantity of information available. Information was obtained from company web sites, stories that have appeared in Agrow and by

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Chapter 1: Overview

Generic Pesticides: Volume III – Business Strategies

contacting companies directly. As such, the author is confident that the 100 profiled companies provide an accurate picture of the current state of the generic pesticide industry

Table 1.1: List of profiled generic pesticide companies Company name

Country

Company name

Country

AgriGuard Agripec Agro-Chemie AgroDragon AH Marks Aimco Pesticides Albaugh Amvac Atabay Atul Baocheng Chemical Industry Baoling Chemical Barclay Chemicals Bharat Group CAC CCI Group Cequisa Cerexagri Changqing Agrochemical Changxing Zhongshan Chemet Chemicals Chemia Cheminova Coromandel Fertilisers Dacheng Pesticide Dhanuka Pesticides Dongbu Fine Chemicals Excel Crop Care Feixiang Chemical Fersol Fujian Sannong Gharda Chemicals Good Harvest

Ireland Brazil Hungary China UK India US US Turkey India China

Isagro Jiangshan Agrochemical Jiangsu Suhua Group Jiangsu Yangnong Chemical Jingma Chemicals Kangmei Chemical Kenso Lanxi Agrochemical LG Life Sciences Limin Chemical Luxembourg Industries

Italy China China China China China Malaysia China South Korea China Israel

China Ireland India China China Spain US China China India Italy Denmark India China India South Korea India China Brazil China India China

Israel India India China Australia China Romania Poland India Canada Slovenia Indonesia India China Mexico India China Argentina Hong Kong India China China

Green Agrosino Greenchem Industries Heben Pesticide Hektas Henglong Pesticide Heranba Herbos Hikal Hindustan Insecticides Hisun Chemical Huaxing Chemical Hui Kwang India Pesticides Indofil Inquiport Iprochem IQV

China China China Turkey China India Croatia India India China China Taiwan India India Venezuela China Spain

Makhteshim-Agan Meghmani Organics Nagarjuna Nanjing Agrochemical Nufarm Nutrichem Laboratory Oltchim Organika-Sarzyna PI Industries Pilarquim Pinus PT Petrosida Gresik Punjab Chemicals Qingfeng Agrochemical Quimica Lucava Rallis Red Sun Reposo Rotam Sabero Organics Sanonda Shandon Qiaochang Chemical Shandong Vicome Greenland Shenghua Biok Sinochem Ningbo Sinon Sipcam-Oxon Suzhou Worldbest Taminco Tecnomyl Tekchem Tide Group United Phosphorus Wangs Xinan Chemical Yancheng Limin Yongnong Chemical Zagro Zibo Nab Agrochemicals

China China China Taiwan Italy China Belgium Paraguay Mexico China India China China China China Singapore China

Note: Country refers to location of headquarters of main pesticide business.

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Chapter 1: Overview

Generic Pesticides: Volume III – Business Strategies

Each company profile contains contact details for the company, followed by a one paragraph overview of the company and its activities. The profile then consists of: a more detailed description of the company and its background; a figure for its annual pesticide sales; a list of the main generic pesticide ais that it manufactures; details on its manufacturing and R&D facilities; a list of its major joint ventures and agreements with other companies; and a short section on the company’s strategy and outlook. Not all of these sections will appear in every company profile.

1.3

Outline of Products and Markets report The 100 ais profiled in the second volume are listed in Table 1.2. The criteria for selecting these included the number of generic companies manufacturing each ai, annual sales and usage figures, and how recently the ai lost its patent protection.

Table 1.2: List of 100 generic pesticide ais Active ingredient

Activity

Active ingredient

Activity

2,4-D abamectin acephate acetamiprid acetochlor alachlor ametryn amitraz atrazine benomyl bensulfuron-methyl bentazone bifenthrin bromoxynil buprofezin butachlor captan carbendazim carbofuran carbosulfan chlorothalonil chlorpyrifos chlorsulfuron clomazone cyfluthrin cyhexatin cymoxanil cypermethrin (and alpha-cypermethrin) deltamethrin dicamba dichlorvos diclofop-methyl dicofol dimethoate diuron emamectin endosulfan epoxiconazole ethion fenoxaprop-P-ethyl

Herbicide Insecticide Insecticide Insecticide Herbicide Herbicide Herbicide Insecticide Herbicide Fungicide Herbicide Herbicide Insecticide Herbicide Insecticide Herbicide Fungicide Fungicide Insecticide Insecticide Fungicide Insecticide Herbicide Herbicide Insecticide Insecticide Fungicide Insecticide

ioxynil isoproturon kresoxim-methyl lambda-cyhalothrin linuron malathion mancozeb maneb MCPA metalaxyl metamitron methamidophos methomyl metolachlor metribuzin metsulfuron-methyl molinate monocrotophos myclobutanil nicosulfuron oxyfluorfen paraquat parathion-methyl pendimethalin permethrin phorate phosphamidon pretilachlor

Herbicide Herbicide Fungicide Insecticide Herbicide Insecticide Fungicide Fungicide Herbicide Fungicide Herbicide Insecticide Insecticide Herbicide Herbicide Herbicide Herbicide Insecticide Fungicide Herbicide Herbicide Herbicide Insecticide Herbicide Insecticide Insecticide Insecticide Herbicide

Insecticide Herbicide Insecticide Herbicide Insecticide Insecticide Herbicide Insecticide Insecticide Fungicide Insecticide Herbicide

prochloraz profenofos prometryn propamocarb propanil propargite propiconazole pyrazosulfuron ethyl pyridaben quinalphos quinclorac quizalofop-P

Fungicide Insecticide Herbicide Fungicide Herbicide Insecticide Fungicide Herbicide Insecticide Insecticide Herbicide Herbicide

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Generic Pesticides: Volume III – Business Strategies

fenthion fipronil fluometuron fluroxypyr fosetyl-aluminium glufosinate glyphosate hexaconazole imazethapyr imidacloprid

Insecticide Insecticide Herbicide Herbicide Fungicide Herbicide Herbicide Fungicide Herbicide Insecticide

simazine tebuconazole terbufos thiamethoxam thiophanate-methyl thiram triadimefon trichlorphon trifluralin ziram

Herbicide Fungicide Insecticide Insecticide Fungicide Fungicide Fungicide Insecticide Herbicide Fungicide

Each profile begins with a box detailing the activity and general uses for that specific ai. The profile then continues with: information on the registration status of the ai in major markets such as the US and the EU; details on the generic companies that currently manufacture the ai; and information on the size of the global market, both in terms of volume manufactured and sales value. Not all of these sections will appear in every ai profile.

1.4

Outline of Market and Industry Analysis report The third volume contains an analysis of the generic pesticide market and industry, building on the information presented in the first two volumes. It provides a review of the major national generic pesticide markets and a discussion of the various business strategies adopted by generic pesticide companies, both in terms of competing with each other and with the major R&D-based agrochemical companies. The report then goes on to provide an in-depth analysis of the ways in which the major agrochemical companies try to maintain their market share after an ai has come off-patent, including finding ways to delay the manufacture of the ai by generic pesticide companies. New in this edition is a chapter exploring the developments that have occurred in the generic pesticide industry since the publication of the previous edition of this report in 2005. Topics discussed include mergers and acquisitions, ais that have lost their patent protection and regulatory developments. Other chapters outline ais that are due to come off-patent over the next few years, highlighting those with the greatest potential for the generic industry, and give an overview of the activities of the main industry associations for generic pesticide manufacturers.

1.5

Information sources A variety of sources of information have been utilised to produce the three reports. These include: the previous editions of the reports; the internet, especially the profiled companies’ web sites; stories that have appeared in Agrow; and other Agrow Reports. The author has also obtained a great deal of information and personal opinion from a large number of people working in the generic pesticide industry throughout the world. In this way, the author has built up an accurate and detailed picture of the generic pesticide market and industry, and the challenges that it will face over the coming few years.

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Chapter 1: Overview

1.6

Generic Pesticides: Volume III – Business Strategies

Introduction to Market and Industry Analysis report This report contains an analysis of the global generic pesticide market and industry, including detailed descriptions of the current state of the industry, the major regional markets and potential future trends and developments. Chapter 2 contains a review of the important developments that have occurred in the generic pesticide sector since the last edition of this report was published in 2005. It also tries to predict what changes and developments might occur over the next few years. The changes are grouped into four sections – Pesticide markets, Mergers & acquisitions, New products and Regulatory issues – and include topics such as the rise of United Phosphorus, the generic ais that have received the most interest from manufacturers over the past two years and the proposed amendments to the EU pesticide registration directive. Chapter 3 contains an analysis of the global industry. It starts with an explanation of the different ways in which generic pesticide companies are established and then continues with a description of the similar ways in which they subsequently develop. This tends to involve the companies gradually evolving from producing bulk technical ais to selling own-brand formulated products, some of which contain proprietary ais. This is followed by a detailed discussion of the various business strategies adopted by generic pesticide companies and also of the various strategies adopted by the R&D-based agrochemical companies to try to prevent generic companies from entering the market for a specific ai. Chapter 4 contains detailed profiles of the major country and regional pesticide markets, including the US, the EU, China and India. These profiles contain information on: the size of the pesticide market, including the market share taken by generic producers; the growth prospects for the market; the major crops grown and pesticide products used; the major pesticide companies, both domestic and foreign, that operate in the market; how pesticide products are marketed and sold in the market; and the regulatory environment. Chapter 5 contains details of ais due to come off-patent over the next few years, including lists of those ais that should prove of most interest to the generic pesticide industry. These lists were taken from Agrow’s New Generics 2007, but they are not identical because some of the ais identified as new generics were profiled in Volume 1 of this report. This is because certain fairly new ais are already being manufactured by more than one generic producer, even though their patents remain in force in most major markets. Chapter 6 provides an overview of the main industry associations for generic pesticide manufacturers, including their structure, membership and main functions. These comprise: the European Crop Care Association; the US Chemical Producers and Distributors Association; the Pesticide Manufacturers and Formulators Association of India; the China Crop Protection Industry Association; and the Brazilian generic agrochemical industry association.

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Chapter 1: Overview

1.7

Generic Pesticides: Volume III – Business Strategies

Current state of the global generic pesticide market and industry The global pesticide market is essentially made up of sales of two types of pesticide ais – proprietary pesticides and off-patent pesticides. Proprietary pesticides are those that still have patent protection and so are only sold by the developing company or approved licensees. Off-patent pesticides are those that have lost their patent protection and can be sub-divided into two classes: proprietary off-patent pesticides, which are produced and sold by the original developing company; and generic pesticides, which are offpatent pesticides that are produced and sold by companies other than the original developing company. Although off-patent products account for the majority of global pesticide sales (60–70%), in many countries, especially developed ones, the R&Dbased agrochemical companies still dominate the market for off-patent pesticides. This means that generic pesticide producers probably generate 20–30% of global pesticide sales, valuing the global generic pesticide market at $6,400–$9,600 million. However, this share of the global pesticide market, although still minor, has grown over the past decade, mainly as a result of the generic section of the pesticide market growing faster than the proprietary section, especially in countries such as India and China. Indeed, the generic pesticide market is highly skewed around the world, accounting for a much greater share of the total pesticide market in developing countries than in developed countries. For instance, pesticide products manufactured by generic companies account for around 75% of all pesticide sales in China, but have practically no market share in Japan. Markets for both off-patent and proprietary pesticides are also growing faster in developing countries than in developed ones. This is both because agricultural practices in developing countries are becoming more advanced, with growers demanding more and newer pesticides, and because developed world countries are trying to limit pesticide use, due to increasing concerns about the effect of pesticides on human health and the environment. The world’s largest country markets for pesticides, in order of size, are the US, Brazil, Japan, China and France, with China having recently overtaken France and, at current growth rates, set to pass Japan within the next few years. The largest generic pesticide companies are still mainly based in the developed world. The one exception is United Phosphorus, which has grown very rapidly over the past couple of years, mainly as a result of acquisitions, and is now the world’s fifth largest generic pesticide company based on sales. It should now rise even further up the list of top generic pesticide companies as a result of its purchase of Cerexagri in February 2007. Numerous other companies based in the developing world are also beginning to take their place among the largest generic pesticide companies. Both Agripec (Brazil) and Red Sun (China) have recently broken into the top 10 generic pesticide companies by sales, while eight of the 10 companies taking the places from 11 to 20 are from either India or China. Indeed, a Chinese company could soon find itself in second position on the list, if China National Chemical Corporation (ChinaChem) succeeds in its bid to acquire Nufarm.

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Chapter 1: Overview

Generic Pesticides: Volume III – Business Strategies

Nevertheless, even the largest generic pesticide companies are still much smaller than the major R&D-based agrochemical companies. For instance, the top two generic pesticide companies – MAI and Nufarm – each have a less than 5% share of the global agrochemical market, while the top two major R&D-based agrochemical companies – Bayer CropScience and Syngenta – each have 15–20% shares. Glyphosate remains by far the largest selling pesticide ai in the world, with annual sales of around $5,000 million, and is manufactured by a large number of generic companies. Nevertheless, of the top 10 most manufactured ais, five of them are insecticides. This reflects the fact that a large number of generic pesticide producers are based in countries with hot regions, such as India, where insects are the main crop pest and the demand for insecticides is great. The other herbicides in the top 10 are 2,4D and paraquat, which are both widely used throughout the world, and the top 10 also contains two of the largest selling fungicides, carbendazim and mancozeb.

1.8

Future prospects for the generic pesticide industry Even though it has been an eventful couple of years for the generic pesticide sector, none of the developments have come completely out of the blue. Indeed, the major development has simply been a continuation of something that has been happening for the past few years: the gradual shift in the focus of the generic pesticide sector away from the developed world towards the developing world, especially India and China. This is clearly evident in terms of the generic pesticide industry, with the rapid rise of United Phosphorus and the bid made by ChinaChem for Nufarm. But it is increasingly also the case for the generic pesticide market, which is growing much faster in developing world countries than in the developed world. Part of this growth is being driven by the fact that many of these pesticide markets are modernising, with products based on older, cheaper ais being replaced by those based on newer, more expensive ais. Much of this modernisation is being driven by the regulatory authorities in these countries, which are banning or restricting the use of many older pesticide ais. These moves are likely to have a dramatic impact on the global generic pesticide industry and on the products that they sell. For many of these older ais had already been banned in Western markets and so developing world markets were their only remaining outlets. Now that these outlets are disappearing, generic pesticide companies in both Western and developing countries are going to have to make major changes to their product portfolios. For instance, Cheminova used to be a major Western producer of organophosphorus insecticides, but has recently stopped producing many of these ais. As such, in January 2007, it submitted a plan to the UN Food and Agriculture Organization proposing to wind down the sale of parathionmethyl and monocrotophos in developing countries between 2007 and 2010. Meanwhile, the organophosphorus insecticides methamidophos, monocrotophos, parathion-ethyl and parathion-methyl accounted for 18% of the Chinese pesticide market in 2004, but this proportion had fallen to 3% by 2006 in anticipation of the phase-out of these ais in 2007. Over the past 10 years, there have been numerous waves of consolidation within the top tier of the R&D-based agrochemical industry. This has

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Chapter 1: Overview

Generic Pesticides: Volume III – Business Strategies

resulted in a number of pesticide products being divested, many of which were acquired by generic pesticide companies. There is not much scope for any further consolidation at the top end of the pesticide industry, but there is scope for further consolidation in the generic pesticide industry, where there are a lot of small and medium-sized companies. Up until 2007, this consolidation had mostly involved the larger, developed world generic companies, such as MAI and Nufarm, acquiring smaller competitors from around the world. But this consolidation process has now led to the acquisition of some of the larger generic pesticide companies, with United Phosphorus purchasing Cerexagri and ChinaChem making a bid for Nufarm. Furthermore, consolidation is also beginning to impact the highly fragmented Indian and Chinese pesticide industries, with the larger companies just beginning to make moves on some of the smaller ones. In both India and China, this consolidation is being partially driven by the move from older ais to newer ones making life difficult for those smaller companies that specialised in producing the older ais. But in China this process is also being driven by the state, which is actively trying to create large pesticide “champions”. So although the future looks fairly healthy for the generic pesticide sector, with a number of big-selling ais such as kresoxim-methyl and thiamethoxam just beginning to lose their patent protection, the precise make-up of the sector looks like it might be changing. More and more developing world companies are becoming major players, at the same time that developing world markets are becoming increasingly important. As such, over the next few years, the generic pesticide industry as a whole will probably start to place greater emphasis on developing world markets and the kind of products they demand. However, with the modernisation of these developing world markets, these pesticide products could well turn out to be very similar to those that are already popular in developed world markets.

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Chapter 2: Industry Developments 2005-2007

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CHAPTER 2 INDUSTRY DEVELOPMENTS 2005–07 Two years may not seem like a long period of time, but it has still been an eventful one for the global generic pesticide industry. Since the last edition of this report was published in 2005, the industry has seen: the first generic pesticide company from the developing world to be included in Agrow’s annual list of the top 20 global agrochemical companies; a number of important pesticide ais, such as the insecticide imidacloprid, lose their patent protection in major markets; and the introduction or revision of pesticide regulations in a whole host of countries and regions, including the EU, the US, China, India and Brazil. All of these changes are creating both opportunities and dangers for generic pesticide companies. This chapter will therefore highlight the most important changes that have occurred over the past two years and assess their implications for the generic pesticide industry. It will also try to predict what changes and developments might occur over the next few years. The changes will be grouped into four sections: Pesticide markets; Mergers & acquisitions; New products; and Regulatory issues.

2.1

Pesticide markets Global, regional and country pesticide markets are discussed in detail in Chapter 4, but this section will look specifically at how the major country markets have changed over the past two years. The most obvious change is that China has now overtaken France to become the world’s fourth largest pesticide market (see Table 2.1).

Table 2.1: Country pesticide markets by value ($ million)1 Country

Market value

US Brazil Japan China France Germany Canada Italy India UK Spain

6,026 3,912 2,850 2,421 2,305 1,373 1,184 922 880 720 443

Year2 2006 2006 2006 2006 2006 2005 2006 2005 2006 2004 2006

Sources: Various (see Chapter 4). Note: 1. Only comprises those countries profiled in Chapter 4; 2. Refers to year in which company’s fiscal year ended.

That China’s pesticide market would overtake that of France has long been predicted, based on the fact that China’s pesticide market was growing at a rate of 7–9% a year, while France’s has been gradually declining over the past decade. If China’s pesticide market continues this growth rate, it looks set to overtake Japan’s within the next few years. In actual fact, the growth rate of China’s pesticide market could well increase over the next few years, as a result of the Chinese government’s

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efforts to encourage growers to switch form older, toxic pesticide ais to newer, safer ones. For products based on older ais, such as organophosphorus insecticides, tend to be cheaper than those based on newer ais, such as pyrethroid or neonicotinoid insecticides. India’s pesticide market tends to be more variable than China’s, due to the country’s erratic weather, but it should still achieve an annual growth rate of 10–15% between 2005 and 2010, according to the Pesticides Manufacturers and Formulators Association of India (PMFAI). There is certainly scope for an increase in the size of the market: India is one of the largest agricultural producers in the world and the only country apart from China with a population over 1 billion, but its pesticide market is currently worth less than Italy’s. This is because agriculture in India is still very old-fashioned, comprising lots of small farm-holdings that don’t use much modern technology, including pesticides. And the pesticide products they do use tend to be based on older and cheaper ais. However, this is now beginning to change, partly as a result of the Indian government encouraging the use of products based on newer, safer ais and restricting or banning certain older ais, such as the herbicide simazine, the insecticide monocrotophos and the fungicide carbendazim. If the Indian pesticide market does grow at a rate of around 10% a year, then it should overtake Italy’s more stagnant market in 2007 and could surpass Germany’s within five years. The positions of the other main country pesticide markets have remained the same over the past two years – with the US, Brazil and Japan still making up the top three – and this should be the case for the next few years. However, the Western markets will probably continue to decline slowly in value, due to a combination of changes in agricultural practices, regulatory pressures and the uptake of genetically-modified (GM) crops. The Brazilian market has had a torrid time since 2005, losing an eighth of its value due to a combination of falling prices, smaller soybean areas, lower incidences of Asian soybean rust and increased uptake of GM herbicidetolerant soybeans. Nevertheless, Brazil remains the second largest pesticide market in the world and the situation does now look to be improving, with the Brazilian Institute of Agribusiness predicting that pesticide sales will increase by 10% in 2007.

2.2

Mergers & acquisitions As usual, the larger generic pesticide companies have been busy buying smaller rivals over the past two years (see Table 2.2). Makhteshim-Agan Industries (MAI) has been concentrating on gaining greater control of its distribution network, by buying stakes in companies that distribute its products in foreign markets. In 2005, it acquired a 49% stake in Mabeno, a Dutch agrochemical distributor, and a 70% stake in Biomark Tradinghouse, a Hungarian agrochemical distributor. Then, in 2006, it acquired a 75% stake in Agrovita, a Czech agrochemical distributor. It has also been actively expanding its non-crop pesticide business. In April 2006, it acquired a 30% stake in Alligare, a US agrochemical company that specialises in herbicides for the non-crop weed control market. A month later, it acquired 60% of the Italian non-crop pesticide company Kollant.

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Meanwhile, Nufarm acquired the Colombian agrochemical company Agroquimicos Genericos in 2005 and the Italian agrochemical company Agrosol in 2006, in order to increase its presence in these countries. Then, in May 2007, it gained complete control of Agripec, by acquiring the 50.1% stake that it didn’t already own.

Table 2.2: Company acquisitions made by generic pesticide companies since 2000 Company

Year

Acquisition

Country

Albaugh Cheminova Cheminova Cheminova

2004 2001 2001 2003

Argentina UK Mexico France

Cheminova Cheminova Cheminova CFL Isagro Isagro ISI ISI MAI MAI MAI MAI MAI MAI

2006 2006 2007 2006 2001 2001 2006 2006 2002 2004 2004 2004 2005 2005

MAI

2006

Atanor Headland Agrochemicals Servicios Químicos Integrales Flexagri (from Bayer CropScience) CropTech Ospray Kerolagro Ficom Organics Caffaro RPG Life Sciences Barpen International (75%) AgroMax (51%) Feinchemie Schwebda Control Solutions (60%) FarmSaver.com Farmoz Mabeno (49%) Biomark Tradinghouse (70%) Agrovita (75%)

MAI MAI Nufarm Nufarm Nufarm Nufarm Nufarm Nufarm Nufarm Nufarm UPL UPL UPL

2006 2006 2001 2001 2002 2002 2004 2005 2006 2007 2004 2005 2005

Alligare (30%) Kollant (60%) Agtrol International Davison Industries Crop Care Australasia Agro Permutadora Agripec (49.9%) Agroquimicos Genericos Agrosol Agripec (100%) AgValue Cequisa SWAL Corporation

Czech Republic US Italy US Australia Australia Portugal Brazil Colombia Italy Brazil US Spain India

UPL UPL UPL UPL

2005 2006 2006 2007

Reposo Cropserve Advanta Cerexagri

Argentina South Africa Netherlands US

Colombia Australia Hungary India Italy India Colombia Argentina Germany US US Australia Netherlands Hungary

Note: Acquisitions since 2005 in bold.

Cheminova has been continuing its efforts to expand its overseas sales by both establishing foreign subsidiaries and acquiring foreign companies. In 2006, it acquired major stakes in two pesticide distribution and marketing companies: CropTech in Colombia and Ospray in Australia. Most recently, in April 2007, it acquired a controlling interest in Kerolagro, a Hungarian plant protection and nutrition company.

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Isagro and Sipcam-Oxon are also looking to expand their overseas sales, specifically by acquiring distribution networks in South America. To this end, through their Isagro Sipcam International (ISI) joint venture, they recently acquired a 75% stake in Barpen International, a Colombian agrochemical distributor, and a 51% stake in AgroMax, an Argentine pesticide distributor. But one of the two major developments to have occurred in the generic pesticide industry over the past two years has been the rapid growth of United Phosphorus (UPL). Since 2005, it has acquired: the Spanish producer Cequisa for Euro 11.5 million; the Argentine producer Reposo for $11 million; the Indian agrochemical company SWAL Corporation for $5 million; the South African agrochemical distributor Cropserve for $3 million; and the Dutch seed company Advanta. Most recently, in February 2007, it made its biggest ever acquisition by purchasing the US company Cerexagri, which was the pesticide business of the French chemical company Arkema, for Euro 111 million. A few of these companies, such as SWAL, have been directly absorbed into UPL, but most of them, including Cequisa, Reposo and Cerexagri, still operate as separate entities. These acquisitions resulted in massive sales growth for UPL, such that a company that recorded revenues of $140 million for the year ending March 2002 had increased its sales to $350 million just four years later. This was sufficient to see UPL become the first developing world pesticide company to enter Agrow’s list of the top 20 agrochemical companies in 2006 (at number 18). For the year ending March 2007, it recorded sales of $477 million, pushing it up to 13th place in the Agrow top 20. For the year ending March 2008, UPL will be able to include sales from Cerexagri for the first time, which should give its revenues another substantial boost. Other Indian companies are now beginning to follow UPL’s lead. For example, Coromandel Fertilisers (CFL) acquired a majority stake in Ficom Organics, an Indian producer of technical pesticide ais, in 2006. This indicates that not only are Indian generic companies beginning to step up onto the world stage, but that the Indian generic pesticide industry, which currently comprises around 600 companies, may be starting to consolidate. Not to be left behind, the Chinese industry, which comprises around 2,500 companies, is also starting to consolidate. At the moment, however, this consolidation is being almost entirely driven by the Chinese government, which is concerned that the domestic pesticide industry suffers from too many companies, production overcapacity and outdated technologies and products. As a result, the government fears that the domestic industry could begin to lose out to more innovative Western companies both at home and abroad. It has therefore launched a five-year development plan (2006–10) to reduce the total number of pesticide companies, create a few large “national champions” with assets of Yuan 5,000–10,000 million and encourage a greater focus on developing novel products. This transformation of the pesticide industry forms part of a larger effort to modernise the whole Chinese chemical sector. In May 2004, the Chinese government formed the China National Chemical Corporation (ChemChina) to drive this modernisation. In March 2005, ChemChina announced that over the next five years it would build up a giant state-owned pesticide group with annual sales of over Yuan 10,000 million (almost 10 times larger than the annual sales of Red Sun, which is currently China’s largest pesticide company). As a first step, in June 2005 it took control of Sanonda and then

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in October 2006 took a 30% stake in the Chinese company Shandong Dacheng Pesticides. But its most radical move came in November 2007 and is the second major development to have occurred in the generic pesticide industry over the past two years. In conjunction with the US private equity firms Fox Paine Management III and the Blackstone Group, it made a Aus$3,000 million ($2,760 million) bid for Nufarm, which is the second largest generic pesticide company in the world. Prior to this move, in August 2007, rumours had abounded that MAI was interested in acquiring Nufarm, but nothing came of it. The Nufarm board has recommended acceptance of ChemChina’s bid, which, if successful, would result in the first Chinese ownership of a leading agrochemical multinational.

2.3

New products Nine of the ten new ais profiled in Volume 2 of this report have only become “generic” within the past two years: the fungicides epoxinconaole and kresoxim-methyl; the herbicides fenoxaprop-P-ethyl, nicosulfuron, pretilachlor and quizalofop; and the insecticides and acaricides emamectin, fipronil and thiamethoxam. The exception is the herbicide glufosinate, which is rather older than the other ais and seems to have become more popular with generic manufacturers mainly because of the uptake of glufosinatetolerant GM crops in an increasing number of countries. In this case, “generic” means that they are either beginning to lose their patent protection or are being produced by generic manufacturers based in countries where the ai is not protected. Indeed, for ais such as the fungicide kresoxim-methyl and the insecticide thiamethoxam, the originating companies are still actively enforcing their patents in most markets. For example, in June 2004, Syngenta launched a lawsuit against two Chinese companies, Yancheng Lvye Chemical Co and its subsidiary Yancheng Yongli Chemical Co, for illegally producing and selling thiamethoxam. Meanwhile, both Syngenta and BASF have launched injunctions against generic companies offering thiamethoxam and kresoxim-methyl, respectively, during recent British Crop Protection Council (BCPC) conferences. All of these ais generate substantial sales, which explains why generic manufacturers are keen to start producing and selling them as soon as possible. Indeed, the insecticides fipronil and thiamethoxam and the fungicide kresoxim-methyl have all crashed into the top 10 best selling generic ais, at numbers three, five and eight respectively. Meanwhile, the herbicides nicosulfuron and fenoxaprop-P-ethyl and the fungicide epoxiconazole all generate annual sales of over $200 million. Meanwhile, the number of generic companies producing certain other fairly new ais has increased substantially over the past two years, as the ais have lost their patent protection in more and more markets and generic companies have developed the necessary production technologies. For example, the number of generic companies profiled in Volume 1 of this report that manufacture the insecticide imidacloprid doubled between 2005 and 2007 (from 20 to 40). Other ais that are now manufactured by more companies include the herbicide imazethapyr, the fungicides propincazole and tebuconazole, and the insecticides abamectin, acetamiprid and bifenthrin (see Table 2.3).

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Table 2.3: Number of producers in 2005 and 2007 Active ingredient

Category

No. of producers – 2005

No. of producers – 2007

Imazethapyr Propiconazole Tebuconazole Abamectin Acetamiprid Bifenthrin Imidacloprid

Herbicide Fungicide Fungicide Insecticide Insecticide Insecticide Insecticide

7 11 5 7 9 7 20

11 23 23 23 23 12 40

Note: Number of producers taken from the 2005 and 2007 editions of Agrow’s Complete Guide to Generic Pesticides.

The trend for some of the larger generic pesticide companies to purchase licences to certain proprietary ais or to acquire rights to ais that will soon lose their patent protection has continued to strengthen over the past few years. For instance, MAI and Nufarm have both acquired licences to the insecticide imidacloprid from Bayer CropScience, while MAI has also acquired a license to the fungicide tebuconazole. Entering into this kind of licensing deal ensures that a generic company doesn’t fall foul of any patents that remain in force. It also often allows the company either to gain access to the original developer’s proprietary manufacturing technology, rather than have to re-engineer the technology from scratch, or to get the original developer to manufacture the ai for it. Since 2005, the larger generic pesticide companies have acquired the rights to a number of ais. For instance, Amvac acquired three pesticide businesses from BASF: the cereal herbicide Avenge (difenzoquat) and BASF’s global phorate insecticide business in 2005, and its global Counter (terbufos) insecticide/nematicide business in 2006. These last two acquisitions were the largest ever made by Amvac. Nufarm acquired BASF’s imazamethabenz herbicide business outside of Europe in 2005, while Cheminova acquired the remaining global rights to Bayer CropScience’s pyrethroid acaricide/insecticide acrinathrin in 2007 (it had acquired the European rights in 2003). But, once again, it is UPL that has been the most extravagant purchaser over the past couple of years. Since 2005, it has acquired: the systemic carbamate herbicide asulam and the insecticides oxydemeton-methyl and trichlorfon from Bayer CropScience for a total of Euro 43.5 million; rights to DuPont’s sulfonylurea rice and aquatic weed herbicide bensulfuron-methyl in all markets except Asia/Pacific; Dow AgroScience’s global propanil herbicide business for $25 million; and DuPont’s fenbutatin-oxide miticide and triphenyl hydroxide fungicide businesses. These product acquisitions have clearly helped to fuel its impressive sales growth over the past couple of years.

2.4

Regulatory issues As usual, the most important regulatory developments to have occurred over the past two years have involved the registration of new pesticides and the ongoing reviews of existing pesticides. In important Western markets such as the EU and the US the current review programmes are drawing to a close and regulatory authorities are busy finalising the details of their replacements. In the developing world, some countries, such as Brazil, have

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introduced brand new pesticide registration regulations, which companies have been trying to get to grips with. In others, such as India and China, the regulatory authorities have introduced new review programmes under existing regulations, with the aim of encouraging growers in their countries to switch from older, toxic pesticides to newer, safer ones. In the EU, the review programme instigated by the adoption of the pesticide registration directive (91/414/EEC) in 1991 is still ongoing. This programme has involved reviewing the registrations for over 800 ais then being sold in pesticide products throughout Europe, which were divided into four lists, and was initially meant to have been completed by 2003. But delays and generally slow progress meant that the deadline for completion had to be extended to 2008. Even this date may be tricky to meet, seeing as the European Commission has not yet started making decisions on the ais that comprise the third and fourth lists. Of the 100 ais profiled in Volume 2 of this report, 38 have been approved (not including alpha-cypermethrin and S-metolachlor), 31 have had their registrations withdrawn and 31 still await decisions (see Table 2.4 and Table 2.5). For 16 of the ais, this exclusion happened after they had been through the entire review process, because the Commission judged that they posed too large a risk to human health or the environment. The other 15 ais were excluded because the sole notifying company decided to stop supporting the ai. These ais were withdrawn in two tranches: 225 ais from the third list had their registrations withdrawn on July 2003; and a further 106 ais had their registrations withdrawn in March 2004.

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Table 2.4: Generic ais approved by European Commission1 Active ingredient

Activity

Date approved2

2,4-D Acetamiprid Alpha-cypermethrin Bentazone Bromoxynil Captan Carbendazim Chlorothalonil Chlorpyrifos Cyfluthrin Cymoxanil Cypermethrin Deltamethrin Dichlorvos Dimethoate Fipronil Fluroxypyr Glufosinate Glyphosate Ioxynil Isoproturon Kresoxim-methyl Lambda-cyfluthrin Linuron Mancozeb Maneb MCPA Methamidophos Metribuzin Metsulfuron-methyl Molinate Paraquat Pendimethalin Propamocarb Propiconazole S-metolachlor Thiamethoxam Thiophanate-methyl Thiram Ziram

Herbicide Insecticide Insecticide Herbicide Herbicide Fungicide Fungicide Fungicide Insecticide Insecticide Fungicide Insecticide Insecticide Insecticide Insecticide Insecticide Herbicide Herbicide Herbicide Herbicide Herbicide Fungicide Insecticide Herbicide Fungicide Fungicide Herbicide Insecticide Herbicide Herbicide Herbicide Herbicide Herbicide Fungicide Fungicide Herbicide Fungicide Fungicide Fungicide Fungicide

October 2002 January 2005 March 2005 August 2001 March 2005 October 2007 January 2007 March 2006 July 2006 January 2004 March 2005 March 2006 November 2003 June 2007 October 2007 October 2007 December 2000 October 2007 July 2002 March 2005 January 2003 February 1999 January 2002 January 2004 July 2006 July 2006 May 2006 January 2007 October 2007 July 2001 August 2004 November 2004 January 2004 October 2007 June 2004 April 2005 March 2006 March 2006 August 2004 August 2004

Notes: 1. Limited to those generic ais profiled in Volume 2; 2. Date that ai was formally included in Annex 1 of Directive 91/414/EEC.

The European crop protection industry has raised concerns about the number of ais that have had their registrations withdrawn, claiming that some farmers, especially in the Mediterranean area, are being left without adequate protection against pests. This loss is being exacerbated by efforts to speed up the approval process, which some claim is leading to ais being excluded rather than properly assessed. Hans Mattaar, European regulatory strategy manager for Bayer CropScience, has warned that the current review programme could end up removing 70–80 per cent of pesticide products from the European market.

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Table 2.5: Generic ais withdrawn by European Commission1 Active ingredient

Activity

Date withdrawn2

Acephate Alachlor Ametryn Amitraz Atrazine Benomyl Butachlor Carbofuran Carbosulfan Diuron Endosulfan Ethion Fenthion Hexaconazole Imazethapyr Malathion Metalaxyl Methomyl Metolachlor Monocrotophos Parathion-methyl Permethrin Phosphamidon Profenofos Prometryn Quinalphos Quinclorac Simazine Terbufos Triadimefon Trichlorphon

Insecticide Herbicide Herbicide Insecticide Herbicide Fungicide Herbicide Insecticide Insecticide Herbicide Insecticide Insecticide Insecticide Fungicide Herbicide Insecticide Fungicide Insecticide Herbicide Insecticide Insecticide Insecticide Insecticide Insecticide Herbicide Insecticide Herbicide Herbicide Insecticide Fungicide Insecticide

March 2003 December 2006 July 2003 February 2004 March 2004 November 2002 July 2003 June 2007 June 2007 January 2007 December 2005 July 2003 February 2004 November 2006 March 2004 June 2007 May 2003 September 2007 July 2003 July 2003 March 2003 December 2000 July 2003 July 2003 July 2003 July 2003 March 2004 March 2004 July 2003 March 2004 May 2007

Notes: 1. Limited to those generic ais profiled in the second report; 2. Date that Annex 1 noninclusion came into force.

In addition to the ongoing pesticide review programme, the Commission has been busy drawing up proposed amendments to 91/414. These include: implementing a scheme to ban ais based on hazard criteria, which means that if an ai exceeds just one hazard cut-off value than it would be excluded; removing any protection for new data generated for the review of existing ais and products; approving pesticide products for geographical zones rather than individual countries; and introducing measures to speed up the approval process. The Commission produced the final version of its proposed amendments in July 2006 and this was then debated by the European Parliament at the end of October 2007. The Parliament approved the data protection and hazardbased criteria proposals but rejected the zonal approval system. The amendments will now progress to the EU Council of Ministers for consideration and should come into force in 2008 after the current review programme for existing ais has been completed. In the US, pesticides are registered under the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), which was amended in 1988. This amendment instigated a programme requiring all ais registered before November 1984 to have their registrations reviewed. This applied to 1,150 ais in 45,000 formulated products, with the review programme to be carried out by the

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Office of Pesticide Programs, which is part of the US Environmental Protection Agency (EPA). In 1996, the Food Quality Protection Act (FQPA) came into force; this widened the scope and considerations that needed to be applied regarding pesticide safety. As part of the FQPA, the EPA now has to assess the cumulative risks of certain pesticide groups with a common mechanism of toxicity, such as organophosphorous insecticides. This review programme was essentially completed in 2006 and did not result in as many generic ais being removed from the market as in the EU. However, in 2007, the OPP started a new 15-year review programme, which aims to review pesticide registrations every 15 years. The OPP has already detailed which ais it plans to review from 2007 to 2010 and has also released work dockets for the first nine ais entering the programme. This review programme is already troubling the US crop protection industry, with the US industry association CropLife America particularly concerned about the EPA’s plans to incorporate new requirements, including endangered species assessments, into the registration review programme in due course. This means that different risk assessment criteria could be applied to pesticides reviewed later in the 15-year cycle than to those earlier in the cycle. It thinks, instead, that the review programme should function solely as a “safety net” to resolve issues overlooked by the original registration and re-registration processes. In China and India, the regulatory authorities have recently begun to review the registrations of some older, more toxic ais, such as organophosphorus insecticides, leading to a certain number of restrictions and withdrawals. This forms part of efforts to encourage Chinese and Indian growers to switch to pesticide products based on newer and safer ais, such as pyrethroid and neonicotinoid insecticides. For example, the Chinese Ministry of Agriculture banned the use of the insecticides methamidophos, monocrotophos, parathion-ethyl, parathionmethyl and phosphamidon from 1 January 2007. In addition, the Ministry’s Institute for the Control of Agrochemicals (ICAMA) is reviewing 379 pesticide ais that received a provisional registration before 23 July 1999, which includes a large number of generic pesticide ais. The ICAMA has split the ais into four groups and is currently working with pesticide manufacturers to generate the required registration data. It plans to complete this review programme by the end of 2008. However, the ICAMA has already started to phase out registrations for older pesticide ais such as phorate, carbofuran, aldicarb and methomyl. In February 2006, the Indian Ministry of Agriculture proposed restricting the use of 31 pesticide ais, all of which were sold in India before 1971 when the Insecticides Act came into force, and to cancel the registrations for seven ais, including the herbicide simazine. At the same time, the Ministry's Directorate of Plant Protection, Quarantine and Storage (DPPQS) initiated a review of the toxicity, persistence, safety in use and availability of alternatives for 37 ais, all of which had been restricted in some other countries. These included: the insecticides acephate, bifenthrin, carbosulfan, deltamethrin, dichlorvos fenthion, monocrotophos, propargite, quinalphos and trichlorfon; the fungicides chlorothalonil, mancozeb and thiophanate-methyl; and the herbicides atrazine, butachlor,

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linuron, pendimethalin and trifluralin. The review will be used to make recommendations for continued use, restricted use or phase-out of the ais. The first of these recommendations came in February 2007, when the Ministry called on pesticide registrants to amend labels and provide certain study data for 10 ais. These included: the insecticides dichlorvos, monocrotophos and quinalphos; the fungicides carbendazim and mancozeb; and the herbicides atrazine, butachlor, and pendimethalin (see individual ai profiles in Volume 1 for details of the required amendments and study data). Then, in August 2007, the Ministry banned all agricultural uses of the insecticide fenthion, except locust control in desert areas and public health. In Brazil, the problems caused by the introduction of new registration regulations for generic pesticide ais in 2002 seem to be resolved, with the Ministry of Agriculture finally approving the first generic ai under the new regulations in September 2005 and the first formulated product in June 2006. The new regulations were supposed to make it easier to register generic pesticide products, but there was general confusion over exactly what data were required for generic products and how they should be obtained. This meant that no generic registrations were granted for three years, producing a backlog of around 350 applications. To help clear this backlog, the Brazilian government passed a Decree in December 2006 to speed up the registration of generic pesticides. This new Decree removed the need for certain “unnecessary” tests and studies and specified that the registration process should take a maximum of 150 days. By June 2007, 17 pesticide ais, including the herbicides glyphosate and paraquat and the fungicide tebuconazole, and 20 formulated products had received generic registrations.

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Chapter 3: Generic Pesticide Companies

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CHAPTER 3 GENERIC PESTICIDE COMPANIES Generic pesticide companies have numerous different origins, but once trading they tend to develop in similar ways. This usually involves gradually progressing from producing bulk technical ais to selling own-brand formulated products, some of which contain proprietary ais. As generic producers grow, the business strategies they adopt and the way in which they compete necessarily change. They also begin to come up against the major R&D-based agrochemical companies; sometimes this interaction can be beneficial, but in other cases it can create a number of problems and challenges.

3.1

Origins of generic companies There are numerous routes by which a generic pesticide company can come into existence (see Table 3.1), with certain routes more likely in certain areas of the world. The simplest route is for a company to be established specifically as a generic pesticide producer. This route is currently most likely in developing world companies, especially China and India. This is because the barriers to entering the pesticide market in these countries can be fairly low, especially if the protection of intellectual property has historically been fairly lax. However, the accession of China and India to the World Trade Organization (WTO) and their subsequent adoption of the TRIPs (Trade-Related aspects of Intellectual Property rights) agreement have enhanced the level of patent protection in these countries. This was demonstrated by Syngenta’s successful lawsuit against two Chinese companies that were manufacturing the patent-protected neonictinoid insecticide thiamethoxam (see Chapter 2). This development should make it more costly to establish small generic pesticide producers in these countries. Some of the generic companies in developing countries, especially the larger companies, were either established by the state or protected in the beginning by tariffs on imported pesticides, as part of the government’s desire to encourage the development of a home-grown pesticide industry. For example, Red Sun was established, and is still owned, by the Chinese government, while Punjab Chemicals was established as a public/private initiative between the Punjab State Industrial Development Corporation and Excel Industries. However, the accession of some of these countries to the WTO is now stimulating more competition in their domestic pesticide markets, as foreign companies begin to gain more of a foothold. Nevertheless, the state can still play a large role in the development of a country’s pesticide industry, as exemplified by the Chinese government’s efforts to build national chemical champions, including within the pesticide sector (see Chapter 4). Many of the generic producers based in the Western world, which tend to be larger and older than those in the developing world, have different origins. They tend to have developed from earlier, less specialised incarnations, which were either suppliers of broad agricultural equipment or general chemical manufacturers. In some cases, the generic businesses are still part of a larger company. Alternatively, they may have been spun-off from the

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larger entity to become a stand-alone company or the non-generic pesticide parts of the business may have been sold or spun-off.

Table 3.1: Origins of the 100 companies profiled in the first report Company

Country

Origins

North America Albaugh Amvac Cerexagri

US US US

Established as a generic pesticide producer Established as a generic pesticide producer Generic business developed as part of larger chemical company

Europe Taminco Cheminova

Belgium Denmark

Agro-Chemie AgriGuard Barclay Chemicals Luxembourg Industries MAI Chemia Isagro Sipcam-Oxon

Hungary Ireland Ireland Israel Israel Italy Italy Italy

Organika-Sarzyna Oltchim Pinus Cequisa IQV Atabay Hektas AH Marks

Poland Romania Slovenia Spain Spain Turkey Turkey UK

Generic business spun-off from larger chemical company Established as a generic pesticide producer (but diversified into other chemicals) Generic business spun-off from larger chemical company Established as a generic pesticide producer Established as a generic pesticide producer Generic business developed as part of larger chemical company Generic business developed as part of larger chemical company Established as a generic pesticide producer Generic business developed as part of larger chemical company Established as a generic pesticide producer (but diversified into other chemicals) Generic business developed as part of larger chemical company Generic business developed as part of larger chemical company Generic business spun-off from larger chemical company Established as a generic pesticide producer Established as a generic pesticide producer Generic business developed as part of larger chemical company Established as a generic pesticide producer Generic business developed as part of larger chemical company

Asia-Pacific Nufarm

Australia

Generic business developed from general agricultural supplier (and diversified into other chemicals) Established as a generic pesticide producer Generic business developed as part of larger chemical company Generic business developed as part of larger chemical company Generic business developed as part of larger chemical company Generic business developed as part of larger chemical company Established as a generic pesticide producer

AgroDragon Baocheng Chemical Baoling Chemical CAC CCI Group Changqing Agrochemical Changxing Zhongshan Dacheng Pesticide

China China China China China China

Feixiang Chemical Fujian Sannong

China China

Good Harvest Green Agrosino

China China

Greenchem Industries Heben Pesticide Henglong Pesticide Hisun Chemical Huaxing Chemical Iprochem

China China China China China China

Jiangshan Agrochemical Jiangsu Suhua Group

China

Established as a generic pesticide producer Established as a generic pesticide producer (but diversified into other chemicals) Generic business developed as part of larger chemical company Established as a generic pesticide producer (but diversified into other chemicals) Established as a generic pesticide producer Established as a generic pesticide producer (but diversified into other chemicals) Established as a generic pesticide producer Established as a generic pesticide producer Established as a generic pesticide producer Established as a generic pesticide producer Established as a generic pesticide producer Established as a generic pesticide trader and then became a producer Generic business developed as part of larger chemical company

China

Generic business developed as part of larger chemical company

China China

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Generic Pesticides: Volume III – Business Strategies

Jiangsu Yangnong Jingma Chemicals

China China

Established as a generic pesticide producer Established as a generic pesticide producer

Kangmei Chemical

China

Lanxi Agrochemical

China

Limin Chemical Nanjing Agrochemical Nutrichem Laboratory Qinfeng Agrochemical Red Sun

China China China China China

Sanonda Shandong Qiaochang Chemical Shandong Vicome Greenland Sinochem Ningbo Shenghua Biok Suzhou Worldbest Tide Group

China China

Established as a generic pesticide producer (but diversified into other chemicals) Generic business developed as part of larger industrial conglomerate Established as a generic pesticide producer Established as a generic pesticide producer Established as a generic pesticide producer Established as a generic pesticide producer Generic business developed as part of larger industrial conglomerate Generic business developed as part of larger chemical company Established as a generic pesticide producer

China

Established as a generic pesticide producer

China China China China

Wangs Xinan Chemical Xinyi Pesticide Yancheng Limin Yongnong Chemical Zibo Nab Agrochemicals Rotam Aimco Pesticides Atul

China

Generic business developed as part of larger chemical company Generic business developed as part of larger chemical company Generic business developed as part of larger chemical company Established as a generic pesticide producer (but diversified into other chemicals) Generic business developed as part of larger chemical company Generic business developed as part of larger chemical company Established as a generic pesticide producer Established as a generic pesticide producer Established as a generic pesticide producer Established as a generic pesticide producer

Bharat Group Chemet Chemicals Coromandel Fertilisers Dhanuka Pesticides Excel Crop Care Gharda Chemicals Heranba Hikal Hindustan Insecticides India Pesticides

India India India India India India India India India India

Indofil Meghmani Organics Nagarjuna

India India India

PI Industries Punjab Chemicals Rallis India

India India India

Sabero Organics

India

United Phosphorus

India

PT Petrosida Gresik Kenso Zagro Dongbu Fine Chemicals LG Life Sciences

Indonesia Malaysia Singapore South Korea South Korea

China China China China Hong Kong India India

© Informa UK Ltd, December 2007

Generic business developed as part of larger chemical company Established as a generic pesticide producer Generic business developed as part of larger industrial conglomerate Established as a generic pesticide producer Established as a generic pesticide producer Generic business developed from general agricultural supplier Established as generic pesticide producer Generic business spun-off from larger chemical company Generic business developed as part of larger chemical company Established as a generic pesticide producer Generic business developed as part of larger chemical company Established as a generic pesticide producer Established as a generic pesticide producer (but diversified into other chemicals and now part of larger industrial conglomerate) Generic business developed as part of larger chemical company Generic business developed as part of larger chemical company Generic business developed from general agricultural supplier (now part of larger industrial conglomerate) Generic business developed as part of larger chemical company Generic business developed as part of larger chemical company Generic business developed as part of larger industrial conglomerate (now main business) Generic business developed as part of larger chemical company Generic business developed as part of larger chemical company (now main business) Generic business developed from general agricultural supplier Established as a generic pesticide producer Generic business spun-off from larger chemical company Generic business developed as part of larger industrial conglomerate Generic business developed as part of larger chemical company

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Hui Kwang

Taiwan

Pilarquim Sinon

Taiwan Taiwan

South America Reposo

Argentina

Agripec Fersol

Brazil Brazil

Quimica Lucava Tekchem Tecnomyl Inquiport

Mexico Mexico Paraguay Venezuela

Generic Pesticides: Volume III – Business Strategies

Established as a generic pesticide producer (but diversified into other chemicals) Established as a generic pesticide producer Established as a generic pesticide producer (but diversified into other chemicals) Generic business developed as part of larger chemical company (now main business) Established as a generic pesticide producer Established as a generic pesticide producer (but diversified into other chemicals) Established as a generic pesticide producer Established as a generic pesticide producer Established as a generic pesticide producer Established as a generic pesticide producer

Indeed, the larger generic pesticide businesses do in general seem to have their origins in chemical companies or industrial conglomerates, rather than being specifically established as generic pesticide producers. This may be because these diversified companies have had access to the funds required to grow their generic pesticide businesses, or it could just be that these generic businesses are often older and therefore have had more time to grow. In any case, there are numerous companies that go against this broad trend. Two generic companies in the US – Amvac and Albaugh – were specifically established as pesticide companies, while a number of Chinese and Indian generic businesses – such as Lanxi Agrochemical, Xinan Chemical and Indofil – were developed from larger companies. Perhaps most interesting are those companies that began as generic pesticide companies and have since diversified into other areas. For instance, Cheminova has expanded into food preservatives, flotation agents and insulation products, while Fujian Sannong now also manufactures pharmaceuticals and other fine chemicals. This demonstrates that operating a generic pesticide business can provide the basis – both by generating funds and providing general chemical expertise – for expanding into other, usually related, business areas. Also interesting are those companies that started off as general chemical companies, but over the years have increasingly focused on generic pesticides, such that pesticides now form the largest part of their business. This has happened with some of the largest companies in the industry, such as Nufarm and United Phosphorus, as well as smaller operations, such as Reposo. The generic pesticide business is generally considered fairly staid and unexciting. However, it is still capable of generating substantial revenues for successful companies and has offered better growth prospects than many other areas of the chemical industry over the past few years, including the R&D-based agrochemical industry. This growth looks set to continue for at least the next few years.

3.2

Development and growth of generic companies The growth of the generic pesticide industry over the past few years has, to a large extent, been driven by factors outside of the industry’s control. As

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Chapter 3: Generic Pesticide Companies

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with the global pharmaceutical industry, the rate of discovery of new pesticide ais has fallen over the past 10 years. This means that the ratio of generic to proprietary pesticide ais is growing, as ais are losing their patent protection faster than novel proprietary pesticides are being developed. This is underscored by the fact that a number of major pesticide ais have recently lost (for example, the herbicide glyphosate and the fungicide tebuconazole) or are in the process of losing (for example, the insecticide imidacloprid and the fungicide kresoxim-methyl) their patent protection in many of the major markets around the world. Generic pesticide companies are doing their best to take advantage of this increase in the number of generic ais, but the original developers of many of the ais are also keen to ensure that they keep a firm foothold in the market. Indeed, in many cases the original developers of a generic ai still hold the largest market share in that ai. For instance, Monsanto still manufactures and sells almost half of the world’s supply of glyphosate, while Bayer CropScience is still the single largest manufacturer of imidacloprid. There are a number of business strategies that generic companies can adopt to try to enhance their sales growth and thereby drive their development, with the precise strategy adopted usually dependent on the size of the company and on the location of its major markets. There are also a number of strategies that R&D-based agrochemical companies can adopt to try to retain a major share of the market in an ai that is about to lose, or has recently lost, its patent protection. These strategies are detailed in the following two sections. 3.2.1

Generic company business strategies There are five broad business strategies that are generally adopted by generic pesticide companies. •

Selling technical ais and competing mainly on price.

•

Selling technical ais and formulated products, and competing mainly on price.

•

Selling technical ais and branded formulated products, but still competing mainly on price.

•

Selling mainly branded formulated products and developing novel mixtures and formulations, and competing on effectiveness, reputation and assistance to growers.

•

Selling both generic and proprietary pesticide products, and competing on effectiveness, reputation and assistance to growers.

Smaller generic pesticide companies tend to adopt one of the first two strategies, whereas the larger companies adopt one or more of the latter three (see Table 3.2). Indeed, generic pesticide companies often move through these five strategies in order as they develop and grow.

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Chapter 3: Generic Pesticide Companies

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Table 3.2: Main business strategies adopted by 100 companies profiled in the first report Company

Country

Main business strategy

North America Albaugh Amvac Cerexagri

US US US

Selling technical ais and branded formulated products Selling both generic and proprietary pesticide products Selling mainly branded formulated products and developing novel mixtures and formulations

Europe Taminco Cheminova

Belgium Denmark

Agro-Chemie AgriGuard

Hungary Ireland

Barclay Chemicals

Ireland

Luxembourg Industries

Israel

MAI Chemia

Israel Italy

Isagro

Italy

Sipcam-Oxon

Italy

Organika-Sarzyna Oltchim Pinus

Poland Romania Slovenia

Cequisa IQV

Spain Spain

Atabay Hektas AH Marks

Turkey Turkey UK

Selling technical ais and branded formulated products Selling mainly branded formulated products and developing novel mixtures and formulations Selling both generic and proprietary pesticide products Selling mainly branded formulated products and developing novel mixtures and formulations Selling mainly branded formulated products and developing novel mixtures and formulations Selling mainly branded formulated products and developing novel mixtures and formulations Selling both generic and proprietary pesticide products Selling mainly branded formulated products and developing novel mixtures and formulations Selling mainly branded formulated products and developing novel mixtures and formulations Selling mainly branded formulated products and developing novel mixtures and formulations Selling technical ais and branded formulated products Selling technical ais and branded formulated products Selling mainly branded formulated products and developing novel mixtures and formulations Selling technical ais and formulated products Selling mainly branded formulated products and developing novel mixtures and formulations Selling technical ais and formulated products Selling technical ais and formulated products Selling mainly branded formulated products and developing novel mixtures and formulations

Asia-Pacific Nufarm AgroDragon Baocheng Chemical Baoling Chemical CAC CCI Group Changqing Agrochemical Changxing Zhongshan Dacheng Pesticide Feixiang Chemical Fujian Sannong Good Harvest Green Agrosino Greenchem Industries Heben Pesticide Henglong Pesticide Hisun Chemical Huaxing Chemical Iprochem Jiangshan Agrochemical Jiangsu Suhua Group

Australia China China China China China China China China China China China China China China China China China China China China

© Informa UK Ltd, December 2007

Selling Selling Selling Selling Selling Selling Selling Selling Selling Selling Selling Selling Selling Selling Selling Selling Selling Selling Selling Selling Selling

32

both generic and proprietary pesticide products technical ais and formulated products technical ais and formulated products technical ais and formulated products technical ais and formulated products technical ais technical ais and formulated products technical ais and formulated products technical ais and formulated products technical ais and formulated products technical ais and formulated products technical ais and formulated products technical ais and formulated products technical ais and formulated products technical ais and formulated products technical ais and formulated products technical ais and formulated products technical ais and formulated products technical ais technical ais and formulated products technical ais and formulated products

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Jiangsu Yangnong Jingma Chemicals Kangmei Chemical Lanxi Agrochemical Limin Chemical Nanjing Agrochemical Nutrichem Laboratory Qinfeng Agrochemical Red Sun Sanonda Shandong Qiaochang Chemical Shandong Vicome Greenland Sinochem Ningbo Shenghua Biok Suzhou Worldbest Tide Group Wangs Xinan Chemical Xinyi Pesticide Yancheng Limin Yongnong Chemical Zibo Nab Agrochemicals Rotam

Generic Pesticides: Volume III – Business Strategies

China China China China China China China China China China China

Selling Selling Selling Selling Selling Selling Selling Selling Selling Selling Selling

China

Selling technical ais and formulated products

Aimco Pesticides Atul Bharat Group Chemet Chemicals Coromandel Fertilisers Dhanuka Pesticides

China China China China China China China China China China Hong Kong India India India India India India

Excel Crop Care Gharda Chemicals

India India

Heranba Hikal Hindustan Insecticides India Pesticides Indofil

India India India India India

Meghmani Organics Nagarjuna PI Industries Punjab Chemicals Rallis India Sabero Organics United Phosphorus PT Petrosida Gresik Kenso

India India India India India India India Indonesia Malaysia

Zagro Dongbu Fine Chemicals

Hui Kwang Pilarquim Sinon

Singapore South Korea South Korea Taiwan Taiwan Taiwan

Selling technical ais and branded formulated products Selling technical ais and formulated products Selling technical ais and formulated products Selling technical ais and formulated products Selling technical ais and formulated products Selling technical ais and formulated products Selling technical ais Selling technical ais and formulated products Selling technical ais and formulated products Selling technical ais and branded formulated products Selling mainly branded formulated products and developing novel mixtures and formulations Selling technical ais and branded formulated products Selling technical ais and branded formulated products Selling technical ais and formulated products Selling technical ais and branded formulated products Selling technical ais and branded formulated products Selling mainly branded formulated products and developing novel mixtures and formulations Selling technical ais and formulated products Selling mainly branded formulated products and developing novel mixtures and formulations Selling technical ais and formulated products Selling technical ais Selling technical ais and formulated products Selling technical ais Selling mainly branded formulated products and developing novel mixtures and formulations Selling technical ais and branded formulated products Selling technical ais and formulated products Selling technical ais and formulated products Selling technical ais and formulated products Selling both generic and proprietary pesticide products Selling technical ais and branded formulated products Selling both generic and proprietary pesticide products Selling technical ais and formulated products Selling mainly branded formulated products and developing novel mixtures and formulations Selling technical ais and formulated products Selling mainly branded formulated products and developing novel mixtures and formulations Selling both generic and proprietary pesticide products

South America Reposo

Argentina

LG Life Sciences

© Informa UK Ltd, December 2007

technical technical technical technical technical technical technical technical technical technical technical

ais ais ais ais ais ais ais ais ais ais ais

and and and and and and and and and and and

formulated formulated formulated formulated formulated formulated formulated formulated formulated formulated formulated

products products products products products products products products products products products

Selling technical ais and formulated products Selling technical ais and branded formulated products Selling mainly branded formulated products and developing novel mixtures and formulations Selling technical ais and branded formulated products

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Agripec

Brazil

Fersol

Brazil

Quimica Lucava Tekchem Tecnomyl

Mexico Mexico Paraguay

Inquiport

Venezuela

Selling mainly branded formulated products and developing novel mixtures and formulations Selling mainly branded formulated products and developing novel mixtures and formulations Selling technical ais and branded formulated products Selling technical ais and formulated products Selling mainly branded formulated products and developing novel mixtures and formulations Selling technical ais and branded formulated products

Most of the companies that are specifically established as generic pesticide producers, especially those in the developing world, begin by just manufacturing technical grade ais. These companies compete mostly on price, and, to a lesser extent, on the quality and purity of the ai that they produce. Although this remains the most basic business strategy for a generic pesticide company to adopt, it can also be reasonably lucrative. A number of generic pesticide companies have actually grown quite large by focusing solely on manufacturing technical ais, and many of the largest pesticide companies, such as Nufarm, find that it makes financial sense to buy ais from these companies rather than conduct the manufacturing themselves. Nevertheless, most generic pesticide companies progress to developing both technical grade ais and unbranded formulations, which they then sell to companies, both domestic and foreign, for them to transform into their ownbrand pesticide products. Common formulations include granules, wettable powders and concentrated suspensions. The majority of the generic pesticide companies in the developing world adopt this strategy, as can be seen by looking at the entries for China and India in Table 3.2. There is a large customer base for companies producing just technical ais or unbranded products. Although all the companies profiled in Volume 1 manufacture some technical ais, the vast majority of generic pesticide companies are purely formulators. For example, in India there are only around 80 manufacturers of technical ais but around 500 formulators, and there are around 2500 pesticide companies in China, but only around 500 of these actually manufacture technical ais. There are also numerous pesticide formulators in the developed world, and these tend to obtain their technical ais from the cheaper producers in India and China. The companies that adopt the strategy of producing technical ais and unbranded products tend to compete mainly on price, although they can also compete on the range and quality of the ais and formulations that they sell. Most companies only manufacture a fairly small range of technical grade ais and some try to gain a competitive advantage by specialising in certain ais. For example, Baoling Chemical claims to be the largest Asian producer of the insecticide profenofos and the fungicides metalaxyl and propamocarb, while PI Industries is one of the world’s largest producers of insecticide ais such as ethion and phorate. Chinese companies have an alternative way of competing, which involves them offering to supply a huge range of pesticide ais. They can do this because many Chinese companies form huge networks of linked businesses. Thus, although each company only produces a few technical ais, by taking advantage of this network they can offer to supply any of the ais manufactured by the other members of the network.

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Many of the generic pesticide companies in developing countries are happy to stick with this business strategy because their sales are currently under no real threat. This is due to both the high rates of growth in the pesticide markets in many developing countries, especially China and South American countries, and by the fact that these companies can still produce technical ais and formulated products cheaper than companies based in the developed world. Developed world companies, on the other hand, usually have to find ways to compete other than price. Most of the generic pesticide companies in developed countries have therefore progressed to producing branded pesticide products, which they usually market directly to the end-user. They try to build up a reputation for these products and their brands, and are usually engaged in developing novel formulations and ai mixtures to try to enhance the efficacy of their products. These companies tend to develop their products for the more affluent pesticide markets in the developed world, where effectiveness, rather than price, is often the most important consideration for the end-user. Growers in these countries, where regulations on pesticide residues are usually quite strict, tend to prefer pesticide products that are convenient to apply and specifically target the disease or pest in question. As such, they are willing to pay more to purchase more effective mixtures and formulations, such as micro-encapsulation. Some developing world companies have also begun to produce their ownbrand pesticide products, which are often for sale only in their domestic market, while still selling technical grade ais into foreign markets. However, these companies still tend to compete mainly on price and therefore focus on selling the standard formulations. Some of the larger developed world companies, such as Dhanuka Pesticides and Gharda Chemicals, have moved on to developing their own ai mixtures and formulations, and have stopped selling technical grade ais. As such, they can now compete on reputation and effectiveness, rather than price. This allows them to charge more for their products and provides a more stable business platform from which to operate. Many of the companies that sell branded products also run schemes providing assistance to growers. These schemes may involve advising growers on the best combination of products to use and training them in the best way to use the products. Some of the largest generic pesticide companies in both the developed and developing worlds have moved beyond the confines of the generic pesticide industry by acquiring and developing proprietary products. This process has been fuelled in recent years by the general consolidation of the global agrochemical industry, which has caused many of the merged companies to sell some of their proprietary products and businesses, or the rights to those products in certain regions. This is either because the products no longer fit in with the rest of the merged portfolio or because selling the product was a requirement of the merger being approved by anti-trust authorities. In addition, the major R&D companies are increasingly selling rights to ais that are either no longer big sellers or are about to lose their patent protection. Many of these products and businesses, which also include some generic products, were acquired by some of the largest generic pesticide companies, such as MAI, Nufarm and United Phosphorus (see Table 3.3).

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Table 3.3: Pesticide businesses acquired by generic pesticide companies from R&D-based agrochemical companies since 2000 Generic company

R&D-based company

Year

Product/business1

Amvac

Zeneca Agrochemical (now Syngenta) BASF Bayer CropScience Syngenta Syngenta BASF BASF BASF Syngenta Bayer CropScience Bayer CropScience Bayer CropScience Syngenta Syngenta Syngenta Syngenta

2000

Dacthal (chlorthal-dimethyl)

2001 2002 2002 2003 2005 2005 2006 2001 2003 2003 2007 2000 2000 2000 2001

Aventis CropScience (now Bayer CropScienece) Aventis CropScience (now Bayer CropScienece) Syngenta Bayer CropScience

2001

Phosdrin (mevinphos) Folex (tribufos) US rights to Ambush (permethrin) US rights to Evital (norflurazon) North American rights to Avenge (difenzoquat) Phorate insecticide business Counter (terbufos) Flutriafol cereal fungicide business European rights to acrinathrin European rights to phosalone Global rights to acrinathrin Agil (propaquizafop) Mavrik (tau-fluvalinate) Nimrod (bupirimate) Scandinavian cereal fungicides business (fenpropimorph, fenpropidin, propiconazole) Panoctine (guazatine)

2001

Apollo (clofentezine)

2002 2002

Racer (flurochloridone) Goltix (metamitron)

Bayer CropScience

2002

MAI MAI

Bayer CropScience Bayer CropScience

2002 2002

MAI

Bayer CropScience

2002

MAI MAI MAI

Bayer CropScience Bayer CropScience Bayer CropScience

2002 2002 2002

MAI

Bayer CropScience

2002

German and Belgian rights to Herold (flufenacet + difluenican) UK rights to Bayton (triadimenol + fuberidazole) Greek and Portuguese rights to Thiodan (endosulfan) Non-exclusive German rights to Folicur (tebuconazole) European rights to Gusathion (azinphos-methyl) Afalon (linuron) European rights to Bulldock (beta-cyfluthrin) and Baythroid (cyfluthrin) European rights to Metasystox (oxydemetonmethyl)

MAI Nufarm

Bayer CropScience Monsanto

2002 2002

Nufarm

BASF

2002

Nufarm

Bayer CropScience

2002

Nufarm

BASF

2005

United Phosphorus United Phosphorus United Phosphorus

Dow AgroSciences

2003

European rights to Nemacur (fenamiphos) Australasian selective herbicide business, including Monza (sulfosulfuron) and Ramrod (propachlor) Phenoxy herbicide business (2,4-D, MCPA, mecoprop, mecoprop-P, dichlorprop and dichlorprop-P) German and Belgian rights to two fenoxapropbased herbicides Imazamethabenz herbicide business outside of Europe Non-EU rights to Surflan (oryzalin)

BASF

2003

Ultra Blazer, Storm and Volt (acifluorfen)

Bayer CropScience

2006

Asulox and Asilan (asulam)

Amvac Amvac Amvac Amvac Amvac Amvac Amvac Cheminova Cheminova Cheminova Cheminova MAI MAI MAI MAI MAI MAI MAI MAI MAI

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United Phosphorus United Phosphorus United Phosphorus United Phosphorus United Phosphorus

Generic Pesticides: Volume III – Business Strategies

Bayer CropScience

2006

Metasystox (oxydemeton-methyl)

Bayer CropScience

2006

Trichlorfon insecticide business

DuPont

2006

Dow AgroSciences

2006

Londax and Mariner (bensulfuron-methyl) – all markets except Asia/Pacific Propanil herbicide business

DuPont

2007

Fenbutatin-oxide miticide and triphenyl hydroxide fungicide businesses

Note: 1. Global rights unless otherwise specified.

This strategy could be viewed as evidence that some of the larger generic pesticide companies want to leave the generic pesticide industry behind and transform themselves into R&D-based companies. However, with certain exceptions (such as Amvac, which considers itself a proprietary pesticide company that happens to sell some generics), these larger companies plan to continue focusing on generic pesticides. They have tended to buy only those proprietary pesticides that fit in with their generic product portfolio and most have no plans to start developing their own proprietary ais. A related strategy adopted by some generic producers, both large and small, is to enter into deals with the major R&D-based agrochemical companies to distribute their products in the country where the generic company is based. For example, Rallis India sells certain pesticide products produced by Bayer CropScience, FMC, Nihon Nohyaku and Syngenta in India, and Herbos sells products produced by various R&D-based companies, including Dow AgroSciences, Isagro and Sygnenta, in Croatia. Some of the largest generic companies have even negotiated exclusive distribution agreements in certain regions. For example, in 2002 Monsanto appointed Nufarm as the exclusive distributor for its Roundup (glyphosate) herbicide in Australia and New Zealand, and in 2004 BASF appointed Nufarm as the exclusive distributor for all its agricultural pesticide products in Australia. Many companies move through these different strategies as they develop, although progressing from one strategy to the next usually requires that the company has developed to a certain size and is therefore able to fund the development. Each successive business strategy offers more scope for growth, but is also more expensive to implement, because of the ancillary costs of developing new mixtures and formulations and setting up a distribution network for branded products. Lots of generic pesticide companies conduct some form of research activity. Initially, this is often focused on developing production processes for specific generic ais, but as the companies progress to producing branded products they often also start to develop new ai mixtures and formulations. This allows them to start competing on factors such as effectiveness and reputation, with the associated business benefits. Developing a distribution network, especially a global one, can be even more expensive, although there are a numbers of ways that this can be accomplished. The simplest way is to enter into distribution agreements with foreign generic companies. For example, Isagro has agreements with Arysta LifeSciences for it to distribute Isagro’s products in Japan and with Valent USA for it to distribute Isagro’s product Domark (tetraconazole) in the US.

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More expensive, but offering more control, is for a company to establish its own overseas distribution network, which can be achieved by either setting up overseas offices or subsidiaries or by acquiring foreign companies. For example, Gharda has established offices in the UK and the US to sell products into the European and North American markets, while much of Nufarm’s growth over the past few years has been driven by its acquisition of overseas companies.

3.3

R&D-based company business strategies The major R&D-based agrochemical companies adopt many of the same business strategies as the largest generic pesticide producers. However, they also adopt a number of unique strategies, many of which involve trying to prevent generic pesticide companies from gaining a foothold in the market for their proprietary ais. Like the largest generic pesticide companies, the R&D-based companies sell branded products and compete on effectiveness, reputation and assistance to growers rather than price (although that can change for generic products, see section 3.4.3). Unlike generic companies, however, they develop novel ais, which gives them additional ways to market and differentiate their products. For instance, they can market their novel ai as a more effective pesticide treatment in certain situations than an existing, perhaps generic, ai, and there are numerous examples of a novel pesticide taking much of the market share from an older ai (see section 3.4.5). Indeed, whole classes of pesticides can be replaced by newer versions, such as the gradual loss of market share by organophosphorus insecticides to pyrethroid insecticides and now neonicotinoid insecticides. These companies also tend to focus their activity on developed countries with more affluent agricultural industries, where farmers are willing to pay for pesticides that are more effective and can be applied at lower rates. However, the R&D-based companies, which have their own global distribution and marketing networks, are beginning to pay more attention to developing countries, especially those where the domestic pesticide market is growing, such as China and many countries in South America. Indeed, in recent years, many of the largest R&D-based companies have begun to expand their sales networks into countries where they previously only had limited access, such as China. This is bringing them into direct contact with the generic pesticide industries in these countries.

3.4

Strategies to counter generic competition The entry of generic producers into the market for a specific ai has the potential to greatly reduce the developing company’s share of the market and thereby hit its revenues and profits, especially with a major ai such as glyphosate. There are numerous ways in which the original developing company can protect its share of the market from generic competitors and the fact that developing companies often manage to retain a major share in the market for an ai demonstrates the potential effectiveness of these strategies.

3.4.1

Patents The initial and most obvious way in which R&D-based agrochemical companies protect their pesticide business against generic producers is through patents, which have been essential to the successful and rapid

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development of the modern agrochemical industry. This protection has allowed the leading agrochemical companies to commit large proportions of their sales revenues to R&D, with the assurance that any discoveries and subsequent pesticide products will be protected from any competition for a considerable time. However, obtaining and maintaining a patent is not cheap, with patentrelated costs accounting for around 4% of the major agrochemical companies’ R&D expenditure, according to a recent study by UK consultants Phillips McDougall. Furthermore, the extent to which patents are protected varies from country to country and continent to continent. As a general rule, R&D-based companies have a greater share of the pesticide market in countries with strong patent protection legislation. Patent protection has traditionally been strong in the US, Japan and most of Western Europe. In contrast, it has historically been weak in India, China, Eastern Europe, the former Soviet Union and South America, allowing generic pesticide producers to play a more significant role in these countries. However, patent protection in some of these countries has recently grown stronger as a result of countries such as China and India joining the WTO, and subsequently adopting the TRIPs agreement. Patent protection for a novel crop protection agent typically lasts for 16–20 years. In some exceptional cases an additional period of protection is allowed, such as in the EU (see below). As well as the patents on a new pesticide ai, the effective ‘protected life’ of a pesticide can be prolonged by patents relating to areas such as product formulations, manufacturing technology, chirality and key chemical intermediates (see sections 3.4.4 and 3.4.5). In the US, the only change to patent legislation in recent years is that all patents now run for 20 years from the date of application, rather than the previous 17 years from date of issue. An additional provision for pharmaceuticals and pesticide products covers the situation where the government patent examiner unnecessarily delays (or neglects) a patent application, in which case a company may apply for a patent extension for the time it was delayed (however, this extension is not automatic). In Europe, the European Commission proposed in 1994 to extend the effective patent life on pesticides by up to five years. At the time, the Commission estimated that the protection of a pesticide patent, typically 20 years, had in practice been reduced to 10 years. This was mainly attributed to the long development and registration periods required before sales could commence. The level of protection also varied in individual member states, creating barriers to the free movement of products and distorting competition. The Commission’s proposal involved granting a ‘complementary’ certificate of protection, similar to one adopted for pharmaceuticals in 1992. Once commercialised, all novel pesticides would, in effect, receive protection for up to 15 years. The certificate, which would be granted by the national patent offices of member states and be based on precise reference dates, would give the same rights and impose the same obligations as the basic patent.

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According to the proposal, the regulation would be applied to all products authorised in the EU after 1 January 1985 for which a patent was still in force, with a transitional regime for products already on the market. The regulation (EC Regulation 1610/96) eventually came into force in 1996 and has now been adopted in the national legislation of member states. In the UK, owners of patents for plant protection products could extend their protection for up to a further five years, with effect from February 1997. The Patents (Supplementary Protection Certificate) Rules 1997 gave practical effect to EC Regulation 1610/96 in the UK. Under the Patents Act 1977, a UK patent can be renewed for up to 20 years after filing. 3.4.2

Legal challenges Most R&D-based companies are quite happy to defend their patent position in the courts, especially as an ai nears the end of its patent protection. Sometimes generic producers knowingly try to flout a company’s patent, but on other occasions it can be difficult to know whether all the patents on an ai have expired. This is because companies can not only patent the ai itself, but also the manufacturing processes used to produce it and specific formulations. Many generic producers, especially those in India and China, have actually become quite adept at developing alternative production routes for specific ais, but others have fallen foul of manufacturing patents. In addition, patents tend to expire at different times in different countries. So, a generic company may be perfectly within its rights to manufacture and sell an ai in its home country, but will have problems if it offers to sell the ai in countries where the patent is still in force. At recent BCPC exhibitions, a number of major agrochemical companies have filed injunctions against Chinese generic producers for advertising pesticide ais that were still protected under UK patents, such as BASF’s kresoxim-methyl. Some R&D-based companies, with access to a large amount of funds, have used the threat of legal action to try to ward off generic producers. Monsanto is one pesticide company that has been accused of over-stepping the mark while defending its ai patents. In 2001, it launched a lawsuit against the US generic producer Chemical Products Technologies (CPT) for allegedly infringing Monsanto's glyphosate patents. CPT claimed that Monsanto's suit had been filed specifically to “harass” a small generic company and to try to dissuade it from offering farmers a lower-priced version of glyphosate.

3.4.3

Price reductions As the patent expiry date for an ai approaches, R&D-based companies may decide to reduce prices in specific markets to make the product less commercially attractive for any new entrant. This was one of the strategies that Monsanto adopted for glyphosate. It can be a relatively painless strategy for a company that already has well-established production plants and existing distribution networks. The pain can be reduced still further by improving the efficiency of the manufacturing process, as Monsanto did with glyphosate. This may result in a new entrant to the market finding that start-up costs, coupled with the relatively high cost of making smaller quantities of the product, make it impossible to compete.

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Care must be taken to avoid this strategy backfiring. In 1993, the Australian Anti-Dumping Authority (ADA) imposed duties on imports of the herbicide trifluralin, which was developed by DowElanco (now Dow AgroSciences), for a five-year period. This followed complaints from Nufarm that DowElanco was selling the herbicide in Australia at half the US retail price. 3.4.4

New formulations and mixtures By developing sophisticated formulation technologies and novel product mixtures, leading to product benefits in areas such as efficacy, ease of handling and environmental characteristics, a company can differentiate its product from generic competitors. The same also applies to generic companies, which can gain an advantage over the original patent holder by developing their own novel formulations and mixtures. This strategy can be so effective that R&D-based companies have sometimes applied new formulation technologies to generic ais that they didn’t originally develop if they can see a market opportunity. These strategies can also offer the developing company another form of patent protection. Novel formulation technologies can be patented and, if the formulation offers sufficient advantages over older formulations and is therefore preferred by growers, may allow the developing company to retain its dominant position in the market for an ai for the length of the formulation patent. For example, Monsanto launched a number of new formulations of glyphosate as the ai lost its patent around the world. •

Roundup Hi-Load – launched in Japan in 1999, this product contains glyphosate-ammonium, which is taken up more quickly than the propylamine salt of glyphosate.

•

Roundup UltraMax – launched in the US in 2000, this product contains 25% more glyphosate than other Roundup products and employs Transorb technology for enhanced uptake, translocation and rainfastness.

•

Roundup Turbo – launched in Germany in 2002, this product is a dry formulation of glyphosate.

•

Roundup WeatherMAX – launched in the US in 2003, this product provides consistent weed control in a variety of weather conditions. By utilising Monsanto's proprietary Transorb II technology, Roundup WeatherMAX is able to penetrate a weed leaf within minutes, thereby minimising the chance that the herbicide will be washed away by rain.

The company now holds 250 patents worldwide on formulations of glyphosate. This approach can also be used by generic companies wanting to enter a market. By offering a new formulation with advantages over existing ones a generic pesticide company can give its product a distinct identity that can help it to stand out from the competition. The company that originally developed a pesticide ai may even try fragmenting the market with a wide range of different product formulations for different crop and non-crop uses. The approach usually involves developing different product formulations for different market sectors, often in mixtures with different ais. This strategy also allows the company to

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charge different prices in different sectors, such as charging high prices for fungicides used on top fruit and lower prices when used on vines and cereals. In addition, it can discourage competitors who do not want to incur the extra expenses involved in developing additional mixtures. With registration costs generally increasing, however, this may not always be in the best interests of the developing company. Marketing an off-patent product in mixtures with other ais that are still protected by patent (either in-house or licensed from another R&D-based company) can be another effective strategy. Not only will the combination product presumably have an improved spectrum of activity, the presence of a patented ingredient will protect it from competition. This mixture strategy can also work well in advance of patent expiry, by reducing mixing opportunities for both R&D-based companies and generic companies. 3.4.5

New ais and single isomers R&D-based companies may develop new ais to try to replace the ai that has lost, or is about to lose, its patent protection, especially in more developed and affluent markets. For example, Dow AgroSciences launched its new herbicide aminopyralid with the expectation that it would replace some of its older cereal herbicides, such as fluroxypyr. A related strategy is to develop pesticide products that only contain the active isomer of an ai. Many chemical compounds can exist in a number of different structural forms, known as isomers, which possess the same composition and molecular weight. Many pesticide ais consist of mixtures of different isomers (usually two symmetrical forms, known as enantiomers), only one of which is responsible for the pesticidal activity. This is either because the developing company doesn’t know which enantiomer is the active one or, more likely, is only able to produce a mixture of all the enantiomers. It is usually more difficult and expensive to produce single enantiomers of a compound, because most manufacturing processes produce equal amounts of all possible enantiomers. However, companies can obtain a separate patent for the single enantiomer of an ai and also for the specific manufacturing process that usually has to be developed to produce it. This patent protection and the increased efficiency of a pesticide product based solely on the active enantiomer usually allow the developing company to take market share away from the original ai. For example, Syngenta introduced single enantiomer versions of two of its top-selling active ingredients, the herbicide metolachlor and the fungicide metalaxyl, both of which are now off-patent. This was made possible by the company developing new technology to manufacture the biologically more active enantiomers on a much larger scale than previously possible, thus making wide-scale production economically viable. Syngenta is now supporting the single enantiomer versions, known as Smetolachlor and metalaxyl-M or mefenoxam, at the expense of the older ais. It claims that S-metolachlor provides equivalent weed control to metolachlor but at an application rate 35% lower and that metalaxyl-M is effective at half the application rate of metalaxyl. This has resulted in S-metolachlor and metalaxyl-M being approved for sale in the EU, but metolachlor and metalaxyl being withdrawn from the

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European market. Syngenta has also tried to prevent the US EPA from registering generic versions of metolachlor, arguing that S-metolachlor is a much safer product than metolachlor, because of the reduced application rate, and that re-introducing metolachlor would undermine the EPA’s reduced risk initiative. Not surprisingly, both metolachlor and metalaxyl have lost market share to the single enantiomer versions. Around 10 years ago, the global markets for metolachlor and metalaxyl were worth around $400million and $200 million, respectively, but they are now probably worth around $100 million and under $50 million. In contrast, the global markets for S-metolachlor and metalaxyl-M are probably worth $300 million and $240 million, respectively. 3.4.6

Manufacturing processes The entry of generic competitors into the market for an ai obviously results in greater competition, which acts to force down the price of the ai. Some R&D-based agrochemical companies anticipate this price reduction and develop cheaper and more efficient manufacturing processes for an ai that is about to lose its patent. This means that the developing company can retain its profit margin in the face of a falling price and even try to price potential competitors out of the market (see section 3.4.3). For instance, by investing in new technology, Monsanto managed to reduce unit production costs for Roundup (glyphosate) by 29% between 1996 and 2005. The centrepiece of this effort was a new $550 million manufacturing and formulation plant at Camaçari in Brazil, which exceeded targets for efficiency, yield and quality in its first year of operations. In 2002, as a result of the Camaçari plant coming on-stream, Monsanto was able to close some of its higher-cost facilities. Manufacturing processes can also be patented and these process patents can be of considerable commercial value because they can help to prolong the period of patent protection for a pesticide ai. This means that even if an ai has lost its patent protection, generic companies can be prevented from producing the ai if the specific manufacturing process for it is still protected. This has resulted in many generic pesticide companies becoming experts at developing alternative manufacturing processes for generic ais. For instance, Gharda developed a novel process for the production of isoproturon, which avoids the use of isocyanate intermediates. Even if the patents on a manufacturing process have expired, the technology required may still be beyond the reach of many generic pesticide companies, especially the smaller ones. This constraint may prevent the companies from manufacturing the ai at all or result in them producing a low quality product.

3.4.7

Controlling raw material supplies The original developer of an ai may try to prevent generic competitors from entering the market by controlling the existing supply of a key intermediate compound or raw materials. This is obviously easier to do if the production capacity for the intermediate is fairly small or the raw material fairly rare.

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3.4.8

Generic Pesticides: Volume III – Business Strategies

Acquiring or forming generic businesses Some R&D-based agrochemical companies have decided to deal with generic competitors by entering the industry. They usually do this by acquiring an existing generic business, which then markets the agrochemical company’s generic products. Examples include: DuPont’s joint venture with Griffin, which led to DuPont buying the company outright in 2003; Dow AgroSciences’ acquisition of the South African company Sentrachem and its generic pesticide subsidiary Sanachem in 1997; and BASF’s acquisition of Micro Flo, a US generic formulator and distributor, in 1998 (although BASF subsequently sold Micro Flo to Arysta LifeScience in 2006).

3.4.9

Selling off-patent products Instead of trying to compete with the generic producers, some companies decide to sell off a post-patent ai. This divestment can include global rights to the ai, or just rights to certain markets, and may also include production plants. Products usually chosen are those that are no longer of sufficient interest or profitability to the developing company. However, they may still be of interest to generic companies, which work on lower margins and may be able to put more effort into marketing products based on the ai. Amvac has built up much of its business by acquiring unwanted, niche pesticide products from some of the major R&D-based agrochemical companies (see Chapter 2). Amvac claims that it can improve the sales of these niche products by actively marketing them and seeking new markets.

3.4.10

Regulatory restrictions Many generic pesticide companies consider that the pesticide registration regulations in many regions and countries, specifically data protection regulations, put them at a disadvantage compared with the R&D-based agrochemical companies. Theoretically, the cost of registering a generic pesticide should be less than a novel pesticide, because the ai has already been approved. But generic pesticide companies often find it difficult gaining access to registration data produced by the original developing company, even if they are willing to pay for it (see Chapter 3 for more details on the data protection position in different countries and regions). For example, the European Crop Care Association (ECCA) has long complained that the data protection provisions in the EU pesticide registration directive placed generic companies at a “severe” disadvantage. The problem is that generic pesticide companies can find it difficult to discover which of the studies used to provide the original registration data are “protected” and which are older “unprotected” studies. They also can have problems gaining access to any protected studies. ECCA has long called for EU member states to provide lists of protected data and to implement a compensation system for accessing the data, as happens in the US. Without access to this data, generic companies are forced to conduct their own studies, with the associated cost. The proposed amendments to the EU pesticide registration directive should go some way to assuaging ECCA’s concerns. These require member states to provide interested parties with information on the studies used for Annex 1 listing and on claims for protected data, while also removing any

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protection for new data generated for the review of existing ais and products (see Chapter 4). Meanwhile, in India, the PMFAI has been arguing against the imposition of a 5–10 year period of data protection. The PMFAI have asserted that introducing an additional data exclusivity period would amount to an extended patent and would go beyond the requirements of TRIPs. Although the R&D-based agrochemical companies are not deliberately withholding registration data from generic producers, they obviously want to see data protection periods last as long as possible. They also benefit from generic companies finding it hard to access registration data or being forced to conduct their own studies, which delays generic products from reaching the market. In addition, the difficulty and cost of meeting the increasingly stringent requirements for registering a pesticide product can effectively exclude a generic company from entering certain regional markets. This is especially the case in the EU, where it is often simply not cost effective for small generic producers to try to obtain a registration for a new pesticide product or defend the registration for an existing product. Ironically, defending a product registration becomes much more difficult after an ai has been approved for inclusion in Annex 1 of the EU pesticide registration directive. This is because generic producers are now required to show that they have access to a complete data package for that ai.

3.5

Competition between generic and R&D-based manufacturers Despite the many ways in which R&D-based manufacturers can try to prevent generic competitors from entering the market for an ai, they will eventually have to compete with generic producers. Price is the primary mechanism by which most generic manufacturers compete with the original developing company and prices for any ai that has recently lost its patent protection tend to decline sharply. For example, the price of technical grade glyphosate fell by almost 30% between 2000, when the US patent for glyphosate expired, and 2004. Like the R&D-based agrochemical companies, generic producers can also compete by developing their own formulations and mixtures. Most reasonably-sized generic companies conduct some form of research into new formulations and mixtures (see Table 3.2), including some fairly advanced technologies. For instance, both Agripec and Indofil have conducted research into micro-encapsulation. Generic companies also have a formulating advantage over the larger R&Dbased companies, in that they can develop formulations specifically targeted at their domestic market. Although this market may be fairly small from the viewpoint of a multinational agrochemical company, generic producers often generate the majority of their sales in their domestic market. They can therefore afford to develop a formulation with properties specifically tailored for the local growing environment. This especially tends to be the case for generic producers in developing countries, because the R&D-based companies mainly concentrate on designing products for the more affluent developed country markets.

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A related competitive advantage for generic producers is that they have often built up a distribution and marketing network for their products in their domestic market. Foreign R&D-based companies, on the other hand, can have more difficulty accessing the market, especially if the country’s government is keen to protect its domestic pesticide industry. For example, until recently most companies wanting to sell pesticide products in China, including all foreign companies, had to do so through a state-owned distribution system known as Agricultural Means and Production of China. However, certain of the larger Chinese companies were allowed to supply their products directly to country dealers. This process is now changing, following China’s accession to the WTO, and some of the major R&D-based agrochemical companies have begun to set up their own sales networks to target country dealers directly. Nevertheless, the original developing company usually manages to retain a dominant position in the market for a newly post-patent ai, at least for a few years after the patent has expired. Occasionally, the tactics they employ for maintaining this position draw complaints from generic competitors, as well as from farmers and growers. For example, in February 2007, the American Corn Growers Association filed a lawsuit against Monsanto accusing it of using its "monopoly power" to restrain competition and maintain "supra-competitive pricing" for its glyphosate-based herbicides. Among other things, the lawsuit accused Monsanto of maintaining a glyphosate monopoly by "various exclusionary tying and bundling practices" that penalised dealers who wanted to sell more than a limited amount of generic glyphosate. These practices were alleged to have induced growers to buy Roundup "virtually exclusively" even though cheaper generic herbicides were available. However, the US Department of Justice has already conducted an inquiry into possible anti-competitive conduct in the glyphosate-based herbicide industry, which it completed in 2004 without requiring Monsanto to take any action.

3.6

Competition between generic companies Unsurprisingly, generic companies tend to compete with each other along similar lines as with the major R&D-based companies, with price, formulations and mixtures being the primary mechanisms. Competition over price is obviously fiercest amongst those companies that produce technical grade ais, because, aside from the quality of the ai, price is the only way to differentiate between the ais produced by different companies. In addition to price, companies that develop novel formulations and mixtures can compete on the basis of the effectiveness of their products, while those companies that produce branded products can build up a reputation for that brand. As Brian Benson, Group General Manager of Agriculture at Nufarm, has said: “We do believe that if you offer the customer a way of doing business – if you make the customer promises, then you meet that customer promise – you will establish a reputation with the customer for meeting and exceeding their requirements and their needs. And if you do that the customer will develop a relationship with your company, with your company brand name, and be more likely to buy products from you.” However, generic companies also compete with each other in a fairly unique way, based on the fact that they have a certain amount of choice over which

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ais they actually produce. R&D-based companies tend only to compete with generic producers over those post-patent ais that they originally developed. Generic companies, on the other hand, can choose their products from a whole range of post-patent ais. The specific ais and products that they decide to manufacture will probably depend on a number of factors, such as size of the market, the company’s chemical expertise, the precise patent position of the ai and how many other generic companies also manufacture the ai. The size of the market is probably the single most important factor, as can be seen from Table 3.4. Glyphosate is by far the biggest selling pesticide ai in the world, with annual sales of around $5,000 million, and so it is not surprising that it is manufactured by a large number of generic companies. But it is the size of a generic pesticide company’s domestic market that usually has most influence over the ais that it manufactures. Of the top 10 most manufactured ais in Table 2.4, five of them are insecticides. This reflects the fact that a large number of generic pesticide producers are based in countries with hot regions, such as India, where insects are the main crop pest and the demand for insecticides is great. The other herbicides in the top 10 are 2,4-D and paraquat, which are both widely used throughout the world, and the top 10 also contains two of the largest selling fungicides, carbendazim and mancozeb.

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Table 3.4: Most popular post-patent ais by number of generic manufacturers Active ingredient

Activity

Glyphosate Imidacloprid Chlorpyrifos Cypermethrin (+ alpha) Carbendazim 2,4-D Mancozeb Acephate Paraquat Abamectin Acetamiprid Propiconazole Tebuconazole Lambda-cyhalothrin Dimethoate Malathion Chlorothalonil Carbofuran Pendimethalin Atrazine Deltamethrin Endosulfan Hexaconzole Metsulfuron-methyl Butachlor Dichlorvos Metalaxyl Quizalofop-P Diuron Methamidophos Monocrotophos Bifenthrin Methomyl Profenofos Propanil Trifluralin Alachlor Amitraz Imazethapyr Oxyfluorfen Parathion-methyl Permethrin Quinalphos

Herbicide Insecticide Insecticide Insecticide Fungicide Herbicide Fungicide Insecticide Herbicide Insecticide Insecticide Fungicide Fungicide Insecticide Insecticide Insecticide Fungicide Insecticide Herbicide Herbicide Insecticide Insecticide Fungicide Herbicide Herbicide Insecticide Fungicide Herbicide Herbicide Insecticide Insecticide Insecticide Insecticide Insecticide Herbicide Herbicide Herbicide Insecticide Herbicide Herbicide Insecticide Insecticide Insecticide

Number of generic manufacturers1 43 40 37 36 27 25 25 24 24 23 23 23 23 21 19 18 17 16 16 15 15 15 15 15 14 14 14 14 13 13 13 12 12 12 12 12 11 11 11 11 11 11 11

Note: 1. Number of generic manufacturers taken from Volume 2.

Indeed, insecticides dominate Table 3.4, accounting for practically half of the entries. However, their precise placing in the table demonstrates the influence of factors other than market size, particularly the age of the ai. For example, the insecticide imidacloprid has been the second largest selling pesticide ai in the world for a number of years, but in the 2005 edition of this report it was only the sixth most manufactured pesticide (with 20 generic manufacturers). In this edition, however, it has moved up to second place behind glyphosate, mirroring the global sales ranking.

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This is probably due to the fact that in 2005 imidacloprid had only recently begun to lose its patent protection and many generic companies had not yet developed the necessary manufacturing technology. But just two years later, the number of companies able to produce imidacloprid has almost doubled. Other ais that are now produced by many more generic companies include the insecticide abamectin (from 7 in 2005 to 23 in 2007) and the fungicide tebuconazole (from 5 in 2005 to 23 in 2007). Similarly, of the 10 new ais profiled in Volume 1 of this report, only the herbicide quizalofop appears in Table 2.4. Once again this is because most of these ais have only recently begun to lose their patent protection and so most generic companies have not yet set up the necessary manufacturing infrastructure (they also probably don’t want to produce an ai that is still patent-protected in most major markets). For example, the insecticide fipronil and the fungicide kresoxim-methyl both generate substantial sales (over $400 million), but they are currently produced by only four and five of the generic manufacturers profiled in Volume 1, respectively. This also helps to explain why older pesticide ais such as acephate and paraquat are quite high up the list, because plenty of companies have the required manufacturing technology and the demand for them is still quite high in many countries. The specific portfolio of pesticide ais that a company produces can be a competitive advantage. Some generic companies try to supply as many ais as possible, often by forming networks with other generic companies (as in China), while others tend to focus on a smaller range of ais or deliberately target ais that aren’t manufactured by many other companies. For example, Excel Crop Care has a fairly small pesticide portfolio, based on only five ais. But they are some of the world’s best-selling generic ais, such as the herbicide glyphosate and the insecticides imidacloprid and chlorpyrifos, and Excel Crop Care is thus one of India’s largest generic producers. Meanwhile, IQV mainly manufactures copper-based fungicides, which are not widely manufactured by other generic producers.

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Chapter 4: Global Generic Agrochemical Market

Generic Pesticides: Volume III – Business Strategies

CHAPTER 4 GLOBAL GENERIC AGROCHEMICAL MARKET The global pesticide market was worth around $32,000 million in 2006, exactly the same as in 2004, reflecting the fact that business conditions have been fairly stagnant since the previous edition of this report. Unlike in 2004, however, when North America and Europe had equal largest shares of the global market, Europe is now in first place, followed by Asia-Pacific, with North America in third place (see Table 4.1). This reflects the fact that although the global pesticide market has been generally stagnant, certain regional and country markets are growing much faster than others. For example, the pesticide market in Eastern Europe has experienced healthy growth rates, which has prevented the overall European market from contracting, while growth in China has driven much of the growth in the Asia-Pacific market. In contrast, the markets in North America have been shrinking.

Table 4.1: Global pesticide sales by region, 2006 ($ million) Region Europe Asia-Pacific North America South America Rest of the world Total

Total sales1 8,500 7,750 7,250 6,500 2,000 32,000

% 27 24 23 20 6 100

Note: 1. Figures rounded up to the nearest $250m.

The global agrochemical market is essentially made up of sales of two types of pesticide ais – proprietary pesticides and off-patent pesticides. Proprietary pesticides are those that still have patent protection and so are only sold by the developing company or approved licensees. Off-patent pesticides are those that have lost their patent protection and can be sub-divided into two classes: proprietary off-patent pesticides, which are produced and sold by the original developing company; and generic pesticides, which are offpatent pesticides that are produced and sold by companies other than the original developing company. Although off-patent products account for the majority of global pesticide sales (60–70%), in many countries, especially developed ones, the R&Dbased agrochemical companies still dominate the market for off-patent pesticides. This means that generic pesticide producers probably generate 20–30% of global pesticide sales, valuing the global generic pesticide market at $6,400–$9,600 million. These sales are spread highly unevenly over the world, with generic producers generating 75% of the pesticide sales in China but practically nothing in Japan. The share of a country’s pesticide market taken by generic products depends on a number of factors, including: ease of registration for generic products; presence of the major R&D-based agrochemical companies in the region; level of patent and environmental legislation; nature of the agricultural industry; and number of generic pesticide producers. As such, generic pesticides tend to account for a larger share of the market in developing countries than in developed countries.

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The centre of the global generic pesticide industry seems slowly to be shifting from the western world to south-east Asia. Hundreds of generic pesticide companies are now based in China and India, which between them account for well over half the companies profiled in the first report (see Table 4.2). These companies sell their products into their rapidly expanding domestic markets and also export them abroad.

Table 4.2: Geographical spread of companies profiled in the first report Regions

Number of companies

China India Asia-Pacific Europe (incl. Israel and Turkey) North America Latin America Total

42 20 10 18 3 7 100

In 2005, when the last edition of this report was published, the top nine generic pesticide companies by sales were all from the developed world, while Agripec was at number 10. Now United Phosphorus has broken into the top 10, at number five, while Agripec has progressed to number seven and Red Sun is at number 10 (see Table 4.3). Nevertheless, the top four generic pesticide companies are exactly the same – and in exactly the same positions – as in the previous edition (not including Monsanto and Griffin).

Table 4.3: Top 50 generic pesticide companies by sales1 Company

Country

Makhteshim-Agan Nufarm Cheminova Sipcam-Oxon United Phosphorus Cerexagri Agripec3 Isagro Amvac Red Sun Xinan Chemical Rallis Sanonda Taminco Meghmani Organics Huaxing Chemical Rotam Excel Crop Care Jiangshan Agrochemical AH Marks Nagarjuna Sabero Organics Indofil Jiangsu Suhua Group Shenghua Biok Changxing Zhongshan

Israel Australia Denmark Italy India US Brazil Italy US China China India China Belgium India China Hong Kong India China UK India India India China China China

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Annual sales ($m)1 1581 1253 680 378 350 270 198 196 194 153 138 133 120 119 105 100 100 93 90 84 80 75 70 70 70 60

Year2 2006 2006 2006 2005 2006 n/k n/k 2006 2006 2005 2005 2006 2005 2006 2007 n/k n/k 2007 n/k n/k 2006 n/k n/k n/k n/k n/k

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Jingma Chemicals Punjab Chemicals Shandong Qiaochang Chemical IQV Dongbu Fine Chemicals Sinochem Ningbo Hektas Baoling Chemical Atul Heben Pesticide Hindustan Insecticides Dhanuka Pesticides Good Harvest Yongnong Chemical Changqing Agrochemical Hikal Zagro Iprochem Jiangsu Yangnong Chemical Tekchem AgriGuard Baocheng Chemical Industry LG Life Sciences Luxembourg Industries Tecnomyl Bharat Group Fersol Herbos Cequisa Coromandel Fertilisers Pinus Yancheng Limin Quimica Lucava Reposo

China India China Spain South Korea China Turkey China India China India India China China China India Singapore China China Mexico Ireland China South Korea Israel Paraguay India Brazil Croatia Spain India Slovenia China Mexico Argentina

60 60 60 58 53 50 49 45 41 40 40 35 35 35 33 33 31 30 30 29 25 25 25 25 25 24 23 22 19 17 16 15 13 13

n/k 2006 n/k 2004 2004 2005 2006 2004 2006 n/k 2006 n/k n/k n/k n/k 2006 2005 n/k n/k 2003 n/k n/k n/k n/k n/k 2004 2006 2006 n/k n/k 2004 n/k n/k n/k

Notes: 1 Some entries include non-pesticide sales, see specific company profiles in Volume 1 for details; 2 Refers to year in which company’s fiscal year ended; 3 Estimate based on percentage reduction from 2005 sales.

The proportion of developing world companies increases as the sales figures decrease, with Chinese and Indian companies dominating the positions from 11 to 30. Indeed, a large number of Chinese and Indian companies – Xinan Chemical, Rallis, Sanonda, Meghmani Organics, Huaxing Chemical and Rotam – now generate annual sales of $100 million or over. The major developed world generic pesticide companies are facing increasing competition from these developing world companies. Many are responding by shifting their business focus away from generic pesticides towards proprietary products, which they have been buying from the major R&D-based agrochemical companies. This process has been fuelled by the consolidation of the agrochemical industry, which has led many of the merged multinational companies to sell the rights to some of their pesticides, often at the instigation of anti-trust authorities. So, the current largest generic pesticide producers could end up transforming themselves into more general agrochemical companies, selling both generic and proprietary products, some of which they might develop themselves. Meanwhile, the larger Chinese and Indian companies could grow to become the largest solely generic producers. This will firmly establish south-east Asia as the centre of the global generic pesticide industry, both in terms of number of companies and sales.

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4.1

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North America The North American market, which encompasses the US and Canada, generates sales of around $7,250 million a year, with the US accounting for 83%. Both the US and Canada have a technically-advanced agricultural industry and generic pesticide manufacturers only account for a minor proportion of the pesticide market in these countries. This is reflected in the fact that Volume 1 of this report contains profiles of only three US-based generic pesticide companies (compared with 42 in China) – although two of these are in the list of top 10 largest generic producers by sales – and no Canadian companies.

4.1.1

United States The US is the world’s largest national pesticide market, worth $6,026 million in 2006 according to the industry association CropLife America. However, the market has recently been contracting, with herbicide sales falling by 6% in 2006, insecticide sales falling by 10% and fungicide sales falling by 13%. Herbicides represent the largest section of the US market, at around 65%, followed by insecticides (20%) and fungicides (10%). This contraction represents the continuing effect of the uptake of genetically-modified (GM) crops, especially glyphosate-tolerant soybeans and insect-resistant maize, by US farmers. GM soybeans – the vast majority of which are tolerant to the herbicide glyphosate –accounted for over 90% of all soybeans grown in the US in 2007. GM maize – split fairly equally between herbicide-tolerant and insect-resistant varieties – accounted for 73% of all maize grown in the US in 2007. Nevertheless, soybeans and maize remain two of the largest crop markets for pesticides in the US (see Table 4.4).

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Table 4.4: US pesticide sales by crop, 2006 ($ million) Crop

Herbicide

Insecticide

Fungicide

Total1

Maize Soybeans Cotton Cereals Rice Sugar beet Sugar cane Sunflowers Oilseed rape Fruit/vegetables Others Totals

1,140 810 247 375 96 72 30 30 11 375 695 3,881

325 60 215 38 6 13 5 5 2 446 122 1,237

5 55 4 37 21 11 0 0 0 353 138 624

1,472 925 661 454 125 97 35 35 13 1,223 986 6,026

Sources: Philips McDougall/CropLife America/Agrow Notes: 1. includes other categories.

Despite the recent contraction of the US agrochemical market, it is likely that the off-patent pesticide market in the US is growing, driven primarily by increasing sales of glyphosate for use on glyphosate-tolerant GM crops. Nevertheless, much of the post-patent pesticides sold in the US are still manufactured by the major R&D-based agrochemical companies, especially in the case of Monsanto with glyphosate. Generic pesticide companies probably only account for 15–20% of the US pesticide market. Three US-based generic pesticide companies were profiled in Volume 1 of this report, two of which are in the global top 10 by sales (Cerexagri, with annual sales of $270m, and Amvac, with sales in 2006 of $194m). This reflects the fact that the US pesticide market is large and well developed, and that US generic pesticide companies have to be of sufficient size to compete with the major R&D-based agrochemical companies. In the previous edition of this report, the US companies Monsanto and Griffin were also profiled, because they are major producers of post-patent pesticides, albeit ones that they or their parent company originally developed. However, for this edition, only companies producing post-patent pesticide ais that they did not originally develop were profiled. The US market is also well regulated and companies launching new pesticide products need to have the financial and scientific resources necessary to complete the registration process. The regulation of pesticides in the US is covered by FIFRA, which was amended in 1988. This amendment instigated a programme requiring all ais registered before November 1984 to have their registrations reviewed. This applied to 1,150 ais in 45,000 formulated products, with the review programme to be carried out by the Office of Pesticide Programs (OPP), which is part of the US EPA. In 1996, the FQPA came into force, widening the scope and considerations that needed to be applied regarding pesticide safety. As part of the FQPA, the EPA now has to assess the cumulative risks of certain pesticide groups with a common mechanism of toxicity, such as organophosphorus insecticides. When the EPA completes the review and risk management assessment for a pesticide that is subject to re-registration, it generally releases a Re-

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registration Eligibility Decision. This summarises the risk assessment conclusions and outlines any risk reduction measures necessary for the pesticide to continue to be registered in the US. If the ai is also part of a group undergoing a cumulative assessment, the EPA releases an Interim Reregistration Eligibility Decision, which is finalised on completion of the cumulative assessment. This review programme was essentially completed in 2006 and did not result in as many generic ais being removed from the market as in the EU (see Chapter 2). However, in 2007, the OPP started a new 15-year review programme, which aims to review pesticide registrations every 15 years. The OPP has already detailed which ais it plans to review from 2007 to 2010 and has also released work dockets for the first nine ais entering the programme. 4.1.2

Canada The Canadian pesticide market was worth Can$1,346 million ($1,184 million) in 2006, according to the industry association CropLife Canada, with the agriculture-heavy region of Western Canada accounting for around threequarters of sales. Canada is probably similar to the US in terms of the share of the pesticide market held by generic pesticide companies (15–20%). However, none of the generic pesticide companies profiled in the first report are Canadian (although Pilarquim now has its corporate headquarters in Canada).

4.2

Europe The European pesticide market is worth around $8,500 million a year, with the market in Western Europe generating the vast majority of these sales (around 80%). France is by far the largest single country market, with annual sales of Euro 1,721 million ($2,305 million) in 2006. Other large markets include Germany ($1,373 million in 2005), Italy ($922 million in 2005), the UK ($720 million in 2004) and Spain ($443 million in 2006). France is also Europe’s largest agricultural producer, with over 19 million ha of cultivated land (arable land and permanent crops) in 2005. Other large producers include Spain (16.1 million ha), Germany (12.1 million ha), Poland (10.6 million ha), Italy (9.1 million ha) and the UK (6.1 million ha). The major crops grown in European countries tend to be fairly similar, with cereals forming the single largest crop in almost every European country (see individual country profiles). In Mediterranean countries, such as France, Spain and Italy, grape vines and fruit are also important crops. Unsurprisingly, France, Germany, Spain, Italy and the UK also comprise the largest users of pesticides in Europe (accounting for 75% of all applied pesticides), although pesticide use does not correspond directly with the size of the market. France is by far the largest pesticide user, applying over 60,000 tonnes of pesticides in 2003, but it is followed by Spain and Italy (which both applied over 30,000 tonnes in 2003), with Germany (23,000 tonnes) and the UK (15,000 tonnes) bringing up the rear. So although Spain and Italy use more pesticide ais than Germany, they actually have smaller markets. This implies that northern European countries such as Germany and the UK use more expensive pesticides than southern European countries such as Italy. This supposition is supported by the fact

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that Italian farmers use huge amounts of cheap, sulphur-based fungicides (with over 9,500 tonnes applied in 2003, mainly to grape vines; although this was down from over 20,000 tonnes in 2002). Whereas the most popular pesticide in Germany is the more expensive herbicide isoproturon (with just over 3,000 tonnes applied to cereal crops in 2003). Herbicides and fungicides are the most commonly used pesticides in Europe, accounting for around 50% and 40% of pesticide use respectively, with insecticides accounting for only around 10%. On the face of it, the European pesticide market looks fairly healthy. According to the European Crop Protection Association (ECPA), over the past five years the crop protection market in Europe has experienced the greatest growth of any region in the world, at 6.4% a year. But almost all of this growth has been generated by the former communist satellite states of Eastern Europe. Between 2000 and 2004, BASF estimates that the crop protection markets in the 10 countries that joined the EU in May 2004 (eight of which were from the former Eastern Europe) grew by 36%. In contrast, over the same period, the crop protection markets of the 15 existing west European members fell by 12%. More recently, pesticide sales grew by 2.4% in Eastern Europe during 2006, but fell by over 4% in Western Europe, according to the UK consultancy Cropnosis. While for 2007, Cropnosis has predicted that sales in Western Europe will grow by just 0.7%, but that sales in Eastern Europe will grow by almost 7%. As in the US, exact information on the size of the generic pesticide market is unknown, although generic pesticide companies probably account for a similar share of the market (15–20%). There are 18 European companies (including those based in Israel and Turkey) that were profiled in Volume 1 (see Table 4.5), with the largest being MAI (sales of $1,581 million in 2006), Cheminova ($680 million in 2006), Sipcam-Oxon ($378 million in 2005) and Isagro ($196 million in 2006).

Table 4.5: List of European manufacturers profiled in Volume 1 by country Company

Country

Company

Country

Taminco Cheminova Agro-Chemie AgriGuard Barclay Chemicals Luxembourg Industries MAI Chemia Isagro

Belgium Denmark Hungary Ireland Ireland Israel Israel Italy Italy

Organika-Sarzyna Sipcam-Oxon Oltchim Pinus Cequisa IQV Atabay Hektas AH Marks

Poland Italy Romania Slovenia Spain Spain Turkey Turkey UK

In the 27 European countries that are members of the European Union (EU), which includes all the main agricultural producers, pesticide products are regulated by the pesticide registration directive (91/414/EEC), which was introduced in 1991. The main intention of this directive was to harmonise the registration of new pesticide ais at the EU level, but it also required that

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over 800 ais then being sold in pesticide products throughout Europe have their registrations renewed. This review programme has resulted in quite a few older generic pesticides, including atrazine, simazine, acephate and benomyl, being removed from the European market. It has also taken much longer than was originally envisaged and the whole review process will probably not now be finished until 2008. Much of the delay was caused by the intricacies of the new registration process, which took a long time to run smoothly. A company wishing to register a new ai or support an existing ai through the review process must initially submit an array of scientific studies to the European Commission. This information is first assessed by one of the member state’s pesticide regulatory authorities, which then submit a report on the ai to the European Food Safety Authority (EFSA). After reviewing the report, EFSA makes a recommendation to the European Commission’s Standing Committee on the Food Chain and Animal Health (SCFCAH) on whether or not the ai should be included in Annex 1 of the directive. A final decision on inclusion is then made by the Standing Committee. Finally, this decision is officially confirmed by the European Commission, which details any conditions on inclusion or the time-scale for withdrawal if the ai is to be excluded. Once an ai has been approved at the European level, it should then be a fairly simple process for a company to register individual pesticide products containing the ai at the member state level, although they still have to register the product separately in each country. Over the past couple of years, the Commission has been considering a number of amendments to the pesticide registration directive, in light of its experience in implementing the directive. One of the most important potential amendments for the European generic pesticide industry concerns data protection. Under 91/414, any proprietary data submitted by a company to support the registration of a novel ai are protected for 10 years, while any data submitted to support the review of an existing ai are protected for five years. ECCA has long claimed that the current data protection provisions place generic pesticide companies at a severe disadvantage. This is because companies applying to register generic versions of ais that have been included in Annex 1 of the pesticide registration directive (91/414/EEC) must prove that the generic ai is equivalent to the original ai. They must also prove that they have access to a complete registration data package. Companies can demonstrate equivalence by submitting a five-batch analysis, which considers physico-chemical properties and toxicity. But proving that they have access to a complete data package, which consists of both ‘unprotected’ and ‘protected’ studies, is more problematic. This is because it can be difficult for generic companies to establish which of the studies used by the first applicants are protected and which are unprotected. Furthermore, the original applicants are currently under no obligation to share this protected data with generic applicants. This means that companies wanting to register a generic pesticide product often have to produce a complete data package from scratch, with the associated cost. In its proposed amendment to 91/414, the Commission attempted to resolve some of these problems. In April 2005, it issued draft proposals requiring

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member states to provide interested parties with information on the studies used for Annex 1 listing and on claims for protected data. These proposals also included details on a compulsory data sharing and compensation system for registering generic products, in which companies would have to agree on compensation for the use of proprietary registration data generated by the original applicant. If agreement could not be reached, an independent arbitrator would set the compensation level. In later proposals, the Commission also suggested removing any protection for new data generated for the review of existing ais and products. Other proposals included introducing a centralised system for approving individual pesticide products, rather than requiring companies to register the products separately in each member state. The proposed system would evaluate and register products at an EU level or on a ‘zonal’ level for regions with similar climate or agricultural conditions, with the Commission favouring registration within three zones: northern, central and southern Europe. The Commission also proposed a scheme to ban ais based on hazard criteria, which means that an ai could be excluded from Annex 1 if it exceeds a single hazard cut-off value. The Commission produced the final version of its proposals in July 2006. This incorporated the introduction of hazard-based criteria and the zonal approval system. It also included the requirement for member states to provide details of protected data and the removal of protection for ai review data. But the Commission pulled back from introducing a compulsory data sharing and compensation system, with the proposed regulatory amendment stating instead that companies should “take all reasonable steps to reach agreement on the sharing of any test and study reports”. At the end of October 2007, the proposed amendment was debated by the European Parliament, which approved the data protection and hazard-based criteria proposals but rejected the zonal approval system. The amendment will now progress to the EU Council of Ministers for consideration and should come into force in 2008 after the current review programme for existing ais has been completed. Pesticides are also affected by a range of other current and proposed pieces of EU legislation. These include: the proposed thematic strategy on the sustainable use of pesticides, which includes firm targets for reductions in pesticide use; the Commission’s proposed surface water directive, which could lead to pesticides detected in surface waters being banned; and REACH (Registration, Evaluation, Authorisation and Restrictions of Chemicals), which doesn’t apply to pesticide ais but does apply to chemical intermediates and co-formulants. 4.2.1

France France has the largest pesticide market in Europe and the fifth largest pesticide market in the world, worth Euro 1,721 million ($2,305 million) in 2006 according to the French agrochemical industry association, the UIPP. However, the French market has declined over the past decade, with sales falling by 20% from 1999 to 2006, and it was recently overtaken by the fastgrowing Chinese market. Herbicides account for the majority of the market, generating 42% of sales in 2006, followed by fungicides (38%) and insecticides (9%).

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The main crops grown in France by area are wheat, maize and oilseed rape. Around 60,000 tonnes of pesticide ais were applied in France in 2003, with the majority of ais applied to cereals and grape vines. Popular ais include: the herbicides glyphosate and isoproturon on cereals, and trifluralin on maize; and the fungicides folpet, mancozeb and sulphur on grape vines. 4.2.2

Germany The German pesticide market was worth Euro 1,098 million ($1,373 million) in 2005, according to the German agrochemical industry association, the IVA. This represents an increase of almost 3% on 2004. Herbicides account for the vast majority of the market, generating 50% of sales in 2005, followed by fungicides (33%) and insecticides (3%). The main crops grown in Germany by area are wheat, barley, maize and oilseed rape. Around 23,000 tonnes of pesticide ais were applied in 2003, with the majority of ais applied to cereals and grape vines. Popular ais include: the herbicides isoproturon and glyphosate on cereals; and sulphurbased fungicides on grape vines.

4.2.3

Italy The Italian pesticide market was worth Euro 740 million ($922 million) in 2005, up by 1.8% on 2004, according to the industry association Agrofarma. Fungicides accounted for the largest share of the market (around 40%), followed by herbicides (33%) and insecticides (26%). The main crops grown in Italy by area are wheat, maize and grape vines. Over 30,000 tonnes of pesticide ai were applied in 2003, with the majority of ais applied to cereals, maize, grape vines, tree fruits and vegetables. Popular ais include: the fungicides mancozeb and sulphur on grape vines; and sulphur-based fungicides on tree fruits.

4.2.4

Spain The Spanish pesticide market was worth Euro 556 million ($443 million) in 2006, according to the Spanish agrochemical association, AEPLA. This represents a rise of less than 3% on 2005, when the value of the Spanish market fell by 14% due to a combination of falling prices, agricultural reforms, higher production costs and adverse weather conditions. Herbicides accounted for the majority of the market (35%), followed by fungicides (25%) and insecticides (23%). The main crops grown in Spain by area are wheat, barley, oil seed rape, grape vines and fruit trees. Over 31,000 tonnes of pesticide ais were applied in 2003, with the majority of ais applied to cereals, citrus fruits, grape vines and vegetables. Popular ais include: the herbicides glyphosate and 2,4-D on cereals; and sulphur-based fungicides on grape vines and vegetables.

4.2.5

UK The UK pesticide market was worth £400 million ($720 million) in 2004, an increase of 11% on 2003. Herbicides accounted for the largest share of the market (45%), followed by fungicides (38%) and insecticides (7%). The main crops grown in the UK are cereals, particularly wheat. Around 15,000 tonnes of pesticide ai were applied in 2003, with the majority of ais

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applied to cereals and potatoes. Popular ais include: the herbicides isoproturon and glyphosate on cereals; and the fungicide mancozeb on potatoes. 4.2.6

Eastern Europe The Eastern European pesticide market is currently worth around $1,750 million a year, almost four times smaller than the Western European market. However, unlike the static or declining pesticide markets in Western Europe, the Eastern European pesticide market has been growing over the past few years and this growth looks set to continue (see section 3.2). This should especially be the case for the eight Eastern European countries that joined the European Union in 2004 – Poland, the Czech Republic, Hungary, Slovakia, Lithuania, Latvia, Slovenia and Estonia – and the two countries that joined in 2007 – Romania and Bulgaria. Agriculture is still a major industry in many of these countries and their farmers should greatly benefit from the injection of funds from the EU’s Common Agricultural Policy, which should allow them to take greater advantage of pesticides.

4.3

Asia-Pacific The pesticide market in Asia-Pacific is worth around $7,750 million a year, with Japan and China accounting for the largest shares of the market in 2006, with 37% and 31% respectively. In many countries in Asia-Pacific, generic pesticides account for the largest share of the pesticide market and there are a huge number of generic producers throughout the region. The first report in this series contained profiles of 10 companies from the Asia-Pacific region (see Table 4.6), not including China and India (which between them accounted for over half of the companies profiled in the report).

Table 4.6: List of Asia-Pacific manufacturers profiled in Volume 1 by country (not including China and India) Company

Country

Company

Country

Nufarm Rotam PT Petrosida Gresik Kenso Corp Zagro

Australia Hong Kong Indonesia Malaysia Singapore

Dongbu Fine Chemicals LG Life Sciences Hui Kwang Pilarquim Sinon

South Korea South Korea Taiwan Taiwan Taiwan

Table 4.6 also reaffirms China’s place as the head of the global generic pesticide industry (at least in terms of number of companies), as four of the companies are based in Hong Kong and Taiwan, which are officially Chinese territories. Unsurprisingly, the largest of the companies in Table 4.6 are based in two of the region’s more developed economies, Australia (Nufarm) and South Korea (Dongbu Fine Chemicals and LG Life Sciences). 4.3.1

Japan The Japanese pesticide market is currently the third largest in the world, after the US and Brazil. However, the Japanese market has been generally shrinking over the past few years (by 15% between 2000 and 2005), as

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consumers grow more concerned about pesticide residues and the Japanese government implements stricter environmental regulations. In the year ending September 2006, pesticide sales in Japan increased slightly (0.5%) to ¥330,932 million ($2,850 million), according to the Japan Crop Protection Association. However, in volume terms, sales fell by 2.1% to 230,568 tonnes. In a few years time, if this trend continues, the Japanese pesticide market will be overtaken by the fast-growing Chinese market (see section 4.3.2). In the first eight months of 2006/07 (1 October 2006 to 31 May 2007), pesticide sales fell by 0.9% on the same period last year to ¥247,232 million ($2,079 million), while volume sales fell by 7.4% to 156,733 tonnes. The vast majority of pesticide products in Japan are supplied by R&D-based agrochemical companies, whether Japanese or foreign, with products from generic producers accounting for under 5% of the market. For instance, Japan should theoretically be an extremely attractive market for Chinese pesticide manufacturers. However, although Chinese companies can supply technical ais to Japanese companies, no Chinese producer has yet obtained a Japanese registration for a formulated product. The Japanese pesticide market is fairly evenly split between herbicides (32%), insecticides (36%) and fungicides (29%), with herbicides mostly used on paddy rice, and insecticides and fungicides predominantly used on vegetables (see Table 4.7).

Table 4.7: Japanese agrochemical sales by crop, 2005–061 Crop

Paddy rice2 – insecticides – fungicides – insecticides/fungicide – herbicides Vegetables/field crops2 – insecticides – fungicides – insecticides/fungicides – herbicides Fruit2 – insecticides – fungicides – insecticides/fungicides – herbicides Other crops Unclassified Total2

Volume

Value

Tonnes

%

¥ million

%

94,858 23,446 14,366 23,520 33,526 88,616 48,826 27,606 997 11,187 22,619 11,003 7,059 41 4,516 17,749 6,726 230,568

41 25 15 25 35 38 55 31 1 13 10 49 31 20 8 3 100

118,220 15,309 15,981 31,417 55,513 113,036 55,725 37,288 655 19,368 53,031 24,676 18,785 61 9,509 34,001 12,644 330,932

36 13 13 27 47 34 49 33 1 17 16 47 35 18 10 4 100

Source: JCPA and Agrow Notes: 1. Year ended 30 September 2006; 2. Totals may not add up due to rounding.

Japan does not really have a generic pesticide industry and none of the 100 companies detailed in the first report are Japanese. This is because Japan has a number of major R&D-based companies, such as Kumiai Chemical, Nissan Chemical and Sumitomo Chemical, which between them dominate the domestic pesticide market. Only the major R&D-based agrochemical

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companies have been able to challenge this dominance, and then only fairly recently. Up until 2003, registration of pesticides in Japan involved three government ministries. The Ministry of Agriculture, Forestry and Fisheries was responsible for evaluating the safety of pesticide products; the Ministry of the Environment (MoE) was responsible for evaluating crop residue and environmental fate data; and the Ministry of Health Welfare and Labour was responsible for reviewing toxicology data and reported its findings to the MoE to help establish directions for safe use. Then, in 2003, the Japanese government amended Japan’s Pesticide Law and brought in a new Basic Law for Food Safety. Among other measures, these new regulations established a Committee for Food Safety, which operates independently of the three ministries in evaluating risks to food safety and advising the ministries on ways to minimise risk. The amendments to Japan’s Pesticide Law were prompted by the discovery in 2002 of the widespread circulation of unapproved pesticides in Japan. The new amendments extended existing controls banning the sale of unregistered pesticides, in order to prohibit the manufacture and import of these products. In addition, the amended law also increased the number of ais banned in Japan. These now include: the fungicides captafol, hexachlorobenzene, quintozene and mercury-based products; the insecticides/acaricides aldrin, cyhexatin, dieldrin, DDT, endrin, parathionethyl and parathion-methyl; and the herbicides chlornitrofen and pentachlorophenol. Despite being a free-market economy, the Japanese pesticide market is still heavily protected and the opportunities for foreign generic pesticide companies to enter the market are minimal. 4.3.2

China China has the fourth largest pesticide market in the world, worth $2,421 million in 2006 according to the marketing and consultancy company ARN. The Chinese market is also growing fast, at 7–9% a year. This means that, having recently overtaken the French market, it is all set to overtake the Japanese market by 2010 to become the third largest market. Furthermore, unlike in the major Western markets, generic pesticide products account for the vast majority (around 75%) of the domestic pesticide market. Around 500 million hectares are treated with pesticides in China each year, with vegetables, rice and wheat accounting for half of all pesticide usage (see Table 4.8).

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Table 4.8: Pesticide usage in China, 2002 Crop

% usage

Vegetables Rice Wheat Citrus Cotton Apples Soybeans Maize Other

23.8 18.1 10.4 8.2 7.4 5.8 4.8 3.8 17.7

Source: Agrow

Insecticides account for the largest share of the Chinese pesticide market, with around 54%, followed by herbicides (30%) and fungicides (25%). Although insecticide use has steadily increased over the past few years, the specific insecticide products being used is beginning to change. This is being driven by the Chinese Ministry of Agriculture, which is gradually phasing out many older, toxic pesticides, especially organophosphporus insecticides, due to environmental concerns. From 1 January 2005, methamidophos, monocrotophos, parathion-ethyl, parathion-methyl and phosphamidon could only be used on cotton, rice, maize and wheat, and they were then completely banned from 1 January 2007. The Ministry expects that these organophosphorus insecticides will be replaced by the less toxic pyrethroids, pyridines, pyrazoles and insect growth regulators. To assist this process, it planned to provide Yuan 5,000 million ($600 million) in loans to help the domestic pesticide industry produce these alternative products. The most popular pesticide ais in China, with annual demand of over 10,000 tonnes, currently include: the insecticides bisultap, dichlorvos and phoxim, the herbicides acetochlor and glyphosate, and the fungicide copper sulphate. Those ais with annual demand of 8,000–10,000 tonnes include the insecticide trichlorfon and the fungicide carbendazim. Those reaching the 5,000–8,000 range include: the insecticides dimethoate, monosultap and omeathoate; the herbicide butachlor; and the fungicides mancozeb and thiophanate-methyl. As a communist country, China’s pesticide market and product distribution system is fairly centralised, although this is beginning to change as a result of the country joining the WTO in 2001. For instance, until recently, Western crop protection companies could only distribute their pesticide products through a network of provincial wholesalers that form a state-owned cooperative system known as AMPC (Agricultural Means and Production of China). The AMPC wholesalers supply 8,000–10,000 regional dealers, who then supply 300,000–400,000 individual retailers. The main problem with this arrangement for Western companies was that the AMPC wholesalers didn’t undertake any promotional activity. This meant that Western companies still needed to establish their own country-wide marketing and sales networks, but without being able to use them to sell directly to retailers.

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Chinese pesticide companies, on the other hand, were allowed to sell directly to retailers, although many of the smaller companies also distributed their products through the AMPC. Up until 2001, the only way that Western companies could get around this restriction was to form a joint venture with a Chinese company, with the Western company obliged to invest over $30 million into the venture. This joint venture could then supply its products to any level of the distribution chain. Then, at the end of 2001, China became a member of the WTO and this helped to open up the Chinese pesticide market to foreign companies. From 2005, any wholly-owned Chinese subsidiary of a foreign crop protection company can distribute its products directly to retailers without any restrictions. China has a thriving and expanding generic pesticide industry, which dominates the domestic market and also exports a great deal of its output. Pesticide products manufactured by domestic companies account for over 75% of the Chinese pesticide market by sales, but account for over 90% of all pesticides applied, because foreign products cost on average 2.8 times more than domestic products. Chinese pesticide exports total around $450 million a year, accounting for around 15% of total pesticide production. There are around 2,500 pesticide companies in China. Most of these companies are formulators, with only just over 500 companies able to manufacture technical grade ais. Nevertheless, Chinese companies formed the largest proportion of those profiled in Volume 1 of this report, with 42 entries (see Table 4.9).

Table 4.9: List of Chinese manufacturers profiled in Volume 1 Company

Company

AgroDragon Baocheng Chemical Baoling Chemical CAC CCI Group Changqing Agrochemical Changxing Zhongshan Dacheng Pesticide Feixiang Chemical Fujian Sannong Good Harvest Green Agrosino Greenchem Industries Heben Pesticide Henglong Pesticide Hisun Chemical Huaxing Chemical Iprochem Jiangshan Agrochemical Jiangsu Suhua Group Jiangsu Yangnong

Jingma Chemicals Kangmei Chemical Lanxi Agrochemical Limin Chemical Nanjing Agrochemical Nutrichem Laboratory Qinfeng Agrochemical Red Sun Sanonda Shandong Qiaochang Chemical Shandong Vicome Greenland Sinochem Ningbo Shenghua Biok Suzhou Worldbest Tide Group Wangs Xinan Chemical Xinyi Pesticide Yancheng Limin Yongnong Chemical Zibo Nab Agrochemicals

The Chinese pesticide market is dominated by China’s largest pesticide producers. According to the Chinese consultancy EChinaChem, the 10 largest Chinese pesticide producers have a 29% share of the Chinese market, while the next 40 largest companies have a 25% share. This means

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the remaining 2,450 generic producers in China have to make do with under half of the market. Furthermore, the large number of companies means that the production capacity of the Chinese pesticide industry currently far exceeds demand, despite the healthy growth rates of the domestic market. For example, in 2006, Chinese manufacturers produced 1.3 million tonnes of pesticide ais, but domestic demand was only around 300,000 tonnes while exports were around 400,000 tonnes. This means that Chinese manufacturers produced around 600,000 tonnes of excess pesticide ais. This overcapacity has led to claims that some Chinese manufacturers are exporting certain pesticide ais, such as glyphosate, at prices lower than the cost of production (so-called dumping) to Australia and certain EU countries. While the Australian Customs Service has dismissed complaints of glyphosate dumping, the European Commission has invoked duties on Chinese glyphosate exports. Red Sun is the largest Chinese pesticide company, while Syngenta is the R&D-based agrochemical company with the largest pesticide sales in China (see Table 4.10). The sales figures for the Chinese and foreign manufacturers in Table 4.10 are not directly comparable, because the Chinese manufacturers did not generate all of their sales in China. Nevertheless, it does demonstrate that the largest Chinese manufacturers are able on a par with the R&D-based multinationals in the Chinese market.

Table 4.10: Top five Chinese and foreign pesticide manufacturers by sales ($ million) Chinese manufactures

Foreign manufacturers

Company1

Annual sales

Company

Annual sales2

Red Sun Xinan Chemical Sanonda Huaxing Chemical Jiangshan Agrochemical

153 138 120 100 90

Syngenta Bayer CropScience Dow AgroSciences Monsanto DuPont

100 95 61 50 38

Source: ARN and Agrow Notes: 1. Top five as detailed in Agrow’s Complete Guide to Generic Pesticides: Volume 1 – The companies. 2. Sales figures are estimates derived from market share information for 2005.

As part of joining the WTO, the Chinese government has been overhauling its regulations covering both pesticide registration and intellectual property rights. In addition to phasing out older organophosphorus insecticides, the ICAMA is reviewing 379 pesticide ais that received a provisional registration before 23 July 1999, which includes a large number of generic pesticide ais. The ICAMA has split the ais into four groups and is currently working with pesticide manufacturers to generate the required registration data. It plans to complete this review programme by the end of 2008. However, the ICAMA has already started to phase out registrations for older pesticide ais such as phorate, carbofuran, aldicarb and methomyl. The ICAMA has also continued to amend China’s pesticide registration regulations – it has revised them three times since 1988 – in order to bring them in line with international standards. These revisions have mainly

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involved increasing data requirements in toxicology, pesticide residues, environmental ecology and crop safety. The Chinese registration process currently operates in three stages. Initially, companies must apply to carry out field trials. The ICAMA's review of these applications lasts for one month. Field trial data is then used in applications for temporary registration. Evaluation of these applications takes up to three months. This allows further trials to be carried out to generate detailed registration data and also allows field demonstrations and test marketing to be carried out within a specified area. Temporary registrations have to be renewed every year and can last for a maximum of four years. Finally, an application is made for full registration. The evaluation of this can take up to one year. This allows full commercial distribution and sale. Through its amendments, the ICAMA is trying to encourage the development of new products and reduce the number of generic products. Registrations are now only granted to generic products if six years have elapsed since the first full registration or if the second registrant has permission to use the original data. Within the six-year data protection period, data requirements are the same as for the original product. After six years, certain efficacy, toxicity, environmental and residue data are not required for further registrations. The ICAMA is also looking to harmonise its pesticide regulations with international standards. In particular, it plans to: make evaluation procedures more scientific, fair and transparent; establish a Good Laboratory Practice (GLP) system; and implement the Mutual Acceptance of Data system that was developed by the Organisation for Economic Co-operation and Development (OECD). In addition to its registration regulations, China is also tightening its pesticide production regulations, in order to place more emphasis on the environment. Under the new rules, new pesticide production facilities must be cited away from urban areas and water sources, and must have adequate waste treatment and disposal systems. All applications to produce pesticides must also now be accompanied by an environmental risk assessment. It has even been alleged that the Chinese authorities are closing pesticide factories within a 100-mile radius of Beijing, in order to ensure that the air is clean for the start of the Beijing Olympics in 2008. Furthermore, the ICAMA plans to crack down on unregistered and counterfeit pesticide products, which are estimated to account for 30–40% of all pesticides on the Chinese market. This crackdown will include implementing a centralised registration and repackaging licence, censoring advertising and banning outdated production processes. For example, in March 2004 the ICAMA announced that it was tightening the manufacturing standards for products based on paraquat by implementing the 1996 UN Food and Agriculture Organization (FAO) specifications for the herbicide. All these efforts to open up the Chinese pesticide market and bring its regulations in line with international standards should act to encourage even more pesticide companies to enter one of the only pesticide markets in the world to still be expanding. This increased competition, together with the withdrawal of older pesticides and the implementation of more stringent environmental controls, should lead to consolidation within the Chinese generic pesticide industry, as smaller producers are forced out of business or integrated into larger chemical corporations.

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This process of consolidation is also being actively driven by the Chinese government, which is concerned that the domestic pesticide industry suffers from too many companies, production overcapacity and outdated technologies and products. As a result, the government fears that the domestic industry could begin to lose out to more innovative Western companies both at home and abroad. It has therefore launched a five-year development plan (2006–10) to reduce the total number of pesticide companies, create a few large “national champions” with assets of Yuan 5,000–10,000 million and encourage a greater focus on developing novel products. This transformation of the pesticide industry forms part of a larger effort to modernise the whole Chinese chemical sector. In May 2004, the Chinese government formed the China National Chemical Corporation (ChemChina) to drive this modernisation. In March 2005, ChemChina announced that over the next five years it would build up a giant state-owned pesticide group with annual sales of over Yuan 10,000 million (almost 10 times larger than the annual sales of Red Sun, which is currently China’s largest pesticide company). As a first step, in June 2005 it took control of Sanonda. Then in October 2006 ChemChina took a 30% stake in the Chinese company Shandong Dacheng Pesticides. But its most radical move came in November 2007, when, in conjunction with the US private equity firms Fox Paine Management III and the Blackstone Group, it made a Aus$3,000 million ($2,760 million) bid for Nufarm. If successful, this would result in the first Chinese ownership of a leading agrochemical multinational. 4.3.3

India The generic pesticide market and industry in India has many similarities with that in China. The market in both countries has grown dramatically over recent years, although the Chinese market is currently much bigger than the Indian one. Both countries have an extensive and well-developed generic pesticide industry that supplies the domestic market and generates substantial exports, but which suffers from substantial overcapacity. In addition, both countries’ governments are actively implementing new business and environmental regulations, partly as a result of their recent accession to the WTO. As a result, the pesticide markets in both countries are beginning to move away from older, toxic pesticides, such as organophosphorus insecticides, towards newer and safer varieties, such as pyrethroid and neonicotinoid insecticides. The Indian pesticide market was worth around Rs 40,000 million ($880 million) in 2006, according to a study conducted by CARE Research, with generic pesticide products accounting for the vast majority of the market (around 70%). However, there is still plenty of scope for growth in the Indian pesticide market: although India is the one of the world’s largest agricultural producers, with over 180 million hectares of cultivated land, it is not one of the top 10 largest pesticide markets. Indeed, the PMFAI has estimated that, despite ever-present problems with erratic weather conditions, the Indian market should achieve an annual growth rate of 10– 15% between 2005 and 2010. The Indian market is heavily skewed in terms of both products and crops. Insecticides account for over 70% of the pesticide market, followed by fungicides with 12% and herbicides with 11%. Cotton accounts for around

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45% of total pesticide use, with insecticides accounting for 90% of the pesticides used on cotton, followed by rice, which accounts for 22% of all pesticide use. Popular insecticides include monocrotophos, cypermethrin, chlorpyrifos, endosulfan, quinalphos, acephate and phorate; popular fungicides include copper oxychloride, metalaxyl and mancozeb; popular herbicides include isoproturon and butachlor. All of these are well-established generic ais. Recently, however, older ais have begun to be replaced by newer ones, which now account for around 55–60% of all the pesticides used in India. The Indian generic pesticide industry, which consists of 80 larger manufacturers and 500 formulators, meets much of the domestic demand. The industry’s annual sales amount to around Rs 60,000 million, of which about half are generated by the Indian market. Indian manufacturers accounted for the second largest proportion of the companies profiled in Volume 1 of this report, after Chinese manufacturers, with 20 entries (see Table 4.11).

Table 4.11: List of Indian manufacturers profiled in Volume 1 Company

Company

Aimco Pesticides Atul Bharat Group Chemet Chemicals Coromandel Fertilisers Dhanuka Pesticides Excel Crop Care Gharda Chemicals Heranba Hikal

Hindustan India Pesticides Indofil Meghmani Organics Nagarjuna PI Industries Punjab Chemicals Rallis India Sabero Organics United Phosphorus

Four of the five largest Indian producers have annual sales similar to the largest Chinese producers (see Table 4.12). The exception is United Phosphorus, which has recently entered into a different league. Following a string of business acquisitions over the past few years, it recorded sales of $350 million for the year ending March 2006, making it the first ever Indian company to be included in Agrow’s annual list of the top 20 global agrochemical companies. The foreign agrochemical companies with the largest shares of the Indian market are Syngenta, Bayer CropScience, Monsanto, BASF and DuPont.

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Table 4.12: Top five Indian pesticide producers Company

Annual sales, 2006–07 ($m)

United Phosphorus Rallis India Meghmani Organics Excel Crop Care Nagarjuna

350 133 105 93 80

Note: 1. Top five as detailed in Agrow’s Complete Guide to Generic Pesticides: Volume 1 – The companies.

As in China, the Indian generic pesticide industry suffers from substantial production overcapacity. For the year ending March 2006, just over half of the country’s production capacity was utilised, reflecting the pressures of adverse weather and intense competition. Production fell by 13% on 2005 to 82,240 tonnes, whereas the annual production capacity is almost 150,000 tonnes. In line with pesticide demand, insecticides dominate production (54,474 tonnes manufactured in 2006), with acephate, cypermethrin and phorate the most popular, followed by fungicides (19,443 tonnes), with maoncozeb the most popular, and herbicides (6,514 tonnes), with isoproturon and glyphosate the most popular. The regulation of pesticides, including their manufacture, sale and distribution, in India is covered by the Insecticides Act. This was introduced in 1968 and is implemented by the Ministry of Agriculture’s Central Insecticides Board. The Ministry of Agriculture has made a number of amendments to the Insecticides Act over the past few years, including simplifying registration procedures and imposing tougher measures against suppliers of counterfeit or adulterated pesticides. Like China, India has a major problem with counterfeit pesticides, which account for 10–15% of the Indian market. In addition, as part of its accession to the WTO, India introduced a new patent law in 2005, which tightened rules on patents for manufacturing processes and brought in product patents. This new law is unlikely to have any immediate effect on Indian pesticide companies, because most only produce post-patent ais. In any case, the law will not cover newer pesticide ais that are already on the market, such as imidacloprid. Nevertheless, the law could encourage an influx of new ais from foreign R&D-based agrochemical companies. The R&D-based companies are also calling for India to introduce a 5–10 year protection period for registration data, which would bring the country in line with systems in other parts of the world. This period would run from the date of the first Indian approval of an ai and would prevent other companies from accessing the registration data, thereby allowing the first registrant to recover the cost of generating the data. Data requirements are much less onerous for generic product approvals in India, and the R&D-based industry has long argued for more stringent data requirements for generic registrations. However, the generic industry maintains that the introduction of product patents in India already provides the required protection. The Ministry of Agriculture has also recently begun to review the registrations of certain older, toxic pesticide ais, leading it to ban or place

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restrictions on a number of them. In February 2006, it proposed restricting the use of 31 pesticide ais, all of which were sold in India before the Insecticides Act came into force, and to cancel the registrations for seven ais, including the herbicide simazine. At the same time, the DPPQS initiated a review of the toxicity, persistence, safety in use and availability of alternatives for 37 ais, all of which had been restricted in some other countries. These included: the insecticides acephate, bifenthrin, carbosulfan, deltamethrin, dichlorvos fenthion, monocrotophos, propargite, quinalphos and trichlorfon; the fungicides chlorothalonil, mancozeb and thiophanate-methyl; and the herbicides atrazine, butachlor, linuron, pendimethalin and trifluralin. The review will be used to make recommendations for continued use, restricted use or phaseout of the ais. The first of these recommendations came in February 2007, when the Ministry called on pesticide registrants to amend labels and provide certain study data for 10 ais. These included: the insecticides dichlorvos, monocrotophos and quinalphos; the fungicides carbendazim and mancozeb; and the herbicides atrazine, butachlor, and pendimethalin (see individual ai profiles in Volume 1 for details of the required amendments and study data). Then, in August 2007, the Ministry banned all agricultural uses of the insecticide fenthion, except locust control in desert areas and public health.

4.4

4.4

South America

The pesticide market in South America is currently worth around $6,500 million a year, but is growing rapidly and pesticide sales are expected to reach $7,000 million by 2009. Brazil is by far the largest country market in South America, accounting for around 60% of all pesticide sales, followed by Argentina (15%), Mexico (7%) and Colombia (7%). The major R&D-based agrochemical companies dominate the Latin American market, with MAI and Nufarm the only generic manufacturers generating substantial sales in the region. Although South American generic producers remain fairly small, they are growing in importance. Seven companies were profiled in Volume 1 of this report (see Table 4.13), compared to only three in the last edition (although two of the seven are Mexican companies that were included within North America in the last edition).

Table 4.13: List of South American manufacturers profiled in Volume 1 Company

Country

Company

Country

Reposo Agripec Fersol Quimica Lucava

Argentina Brazil Brazil Mexico

Tekchem Tecnomyl Inquiport

Mexico Paraguay Venezuela

Recent changes to the way pesticides are regulated in many South American countries are beginning to open the region up to generic producers. Brazil introduced new regulations for registering generic pesticides in 2002 and, after some initial confusion, has begun approving new generic pesticide ais (see section 4.4.1). Meanwhile, Colombia introduced a new decree for registering generic pesticides in 2003. Decree 501 gives generic companies

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greater freedom to use data on registered ais to produce generic products and should simplify registration procedures and shorten approval times. This new decree was introduced as part of ongoing efforts to harmonise pesticide registration requirements and procedures among Andean member countries, which comprise Bolivia, Colombia, Ecuador, Peru and Venezuela. The Mercosur countries (Argentina, Brazil, Uruguay and Paraguay) have been looking at harmonising their pesticide registration systems for the past 10 years. Both of these efforts should eventually make it easier for generic producers to register their products in South American countries, although a number of hurdles still need to be overcome. 4.4.1

Brazil Brazil has the second largest pesticide market in the world, worth $3,912 million in 2006 according to the Brazilian generic agrochemical industry (AENDA), and there is still plenty of scope for further growth, especially for generic pesticide producers. Herbicides currently account for the largest share of the pesticide market (40%), followed by insecticides (30%) and fungicides (25%). Nevertheless, the Brazilian market has lost almost around 13% of its value since 2004 (when it was worth $4,494 million), due to a combination of falling prices, smaller soybean areas, lower incidences of Asian soybean rust and increased uptake of GM herbicide-tolerant soybeans. However, the situation does now look to be improving, with the Brazilian Institute of Agribusiness predicting that pesticide sales will increase by 10% in 2007. Brazil has around 63 million ha of cultivated land, although this represents only 10% of the potential farmland that could be planted with arable crops. Major crops grown in Brazil include cereals (64 million tonnes produced in 2004), soybeans (49 million tonnes), maize (42 million tonnes), root vegetables and potatoes (28 million tonnes) and citrus fruit (21 million tonnes). The most popular pesticides in Brazil are the herbicide glyphosate, the insecticide methamidophos, and the fungicide pyraclostrobin. Despite the size of the Brazilian pesticide market, only two Brazilian generic pesticide companies, Agripec and Fersol, were profiled in the first report. Indeed, generic pesticide companies do not currently enjoy a large share of the Brazilian pesticide market, mainly because of the recent problems over the registration of generic products in Brazil. Of the top 10 pesticide companies in Brazil in 2006, which account for over 85% of the country’s pesticide sales, seven are R&D-based agrochemical multinationals, with Bayer CropScience and Syngenta generating the largest sales. However, recent changes in Brazilian pesticide regulations are now starting to open the market up to generic producers. Pesticide registration in Brazil is governed by Law 7802/1989 and Decree 4074/2002. Under these rules, approval is required for the experimentation, production, import, export, sale and use of pesticides. Registration is handled by three key regulatory bodies: the Ministries of Agriculture, Health, and the Environment. Until 2002, the approval of generic pesticides required a dossier containing partial toxicological, environmental, chemical and agronomic studies. Decree 4074 then came into force and introduced an equivalence system for

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registering generic products, which quickly became a major source of controversy in Brazil. The equivalence system is based on the FAO’s five-batch analysis criteria, which focus on physico-chemical properties and acute toxicity. Under Decree 4074, pesticide producers were given a 90-day period to present their products’ detailed composition, using the five-batch analysis. Problems arose because Brazilian generic producers did not have five-batch test data for their products and claimed that Brazilian laboratories were not capable of carrying out the tests. In addition, the R&D-based agrochemical companies were not prepared to present their five-batch analysis results until the country’s intellectual property law was passed. This law, 10.603, was eventually passed in December 2002 and extended data protection periods from five to 10 years. New data submitted after the original registration will be granted a protection period equal to the products’ original period or for one year from the registration of new data, whichever is longer. In all cases, data are only protected until they are available in another country, with a minimum protection period of one year. Law 10.603 also stipulated that: payment for data would be evaluated on a case-by-case basis depending on the economic value of the information; and if a company fails to commercialise a product within two years of its registration, the government can release data at the request of a third party. Even after Law 10.603 was passed, the five-batch analysis system caused confusion as reference products and data protection periods for the analysis test were not clear. This meant that no generic registrations were granted for three years, producing a backlog of around 350 applications. The Ministry of Agriculture finally approved the first generic ai under the new regulations in September 2005, when it granted Atanor the right to import, export and sell the herbicide glyphosate. Then it approved the first formulated product in June 2006, when Rotam was granted the right to market the fungicide Rodazil (carbendazim). Nevertheless, the system was still fairly slow and so in December 2006 the Brazilian government passed a Decree to speed up the registration of generic pesticide. This new Decree removed the need for certain “unnecessary” tests and studies and specified that the registration process should take a maximum of 150 days. By June 2007, 17 pesticide ais, including the herbicides glyphosate and paraquat and the fungicide tebuconazole, and 20 formulated products had received generic registrations. Despite these efforts, the demand for generic pesticide products in Brazil is still currently outstripping supply. In 2006, this situation led 20 agricultural co-operatives comprising 15,000 Brazilian farmers to set up a national consortium, the CCAB, with the aim of obtaining its own registrations for generic pesticides. The CCAB is targeting Asia as a source of generic ais and plans to import ais and manufacture its own products in Brazil. It is seeking partnerships with companies that are not from among Brazil’s dominant pesticide suppliers.

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CHAPTER 5 FUTURE GENERIC PESTICIDE TARGETS As pesticides start losing their patent protection (or even well before in those countries where patents have not been acknowledged or effectively protected), they are targeted by generic producers. About 30–40% of commercialised pesticide ais are manufactured by generic producers after they lose their patent protection. The proportion of herbicides targeted is much less than that for fungicides and insecticides. The remaining 60–70% of pesticide ais are not of interest to generic producers for a variety of reasons, including: •

market size limitations;

•

manufacturing difficulties;

•

problems with access to key intermediates.

Of the herbicides, insecticides and fungicides that are targeted by generic producers, about 40–50% are made by three or more producers. There is little difference across the three main market sectors in this respect. The most popular generic ais in terms of numbers of manufacturers are discussed in more detail in Chapter 3. 5.1.1

Future herbicide targets Between 1995 and 2006, 71 new herbicide ais were reported or launched, many of which now generate significant sales and will figure amongst the main future targets for generic companies (see Table 4.1). Generic companies tend to focus on herbicides that can be used in a wide variety of crops and geographical regions, together with ais that are used on big crop sectors such as cereals and rice. Those herbicides that are likely to receive the most attention from generic producers over the next five years are detailed below. These ais are taken from Agrow’s New Generics 2007. •

Amidosulfuron (control of broadleaf weeds and cleavers in cereals).

•

Carfentrazone-ethyl (control of broadleaf weeds and grasses in cereals and rice).

•

Cinidon-ethyl (control of broadleaf weeds in cereals).

•

Cyclosulfamuron (control of broadleaf weeds and sedges in cereals and rice).

•

Cyhalofop-butyl (control of grasses in rice).

•

Flazasulfuron (broad-spectrum post-emergence herbicide).

•

Florasulam (cereal herbicide).

•

Flupyrsulfuron-methyl sodium (control of grasses in cereals).

•

Halosulfuron-methyl (control of broadleaf weeds and sedges in maize, sugar cane and turf).

•

Imazapic (control of broadleaf weeds in pastures).

•

Imazosulfuron (control of broadleaf weeds and sedges in rice, barley and wheat).

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•

Mesotrione (pre- and post-emergence maize herbicide).

•

Metosulam (control of broadleaf weeds in cereals and maize).

•

Nicosulfuron (post-emergence maize herbicide).

•

Sulcotrione (controls broadleaf weeds and grasses in maize and sugar cane).

•

Sulfosulfuron (control of broadleaf weeds and grasses in wheat).

•

Triflusulfuron-methyl (control of broadleaf weeds in sugar beet).

Table 5.1: Significant new herbicides reported and commercialised, 1995–2006 Active Ingredient

Trade Name

Year1

Developing Company

Imazamox Thiafluamid Prosulfuron Oxasulfuron Azimsulfuron Sulfentrazone Isoxaflutole Butroxydim Cloransulam-methyl Prohexadione-calcium Pyrithiobac-sodium Cumyluron Flurtamone Fluthiamid Fentrazamide Azafenidin Flupyrsulfuron-methyl-sodium Carfentrazone-ethyl Pentoxazone Bispyribac-sodium

Bolero Axiom Exceed Dynam Gulliver Boral Converge Falcon FirstRate Viviful Staple Gamyla Benchmark n/k Lecspro Evolus Balance Aim Wechser Grass-short

1995 1995 1995 1995 1995 1995 1995 1995 1996 1996 1996 1996 1996 1997 1997 1997 1997 1997 1997 1997

Cyanamid4 Bayer Ciba4 Ciba4 DuPont FMC Rhone-Poulenc2 Zeneca5 DowElanco3 Kumiai Chemical/BASF Kumiai Chemical/DuPont Marubeni Corporation Rhone-Poulenc2 Bayer Bayer DuPont DuPont FMC Kaken Pharmaceutical Kumiai Chemical

Pyribenzoxim Prosulfuron Cyclanilide Oxadiargyl Oxaziclomefone Ethoxysulfuron Cinidon-ethyl Clefoxidim Diflufenzopyr-sodium Tepraloxydim Flufenacet Cyhalofop-butyl Florasulam Azafenidin Pyraflufen-ethyl Oxadiargyl Fluazolate Fenoxaprop-P-ethyl

Kiljabi Gold Peak Finish Raft Homerun Sunrice Bingo Aura Distinct Aramo Axiom Clincher Primus Evolus Ecopart Topstar n/k Puma

1997 1997 1997 1997 1997 1998 1998 1998 1998 1998 1998 1998 1998 1998 1998 1998 1998 1999

LG Chemical6 Novartis5 Rhone-Poulenc2 Rhone-Poulenc2 Rhone-Poulenc Yuka Agro AgrEvo2 BASF BASF BASF BASF Bayer Dow AgroSciences Dow AgroSciences DuPont Nihon Nohyaku Rhone-Poulenc2 TwinAgro AgrEvo2

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Iodosulfuron-methyl Amicarbazone Fluthiacet-methyl Carvone Indanofan Flazasulfuron Tralkoxydim Foramsulfuron Flucarbazone-sodium Diclosulam Clodinafop-propargyl Pethoxamid Mesotrione Mesosulfuron-methyl Picolinafen Propoxycarbazone-sodium Ethametsulfuron-methyl Benzobicyclon Pyriftalid Trifloxysulfuron-sodium Flumioxazin Tritosulfuron Dimethenamid-P Metamifop Penoxsulam Flucetosulfuron Butafenacil Flufenpyr-ethyl Beflubutamid

Husar n/k Action Talent Kirifuda Katana Achieve Option Everest Strongarm Discover Successor 600 Callisto Cossack Sniper Attribut Muster Show-Ace Apiro Ace Krismat Valor Corto Frontier S n/k Viper n/k Inspire n/k Herbaflex

1999 1999 1999 1999 1999 1999 1999 2000 2000 2000 2000 2000 2000 2001 2001 2001 2001 2001 2001 2001 2001 2002 2003 2003 2003 2003 2003 2003 2003

Oxadiazon Aminopyralid

Longshot Milestone

2004 2004

AgrEvo2 Bayer Kumiai Chemical/Novartis1 Luxan Mitsubishi Chemical7 Zeneca5 Zeneca5 Aventis CropScience2 Bayer Dow AgroSciences Novartis5 Tokuyama/Stahler Agrochemie Zeneca5 Aventis CropScience2 BASF Bayer DuPont SDS Biotech Syngenta Syngenta Valent BASF BASF Dongbu Hannong Chemical Dow AgroSciences LG Life Sciences Syngenta Valent Ube Industries/Stahler Agrochemie Bayer CropScience Dow AgroSciences

Topramezone Pinoxaden

Clio Axial

2005 2005

BASF Syngenta

Source: Agrow Notes: 1. Year ai first reported, approved or launched; 2. Now part of Bayer CropScience; 3. Now Dow AgroSciences; 4. Now part of BASF; 5. Now part of Syngenta; 6. Now LG Life Sciences; 7. Now part of Nihon Nohyaku.

5.1.2

Future insecticide targets Between 1995 and 2006, 37 new insecticide ais were reported or launched, many of which now generate significant sales and will figure amongst the main future targets for generic companies. The insecticides that are likely to receive the most attention from the generic producers over the next five years are detailed below. The ais are taken from Agrow’s New Generics 2007, but the list is not identical because some of the insecticide ais identified as new generics have been profiled in Volume 1 of this report. This is because ais such as fipronil and pyridaben are already being manufactured by more than one generic producer, even though their patents remain in force in most major markets. •

Acequinocyl (broad-spectrum acaricide for use on fruit and vegetables).

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•

Clothianidin (insecticide for use on rice, vegetables, fruit, tea, turf and ornamentals).

•

Fenpyroximate (miticide for use on a wide variety of fruit and vegetables).

•

Lufenuron (control of caterpillars, mites and thrips on a wide variety of crops, including vegetables, fruit, maize and potatoes).

•

Spinosad (control of caterpillars, flies and beetles on a wide variety of crops, including vegetables, fruit, maize and potatoes).

•

Tebufenpyrad (broad-spectrum miticide for use on cotton, fruit and vegetables).

•

Thiacloprid (insecticide for controlling sucking insects on fruit and vegetables).

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Table 5.2: Significant new insecticides reported and commercialised, 1995–2006 Active Ingredient

Trade Name Year1

Developing Company

Tebupirimfos Chlorethoxyfos Acetamiprid Tebufenozide Pyrimidifen

Aztec Fortress Mospilan Confirm Miteclean

1995 1995 1995 1995 1995

Bayer DuPont Nippon Soda Rohm and Haas3 Sankyo

Verbutin Novaluron Methoxyfenozide Bifenazate Chlorfenapyr Halofenozide Etoxazole Acequinocyl Emamectin-benzoate Pymetrozine Alanycarb Fosthiazate Spirodiclofen Thiacloprid Bistrifluron Funbacnew Chromafenozide Thiamethoxam Chlorfenapyr Fluacrypyrim Clothianidin Spiromesifen Gamma-cyhalothrin Tolfenpyrad

Censor Rimon Intrepid Floramite Alert Mach 2 Baroque Kanemite Proclaim Chess Orion Nemathorin Envidor Calypso n/k n/k Matric Adage Pylon Titaron Poncho Oberon Archer Plus Hachihachi

1996 1996 1996 1996 1997 1997 1998 1999 1999 1999 1999 1999 2000 2000 2000 2000 2000 2000 2001 2001 2001 2002 2002 2002

Tebufenpyrad

Pyranica

2002

Dinotefuran Milbemectin Pyridalyl Ethiprole Flonicamid Lufenuron

Starkle Milbeknock Pleo Kirapu Aria Zyrox

2002 2002 2002 2004 2004 2004

Chinoin MAI Rohm and Haas3 Uniroyal Cyanamid3 RohMid Yashima Chemical Agro-Kanesho Novartis4 Novartis4 Otsuka Chemical Zeneca4 Bayer Bayer Dongbu Hannong Chemical Newstequi Nippon Kayaku/Sankyo Novartis4 BASF Nippon Soda Takeda Chemical Bayer Cheminova/Dow AgroSciences Mistubishi Chemical5/Otsuka Chemical Mistubishi Chemical5/Platte Chemica Mistui Chemical/Hokko Chemical Sankyo Co Sumitomo Chemical Bayer CropScience ISK/FMC Syngenta

Flubendiamide

n/k

2005

Bayer/Nihon Nohyaku

Source: Agrow Notes: 1. Year ai first reported, approved or launched; 2. Now Dow AgroSciences; 3. Now part of BASF; 4. Now part of Syngenta; 5. Now part of Nihon Nohyaku.

5.1.3

Future fungicide targets Between 1995 and 2006, 54 new fungicide ais were reported or launched, many of which now generate significant sales and will figure amongst the main future targets for generic companies (see Table 5.3).

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The fungicides that are likely to receive the most attention from generic producers over the next five years are detailed below. The ais are taken from Agrow’s New Generics 2007, but the list is not identical because some of the fungicide ais identified as new generics have been profiled in Volume 1 of this report. This is because ais such as kresoxim-methyl and tebuconazole are already being manufactured by more than one generic producer, even though their patents remain in force in most major markets. •

Azoxystrobin (broad-spectrum fungicide for use on a wide range of crops).

•

Bromuconazole (control of a wide range of foliar and stem diseases on cereals).

•

Dimethomorph (control of oomycete fungi on vines, potatoes and tomatoes).

•

Fenbuconazole (broad-spectrum fungicide for use on cereals, sugar beet, fruit and vegetables).

•

Fluazinam (broad-spectrum fungicide and miticide for use on potatoes, top fruit and vegetables).

•

Fluquinconazole (fungicidal seed treatment for small-grain cereals, oilseed rape, fruit and vegetables).

•

Flutolanil (systemic fungicide for use on cereals, rice, soybeans, wheat, sugar beet, fruit and vegetables).

•

Quinoxyfen (control of powdery mildews on cereals, soft fruit, vines, vegetables and horticultural crops).

•

Tetraconazole (fungicide for use on cereals, sugar beet, vines, orchards and vegetables).

•

Triticonazole (fungicidal seed treatment for small-grain cereals and maize).

In the medium-term, triazole fungicides, such as fluquinconazole, and strobilurin fungicides, such as azoxystrobin, will be a major focus for generic pesticide producers.

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Table 5.3: Significant new fungicides reported and commercialised, 1995–2006 Active Ingredient

Trade Name

Year1 Developing Company

Fenbuconazole Kresoxim-methyl Spiroxamine Acibenzolar-S-methyl Quinoxyfen Famoxadone Azoxystrobin Carpropamid Furametpyr Diflumetorim Fenhexamid Iprovalicarb Cymoxanil Cyamidazosulfamid Mepanipyrim Ethaboxam Trifloxystrobin Fenamidone Triticonazole Fluquinconazole Propamocarb-hydrochloride Pyraclostrobin Metconazole Simeconazole Diclocymet Oxpoconazole-fumarate Picoxystrobin Fenamidone Fenoxanil Fenhexamid Zoxamide Cyazofamid Silthiofam Fluazinam Boscalid Dimoxystrobin Metrafenone Fluoxastrobin Prothioconazole Titriconazole Benalaxyl-M Benthiavalicarb Tiadinil Cyflufenamid Orysastrobin Fluopicolide Pyrimethanil

Enable Candit Impulse Bion Fortress Charisma Abound Arcado Limber Pyricut Elevate Melody Curzate Docious Frupica Guardian Flint Fenomen Premis B Jockey Tattoo C Cabrio Caramba Patchikoron Delaus All-Shine Acanto Reason Achieve Teldor Zoxium Ranman Latitude Omega Filan Swing Gold Flexity Fandango Proline Charter n/k Valbon V-Get Pancho n/k Infinito Scala

1995 1996 1996 1996 1996 1996 1996 1997 1997 1997 1998 1998 1998 1998 1998 1998 1998 1998 1999 2000 2000 2000 2000 2000 2000 2000 2000 2001 2001 2001 2001 2001 2001 2001 2002 2002 2002 2002 2002 2002 2002 2002 2003 2003 2004 2004 2004

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Rohm and Haas4 BASF Bayer Ciba5 DowElanco3 DuPont Zeneca5 Bayer Sumitomo Chemical Ube Bayer Bayer DuPont ISK Kumiai Chemical LG Chemical6 Novartis5 Rhone-Poulenc2 Rhone-Poulenc2 Aventis2 Aventis2 BASF Kureha/BASF Sankyo Co Sumitomo Chemical Ube Industries/Otsuka Chemical Zeneca5 Aventis CropScience2 BASF/Nihon Nohyaku Bayer Dow AgroSciences ISK Monsanto Syngenta/ISK BASF BASF BASF Bayer Bayer Bayer Isagro Kumiai Chemical Nihon Nohyaku Nippon Soda BASF Bayer CropScience Bayer CropScience

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Proquinazid Laminarin Ipconazole Mandipropamid Furfural

Talius Lodus 40 Vortex Revus Multiguard Protect Capri Work Up

Kiralaxyl Metconazole

2004 2004 2004 2005 2006

DuPont Goemar Kureha/Bayer/Crompton Syngenta AgriGuard

2006 Isagro 2006 Kureha

Source: Agrow Notes: 1. Year ai first reported, approved or launched; 2. Now part of Bayer CropScience; 3. Now Dow AgroSciences; 4. Now part of BASF; 5. Now part of Syngenta; 6. Now LG Life Sciences.

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CHAPTER 6 ROLE OF INDUSTRY ASSOCIATIONS The R&D-based agrochemical industry has a well-established network of industry associations at the country, regional and global level. These associations are very good at lobbying on behalf of the R&D-based industry and are usually consulted by regulatory authorities on proposals for any new pesticide regulations. Industry associations for generic pesticide companies are less common, but also tend to be involved in consultations over new pesticide regulations, especially concerning generic registrations and data protection and compensation. The larger generic companies, such as Nufarm and Cheminova, often see their interests as more allied with the R&D-based companies, and therefore tend to be members of both R&D-based and generic industry associations. The activities of the majority of the R&D-based associations are co-ordinated on a global basis by CropLife International (www.croplife.org). This federation was formed in June 2001 to replace the former Global Crop Protection Federation (GCPF). The change in the international association’s name reflects the fact that many leading pesticide companies are now also involved in developing seeds and genetically modified crops. CropLife International co-ordinates the activities of six regional trade associations: •

European Crop Protection Association;

•

CropLife America;

•

CropLife Latin America;

•

CropLife Africa Middle East;

•

CropLife Asia;

•

Japan Crop Protection Association.

CropLife International also represents more than 70 national trade associations, whose members comprise both R&D-based companies and generic companies. In view of these mixed interests, there are inevitably conflicts over issues relating to generic pesticides. There are also an increasing number of industry associations that have either specifically been set up for generic pesticide companies or are based in countries, such as China, where the industry solely comprises generic pesticide producers. The main associations are: •

European Crop Care Association (ECCA);

•

US Chemical Producers and Distributors Association (CPDA);

•

Pesticide Manufacturers and Formulators Association of India (PMFAI);

•

China Crop Protection Industry Association (CCPIA);

•

Associação Brasileira dos Defensivos Genéricos (AENDA; the Brazilian generic agrochemical industry association).

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They all operate fairly independently and there is little co-ordination between their respective activities. Over some issues, such as data protection, these generic pesticide associations can be at loggerheads with the R&D-based associations, while on other issues, such as pesticide harmonisation, they can be team up as part of a united industry front. 6.1.1

ECCA European Crop Care Association ECCA Secretary-General Poenaardlaan 7 B-3090 Overijse Belgium Tel: +32 2 687 9767 E-mail: [email protected] www.ecca-org.eu President: Pedro Brito Correia Secretary-General: David van Hoogstraten ECCA was established in 1993 by eight founding companies. The association now has 16 members, comprising generic pesticide producers, formulators, marketing companies and traders based in Western Europe (see Table 6.1). In addition to European companies, the European operations of three major Indian generic producers are also members of ECCA.

Table 6.1: ECCA member companies1 Company

Country

Company

Country

AEFISA Agripraza Agrochimica Barclay Chemicals2 Brabant Chemie Chimac-Agriphar Clayton Plant Protection Ets Bourgeois Excel Crop Care2

Spain Italy Italy Ireland Holland Belgium Ireland France Belgium

Gharda Chemicals2 Helm Herbex2 Industrias Afrasa LAPA SARL Limaru Protex UPL2

UK Germany Portugal Spain France Belgium Belgium UK

Source: Agrow Reports Notes: 1. ECCA member companies in 2001, because the association does not advertise its current membership; 2. Company profiled in first report.

ECCA’s main role is to deal with the European Commission on behalf of the European generic pesticide industry, specifically with regard to EU pesticide regulations. As such, one of ECCA’s main preoccupations over the past decade has been the EU’s pesticide review programme, which was instigated as part of the EU pesticide registration directive (91/414/EEC). For example, ECCA was concerned that there is no obligation for pesticide producers to combine to form ‘task forces’ in order to share the costs of reregistration. This is unlike the situation in the US, where the costs of studies required for the EPA review procedure are divided out equally amongst interested parties. More recently, ECCA has become concerned about the related area of data protection. The current provisions for the protection of agrochemical

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regulatory data in the EU are notoriously complex, particularly regarding the EU review of existing ais. Companies applying to register generic versions of ais that have been listed in Annex 1 of the EU pesticide registration directive must prove that the generic ai is equivalent to the original ai. They must also prove that they have access to a complete registration data package. Companies can demonstrate equivalence by submitting a five-batch analysis, which considers physico-chemical properties and toxicity. But proving that they have access to a complete data package, which consists of both “unprotected” and “protected” studies, is more problematic. This is because it can be difficult for generic companies to establish which of the studies used by the first applicants are protected and which are unprotected. Furthermore, the original applicants are currently under no obligation to share this protected data with generic applicants. This means that companies wanting to register a generic pesticide product often have to produce a complete data package from scratch, with the associated cost. ECCA wants a system similar to the one that exists in the US, where data compensation payments are made to the original applicant when a company registers a pesticide product based on an off-patent ai. For the most part, ECCA members are small companies that cannot afford the huge costs involved with generating full data packages. ECCA asserts that its members are prepared to pay “reasonable costs” for continued market access and hopes that an acceptable settlement can be made through negotiations with the ECPA. ECCA has made progress on some of these issues. For instance: it has gained acceptance that listing of ais is done by reference to physicochemical properties alone; that rapporteur member states should not exclude notifiers that are not data holders from the review process; and that a period of time after Annex 1 listing should be set aside to allow generic producers an opportunity to comply with data requirements to maintain national registrations for their pesticide products. In addition, in May 2005, the European Commission issued a guidance document requiring member states to draw up a list of studies that were used to evaluate an ai and indicate which of these studies are claimed as protected by the original applicant and which are older unprotected studies. This guidance document formed part of the Commission’s proposals for amending Directive 91/414. These proposals also included a compulsory data sharing and compensation system for registering generic products, in which companies would have to agree on compensation for the use of proprietary registration data generated by the original applicant. If agreement could not be reached, an independent arbitrator would set the compensation level. In later proposals, the Commission also suggested removing any protection for new data generated for the review of existing ais and products (see Chapter 3). The Commission produced the final version of its proposals in July 2006. This version included the requirement for member states to provide details of protected data and the removal of protection for ai review data. But the Commission pulled back from introducing a compulsory data sharing and compensation system, with the proposed regulatory amendment stating instead that companies should “take all reasonable steps to reach agreement on the sharing of any test and study reports” .

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At the end of October 2007, the proposed amendment was debated by the European Parliament, which approved the data protection proposals. The amendment will now progress to the EU Council of Ministers for consideration and should come into force in 2008 after the current review programme for existing ais has been completed. ECPA and ECCA have been at loggerheads for some years over issues such as data protection, the European pesticide directive and access to task force membership. However, there are also areas of common interest between the parties, such as the need to present a united industry front in the face of attacks from environmental lobby groups and the potential imposition of economic instruments such as pesticide taxes. 6.1.2

CPDA Chemical Producers & Distributors Association 1730 Rhode Island Avenue, Suite 812 Washington, DC 20036 USA Tel: +1 202 386 7404 Fax: +1 202 386 7409 E-mail: [email protected] www.cpda.com President: Susan Ferenc Director, Regulatory Affairs:

Michael White

The CPDA was established in 1975 and now has 73 members, comprising producers and distributors of agricultural pesticides, lawn and garden products, adjuvants and inerts. The membership includes US companies and the US operations of foreign generic producers, as well as some R&D-based agrochemical companies. Seven of the companies profiled in Volume 1 of this report are members of the CPDA: Albaugh, Cerexagri, Cheminova, MAI, Nufarm, Sinon, Sipcam-Oxon and United Phosphorus. The CPDA has two main objectives: to eliminate barriers to market entry for generic pesticide producers; and to represent the interests of generic pesticide companies in federal legislative and regulatory affairs. To achieve these objectives, the CPDA has set itself four main goals. •

To promote reasonable, scientifically-based federal legislative and regulatory actions that balance risk and benefits and enhance the quality of life.

•

To promote education and training that contribute to product stewardship and industry compliance.

•

To establish good management practices and appropriate standards for the industry to protect the environment.

•

To promote the interests of small- to medium-size pesticide producers, formulators and distributors providing affordable generic products for food and non-food uses.

The CPDA is engaged in a number of efforts relating to US pesticide regulations. In 2006-07, these included supporting the early re-authorisation of the Pesticide Registration Improvement Act, which established a system of pesticide registration fees and specific timescales for pesticide product

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approvals, and dissuading the EPA from adopting a proposal that would have significantly increased review times for “me-too” product submissions. 6.1.3

PMFAI Pesticide Manufacturers and Formulators Association of India B-4, Anand Co-operative Hsg. Society Sitladevi Temple Road, Mahim Mumbai 400 016 India Tel +91 22 437 5279 Fax: +91 22 437 6856 E-mail: [email protected] www.pmfai.org President: Pradeep Dave Vice-president: Deepak Shah The PMFAI was established in 1967 as the Pesticides Formulators Association of India, before changing its name to its current version in 1997. It currently has around 150 members, comprising manufacturers of technical ais and pesticide products, as well as formulators. The membership includes Indian companies and the Indian operations of foreign pesticide companies. Most of the Indian companies profiled in Volume 1 of this report are members of the PMFAI, as are a number of Indian subsidiaries of overseas companies (see Table 6.2).

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Table 6.2: List of companies profiled in Volume 1 that are members of the PMFAI Aimco Pesticides

Hikal

Atul Bharat Group Cheminova India Coromandel Fertilisers Dhanuka Pesticides Excel Crop Care Gharda Chemicals Heranba

Hindustan Insecticides Indofil Meghmani Organics Punjab Chemicals Rallis India Rotam India Sabero Organics United Phosphorus

Source: PMFAI

The main aim of the PMFAI is to promote the environmentally-sound use of pesticide products in India and to foster innovation. To achieve this aim, it has set itself a number of objectives, including: to protect and promote the interests of generic pesticide manufacturers and formulators; to promote research into novel pesticide formulations and methods of application; and to promote co-operation and exchange of information between its members. The PMFAI conducts training courses, organises conferences and represents the generic pesticide industry in negotiations with the Indian Ministry of Agriculture. Recently, it contributed to discussions regarding the amendment of India’s Insecticides Act, calling for greater uniformity in the way pesticides are regulated in different Indian states and pressing for changes to the rules governing imports of ais. It has also argued that the current excise duty on pesticides should be halved to 8% and lobbied against the imposition of a 5– 10 year period of data protection, which has been requested by the R&Dbased agrochemical industry. 6.1.4

CCPIA China Crop Protection Industry Association Building 16, District Four Anhuili Beijing 100723 China Tel: +86 10 8488 5145 Fax: +86 10 8488 5002 E-mail: [email protected] Founded in April 1982, the CCPIA was one of the first chemical industry associations in China. Since its formation, CCPIA has experienced rapid growth, with its membership increasing almost ten-fold to 445. Most of its members are pesticide companies, research institutes and provincial pesticide associations involved in the research, design and production of pesticide-related products. These include technical ais, formulated pesticide products, intermediates, packaging and pesticide application equipment. In total, CCPIA members account for around 85% of China’s total pesticide production. The CCPIA’s main role is to provide a link between the Chinese agrochemical industry and the Chinese government, in order to promote the sustainable and healthy development of the pesticide industry. Its main responsibilities and functions are detailed below.

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•

Generic Pesticides: Volume III – Business Strategies

Assisting the government in the management of pesticides.

• Providing assistance with the governing laws and regulations, and coordinating the development of pesticide manufacturers. • Promoting the protection of intellectual property and defending the legal interests of its members. •

Advising on exports, joint ventures and collaborations.

• Providing training courses on skills, techniques, management, relevant laws and regulations. •

Publishing journals such as China Agrochemicals and the China Crop

Protection Industry Yearbook.

• Organising international technical exchanges, symposiums and exhibitions. These include AgrochemEx, which is the largest annual Chinese agrochemical exhibition, showcasing the latest agrochemical technologies and providing networking opportunities. 6.1.5

AENDA Associação Brasileira dos Defensivos Genéricos Av. Dr. Vieira de Carvalho, 172 – Conj. 306 Cep: 01210-010 – São Paulo/SP Brazil Tel: +55 11 3354 0053 Fax: +55 11 3331 0285 E-mail: [email protected] www.aenda.org.br President (2007–09): Joao Pedro Engels Executive Director: Tulio Oliveira Established in 1986, AENDA represents generic pesticide companies in Brazil, which is the world’s second largest pesticide market, comprising both Brazilian companies and Brazilian subsidiaries of overseas generic producers. It currently has 43 member companies, including four companies profiled in Volume 1: Fersol, Pilarquim, Rotam and United Phosphorus. AENDA performs a variety of functions, including lobbying the Brazilian government on behalf of the generic pesticide industry, organising conferences, exhibitions and training courses, and producing a members’ newsletter entitled AENDA Opinion. Over the past few years, AENDA has been heavily involved in improving the process for registering generic pesticide products in Brazil. Until 2002, the approval of generic pesticides required a dossier containing partial toxicological, environmental, chemical and agronomic studies. A new Decree (4074) then came into force and introduced an equivalence system for registering generic products, which quickly became a major source of controversy in Brazil. The equivalence system is based on the FAO’s five-batch analysis criteria, which focus on physico-chemical properties and acute toxicity. But companies claimed that Brazilian laboratories were not capable of carrying

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out these tests and there was also a great deal of confusion over exactly what data were required for generic products. This meant that no generic registrations were granted for three years, producing a backlog of around 350 applications. The Brazilian Ministry of Agriculture finally approved the first generic ai under the new regulations in September 2005, when it granted Atanor the right to import, export and sell the herbicide glyphosate. Then it approved the first formulated product in June 2006, when Rotam was granted the right to market the fungicide Rodazil (carbendazim). Nevertheless, the system was still fairly slow and so in December 2006, following lobbying from AENDA, the Brazilian government passed a Decree to speed up the registration of generic pesticides. This new Decree removed the need for certain “unnecessary” tests and studies and specified that the registration process should take a maximum of 150 days. By June 2007, 17 pesticide ais, including the herbicides glyphosate and paraquat and the fungicide tebuconazole, and 20 formulated products had received generic registrations. AENDA has also been actively pushing for more competition in the Brazilian market, arguing that high pesticide registration costs effectively prevent small and medium-sized companies from launching new products. However, this campaign may have ended up causing problems for AENDA. In September 2005, four companies – Agripec, Agricur, Cheminova and Milenia – cancelled their memberships, with Nufarm electing to leave in January 2006. AENDA claims this was due to its efforts to increase competition in the industry, because Agripec, Cheminova, Milenia and Nufarm already generate substantial sales in Brazil. However, Milenia stated that it left AENDA because it preferred being a member of the Brazilian fine chemicals association, Abifina. The withdrawal of these five companies threw AENDA into a financial crisis, forcing it to cut expenses and some jobs. However, no other companies have since left and the association is once again in a stable condition.

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The personal details shown on this advertisement or provided by you will be held on a database and may be published (electronically or otherwise) in a trade directory. They may also be shared with companies in Informa. They may be used to keep you up to date with developments in your industry. Sometimes your details may be obtained from, or made available to, external companies for marketing purposes. We believe that you are the correct person to receive details of products connected with this subject. If this is not the case or if you do not wish to receive details please write to Norman Oxlade, Reference Services Manager, Informa Healthcare, Telephone House, 69-77 Paul Street, London, UK. Telephone: +44 (0)20 7017 6922, Fax: +44(0)20 7017 6919, Email: [email protected]. Informa UK Limited. Registered in England and Wales. Registered Number: 1072954. Registered Office: Mortimer House, 37/41 Mortimer Street, London, W1T 3JH.

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