It may be the centre of a historic takeover deal but Monsanto (NYSE:MON) shares have been sliding since the start of June, and one product is especially causing grief to its sprawling agrochemical and agricultural biotech empire – in Europe.
In May, Germany’s Bayer (ETR:BAYN) made an improved $62bn cash offer for genetically-engineered pioneer Monsanto - the biggest cash offer ever.
But rather than see share price upside, Monsanto has seen shares falling since May 31 from $112 to close on Monday down 2% on the day at $107.05.
A product that increasingly is a modest part of the company’s portfolio owing to dropped patents - a herbicide called Roundup - is nevertheless progressing like the poison it is for roots.
That’s because last week the European Union was unable to agree upon an extension to trade the product for a further 12-18 months pending further research into whether or not it is a cancer risk to humans.
Roundup is a popular product used by gardeners but EU nations have refused to back a limited extension of the pesticide glyphosate’s use, threatening withdrawal of Monsanto’s Roundup and other weedkillers from shelves if no decision is reached by the end of the month.
Contradictory findings on the carcinogenic risks of the chemical have thrust it into the centre of a dispute among EU and US politicians, regulators and researchers.
The EU had hoped a study by the European Union’s Agency for Chemical Products (ECHA) would allay health concerns.
Instead, the proposal failed to win the qualified majority – the support of member states representing at least 65% of the EU’s population – needed for adoption. Seven member states abstained – one of those being Germany where Bayer is based.
Monsanto chemist John E. Franz repurposed the chemical glyphosate as a systemic herbicide in 1970. Monsanto's last commercially-relevant United States patent on glyphosate expired in 2000, and since then glyphosate has been marketed in the United States and worldwide by many agrochemical companies, in different solution strengths and with various adjuvants, under dozens of tradenames.
As of 2009, sales of glyphosate represented about 10% of Monsanto's revenue due to competition from other producers of other glyphosate-based herbicides. Monsanto’s Roundup products (which include genetically-modified seeds) represented about half of Monsanto's gross margin.
The EU Commission, the executive body, may submit its proposal to an appeal committee of political representatives of the 28 member states within one month. If, again, there is no decision, the European Commission may adopt its own proposal but risks a major rift with EU government states over the democratic process.