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Growing the Future with Product InnovationsPeter EckesSenior Vice PresidentGlobal Research Agricultural Products Division
August 2005
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Pipeline
BASFTheChemicalCompany
Strategy:Focus on high-value• Markets• Products• Innovation
ProfitabilityProfitability
CustomerSatisfaction
PipelineProfitability
CustomerSatisfaction
Pipeline
Success intoday‘s and tomorrow‘s
agro markets
BASF – Top Player in Agricultural Products
3
Breakthrough technology provides added value to customers
Innovation creates profitable growth for BASF top and bottom line
Total market value in million USD
Source: Amis Global, Phillips McDougallMarket value of Strobilurins including the value of mixture partners of ready mixes
Success Story Strobilurin ChemistryProduct Innovation Pay Off
500
1,000
1,500
2,000
1996 1997 1998 1999 2000 2001 2002 2003 2004
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The rightchemistry
The best technology
The right candidate
The highestspeed
Research
Development
The right product
The righteffortValue
=
=
=
• Effectiveness: focused R&D processes to select the right chemistry and the right development candidate
• Efficiency: - Intelligent use of
modern technologies - Ambitious project
management
Create Value with R&DManaging Effectiveness and Efficiency
1 | Success Factor – Strategy
2 | Success Factor – People
3 | Success Factor – Processes
4 | Success Factor – Projects
5 | On the Horizon
6
R&D Focus on Future Customer Needs
Row crop
farmer
Specialty crop
farmer
Non-crop user
Top customer needs Strong customer needs
Fungicides Insecticides Herbicides2010-2015
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Market Trends Drive Research Resources
Increased Discovery Research Spending:
2002 2005
39%
33%
21%35%
27%
38%
+ 7%+ 37%
Fungicides market trend ìHigh demand for innovation due to resistance and new diseases
Insecticides market trend ìHigh demand for new products due to phase out of old products and resistance
Herbicides market trend îSelective demand for innovation midterm
New Opportunities éLong-term opportunity for Plant Health products,increasing harvest yield and quality
New Mode of Action
Old Mode of Action
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Fivefold Increase of Classes with New Mode of Action
Strategic focus on break through technologies
Focus on chemistry with novel biological action
• Product differentiation
• Resistance breakers
• Attractive market potential
Chemical classes in BASF researchwith new mode of action
Ready to deliver new technologies
5 x
2000 2004
1 | Success Factor – Strategy
2 | Success Factor – People
3 | Success Factor – Processes
4 | Success Factor – Projects
5 | On the Horizon
11Motivated, experienced and creative individuals ...
Excellent People
• Bernd, a creative discovery chemist synthesized F500
• Maria, an experienced agronomist recognized the potential of Boscalid
12... working together as a great team
Successful Interdisciplinary Teams
Boscalid innovation team
• Challenging goals
• Ownership, commitment and passion
• Out-of-the-box thinking
• Openness to change
Marketing Management
Production
Biology
Marketing/Sales
Agronomy
Chemistry
Ecotox
Process Development
Formulation
Registration
Project Mangement
Marketing/Sales
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Form the Best Team in the IndustryPeople Drive Our R&D Success
80 experts
> 1100 years of experience
• In the last three years, 80 R&D experts from the industry decided to join our team
• Continuous search for great talent
• BASF top address for scientists globally
1 | Success Factor – Strategy
2 | Success Factor – People
3 | Success Factor – Processes
4 | Success Factor – Projects
5 | On the Horizon
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Fit to target segments?
Fit to financial targets?
Activity?
Research Development Launch
Effective Selection of Candidates
Fit to performance profile?
• Clear decision criteriain research process
• Select the right candidates and development products
• Key performance indicators to measure performance New
actives
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Principles of Structure-Based Design
• Determine structure of biomolecule (lock)
• Identify small molecular inhibitor (key)
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Molecular structure makes chemical optimization more effective
Effective Structure-Based Design
• Identify relevant weedbiomolecule
• Determine structure of biomolecule (lock)
• Identify small molecular inhibitor (key)
• Optimize inhibitor fit by computer-aided design and virtual screening
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Efficiency Through Miniaturization
Miniaturization
• Faster
• Less substance
• Shorter cycle times
Automatization
• BASF’s own automatization
• Leafcutter produces 500,000 leaf discs annually
Leafcutter
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Efficient Development Process
Reduction of development time key to success
• Parallel processing of time critical registration studies
• Early evaluation of critical areas
• Well structured project management
Pro
ject
A
1989
Pro
ject
B
1995
Pro
ject
D
2003
Reduction of development time 30%
Pro
ject
dev
elop
men
t tim
e
Pro
ject
C
1997Start
1 | Success Factor – Strategy
2 | Success Factor – People
3 | Success Factor – Processes
4 | Success Factor – Projects
5 | On the Horizon
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High Sales Share of InnovativeActive Ingredients
Share of 2004 sales with new actives (launched 2000-2004)
6 %Competitor 2
3 %Competitor 3
0 %Competitor 4
11 %Competitor 1
BASF
18 %
Source: Phillips McDougal, BASF and competitor publication
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R&D Pipeline
1 new Fungicide 2 new Fungicides 3 Fungicide Technologies 1 new Insecticide 2 Insecticide Technologies
1 new Fungicide 1 new Herbicide 1 new Insecticide 1 new Insecticide 1 Insecticide Technology
3 Fungicides 3 Fungicide Technologies 1 Insecticide Technology
2 new Fungicides 2 new Fungicides 3 Fungicide Technologies 3 new Herbicides 2 new Herbicides 1 Herbicide Technology
1 HT project* 2 Insecticide Technologies
Row Crops
Applications
Specialty Crops
Non-Crop Uses
Seed Treatment
In Launch In Development
*Herbicide tolerant soybeans
Discovery
Peak Sales Forecast
EUR 1,100 million EUR 700 million
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Fit to target segments?
Fit to financial targets?
Activity?
Research Development Launch
New BASF Fungicide TechnologyOur R&D Engine in Action
Fit to performance profile?
• Genesis of new BASF fungicide technology
New actives
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New BASF Fungicide TechnologyStarting Point of Innovation: Discovering Biological Activity
• Good biological activity against fungi in microtitertest
untreated
treated
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New BASF Fungicide TechnologyAssessing Potential: Fit to Target Segments
• Broad spectrum offungal pathogen activity in greenhouse
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New BASF Fungicide Technology Identifying Lock – Designing Key: Meeting Performance Profile
• Identified molecular target (lock)
• Designed new active (key)
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New BASF Fungicide Technology Financial and Risk Assessment: Meeting Financial Expectation
• Thorough financial and risk assessment
Expected
Optimistic case
Pessimistic case
Net present value of discounted cash flows(cumulative)
negative
positive
Break even
Development Commercial phase
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New BASF Fungicide Technology Latest Innovation in Development Pipeline Fungicides
Development of robust technology for control of multiple fungal diseases
Creating the next success story
Technology attributes:- New chemical class
- New mode of action
- Broad spectrum fungicide
- Excellent crop selectivity
Farmer benefits:- Complementary to current
portfolio
- Resistance breaker
- Benchmark control for key diseases
- Safeguard crop yield and quality BASF new technology
Without treatment
1 | Success Factor – Strategy
2 | Success Factor – People
3 | Success Factor – Processes
4 | Success Factor – Projects
5 | On the Horizon
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Potential Productivity of Crops (harvest yield)
Plant HealthNew Opportunities Beyond Traditional Crop Protection
Oerke et al., Elsvier: Crop Production and Crop Protection
Untapped potential• Improving
performance of plant
• Enhancing grain quality
Without crop protection products
30 %
With crop protection products
+28 %
+42 %100 %
0 %
30 %
58 %
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Plant Health Leads to Improved Yield and Quality
untreated treated
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Key Messages
• BASF pursues a market driven R&D Strategy
• BASF focuses on innovative technologies with new mode of action
• BASF has an outstanding R&D team
• BASF maintains excellence in R&D through continuous process improvements
• BASF’s strong pipeline continues to drive profitable growth
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Disclaimer
This presentation contains forward-looking statements under the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove tobe accurate.
Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. Such factors includethose discussed in BASF’s Form 20-F filed with the Securities and Exchange Commission. We do not assume any obligation to update the forward-looking statements contained in this presentation.
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