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Article: FMC interview - technology is the cornerstone of our growth plan
24 July 2020
Sanjiv Rana talks with FMC's new president and chief executive
officer, Mark Douglas, to discuss his vision and strategy for the
company's growth.
Mark Douglas
Sanjiv Rana
Sanjiv Rana (SR): You took over as CEO at a turbulent time
in the midst of the disruption caused by Covid-19. How did you
tackle the challenges that changed quickly from being a regional
disturbance to a global one?
Mark Douglas (MD): Covid-19 certainly has presented some unique
challenges over the last several months. As you know, the
agricultural industry, including companies that supply inputs, was
designated as essential in many countries. Therefore, it was
imperative that we figured out how to operate under extraordinary
circumstances so we could continue to supply farmers with products
they needed.
Like other global companies, we began to address the impact of
this virus back in early January when FMC teams in China were
facing the initial outbreak. We learned a lot from those early
days, from how to safely maintain production operations and keep
our supply chain intact, to figuring out how to preserve business
continuity when many employees had begun to work from home.
Perhaps one of the most significant lessons learned was how to
use digital and online technology to stay connected to our
customers. FMC sales, marketing and technical teams in Asia Pacific
shifted to digital, online, and social media channels to host
customer events, provide technical training, conduct virtual plot
tours, and host other online customer engagements that are
traditionally conducted in a live setting. Participation exceeded
our expectations. We were able to export what we had learned in the
Asia Pacific to our commercial teams in other regions and countries
as the pandemic emerged in those areas.
SR: What has been the impact of the disruption on FMC in
terms of manufacturing? Did you have to look at alternative
suppliers following the initial closures in China and slow
resumption of manufacturing?
MD: We have detailed business continuity plans for all
manufacturing locations. These plans are designed to ensure we can
safely operate production plants and ship products under a variety
of difficult conditions. It's been a challenge, but those business
continuity plans have helped maintain operations with minimal
disruptions over the last several months.
SR: What about the impact on product distribution? How did
you manage to tackle logistical bottlenecks in ports and inland
transport to ensure seamless distribution of products to
farmers?
MD: Regarding supply chain, logistics and product distribution,
the challenges have been more complex as regions, countries and
other jurisdictions established their own set of rules, border
restrictions and other measures in response to Covid-19. In some
cases, something as basic as access to warehouses became difficult
early in the pandemic. But our agility has been a strength. Our
"hub and spoke" process has worked well whereby operations and
supply chain teams at our Philadelphia headquarters are in constant
contact with their counterparts in every region. They are
monitoring the supply chain daily and, when necessary, adjusting to
events that could impact our network. You have to be on top of this
every minute, not only to quickly react to changing events at
ports, borders and airports, but to anticipate them and adjust
whenever possible. I think it's also important to add that FMC and
other companies have had quite a bit of practice over the last
several years as we have managed through production disruptions and
related events in parts of China.
SR: FMC has reached a stable growth phase after the rapid
growth since 2018. What are the main items on your agenda to ensure
that the growth momentum is maintained? What are FMC's mid-term
growth targets?
MD: We have been very pleased with our track record of growth
over the last several years. In December 2018, we introduced FMC's
five-year growth plan with revenue growing 5% - 7% CAGR, taking us
to $5.5 to $6 billion by 2023. This would translate to more than
twice the expected market growth. We targeted EBITDA to grow 7%-9%
CAGR to about $1.5 to $1.7 billion. Our long-range plan also calls
for increased investment in R&D of about $1.8 billion, roughly
7% of sales, during the 5-year plan. Of course, we are very
disciplined on costs, which will continue to be a priority. Now
into our second year of the five-year plan, we are tracking very
well and are pleased with our progress, especially in light of
market disruptions over the last few years.
SR: What role does new technology play in your growth
plans?
MD: Technology is a key driver of our growth. We have an
incredible synthetics pipeline of 22 new active ingredients, 14 of
which feature new modes of action in herbicides, fungicides, and
insecticides. On the biologicals side, our Plant Health business is
developing new bioinsecticides, bionematicides, biofungicides and
biostimulants that offer excellent sustainability profiles.
In addition to new product technologies, we recently announced
key investment areas that support our mid- and longer-term growth.
Back in May, we announced our new precision agriculture platform
called Arc farm intelligence, the first proprietary mobile platform
in the ag industry to deliver real-time data that predicts insect
pressure one week in advance with more than 90% confidence for key
insects.
In addition, we recently announced the launch of FMC Ventures.
There's a lot of interesting technology in the agriculture industry
being developed by small start-ups. We will be highly focused on
investing in emerging technologies that could radically alter how
products are developed, sold and applied. This could take us in any
number of directions, but our primary focus is precision
agriculture, artificial intelligence, synthetic biology, and
biopesticides, as well as emerging business models.
SR: Can we talk about FMC's pipeline and the promising
candidates and chemical families within it? The diamides are a
mainstay of your portfolio - which product categories or chemical
families will provide a similar boost in the coming years? Apart
from Rynaxypyr, which are the promising ais where you see peak
annual sales in the region of $100 million or more?
MD: As I mentioned earlier, technology is the cornerstone of our
growth plan. Obviously, diamides have played an important role in
our success and will continue to be a leading molecule in our
portfolio for the foreseeable future. But our technology
investments extend well beyond just diamides.
Over the next several years, we expect to commercially launch
several new ais, most with estimated peak sales of over $200
million, and in some cases significantly higher. For example, in
2021 we will introduce Overwatch herbicide in Australia powered by
our new Isoflex [trade-marked name of bixlozone] active ingredient.
This pre- emergent herbicide provides outstanding control of annual
ryegrass and other weeds that have developed resistance to older
technologies. We expect Isoflex to reach peak sales of around $500
million.
Another great example is fluindapyr active ingredient, an SDHi
molecule that combats various diseases in row crops, specialty
crops and turf. We jointly developed it with Isagro, and recently
announced an agreement to acquire all IP, registrations,
formulations and global assets. Pre-launch is expected this year in
Paraguay, with an initial launch in the US next year, followed by
China, Europe, Argentina, Brazil and other countries. Peak sales
opportunity for fluindapyr is $350 million to $500 million.
FMC's development pipeline
SR: Diamides brought in some $1.4 billion in revenues in
2018. How has the category grown since then? What are the revenues
being targeted through further expansion in the next 2-3
years?
MD: When we acquired the diamides franchise as part of the
DuPont crop protection transaction in 2017, our diamide sales were
about $1.1 billion. Today they are in the $1.7 to $1.8 billion
range. The FMC diamides portfolio consists of two key molecules -
Rynaxypyr [trade-marked name of chlorantraniliprole] and Cyazypyr
[trade-marked name of cyantraniliprole]. We expect them to continue
on their strong growth trajectories.
SR: Are you looking at licensing deals with companies as you
near patent expirations in some countries in the next 2-3
years?
MD: The patent estate for these molecules is extensive and made
up of several different patent families. They cover composition of
matter for the ai and certain intermediates, manufacturing
processes for the ai and certain intermediates, as well as patents
for formulations, uses and applications. For Rynaxypyr, we have
more than 20 patent families filed in over 75 countries with a
total of about 640 granted and pending patents. Together with
Cyazypyr related patents, we have over 30 patent families and close
to 1,000 granted and pending patents.
Composition of matter patents are typically what observers focus
on, but process patents are also extremely important. These are
complex molecules to produce—for example, chlorantraniliprole
requires 16 separate steps, many of which produce an intermediate
whose sole use is the production of chlorantraniliprole. FMC has
many of the 16 process steps separately patented, and several of
these intermediate process patents run well past the expiration of
the composition of matter patents. In some cases, they extend all
the way to the next decade. When you take this into account, as
well as our diamides formulation patents, use patents and
application patents, we are very confident in the strength of our
IP protection for many years.
Growing this franchise extends well beyond IP protection also
includes an extensive third-party sales strategy. Allowing others
to sell Rynaxypyr and Cyazypyr, as long as they purchase the ais or
formulations from FMC and license the trademarks, is a profitable
way for us to grow and increase market reach for the molecule. We
have commercial agreements in place, or actively negotiating new
agreements, with more than 15 companies to supply Rynaxypyr and
Cyazypyr on a global or country basis before patent expiration. The
duration of these agreements extends well beyond the patent
expiration dates and are exclusive in nature. Furthermore, we are
exploring opportunities with companies beyond those we are engaged
with today.
In summary, our IP and commercial strategies ensure that the FMC
diamide technologies will continue to gain market share and our
franchise will continue a strong growth trajectory well into the
future.
SR: What has been the revenue break up in 2019 for
insecticides, fungicides and herbicide? Do you see the proportion
changing as new pipeline candidates come into the market?
MD: In 2019, our revenue breakdown by product category was 60%
insecticides, 27% herbicides, 6% fungicides, and the remaining 7%
included biological products, seed treatments, and micronutrients.
We are the market leader in insecticides, we are well balanced in
herbicides, and we are strengthening fungicides, which are mainly
used on high-value crop segments.
SR: What steps are you taking to establish a presence in
digital and precision agriculture? Is the focus on developing
pest/disease detection apps, such as Arc, which was debuted in
May?
MD: Since early 2019, our Precision Agriculture team has been
assessing opportunities to help growers make better informed
decisions. Customers today are demanding more data and information
on the conditions impacting their fields. We have focused much of
our recent Precision Ag efforts on digital agronomy, machine
learning, and developing data-driven insights that provide
customers with critical information they need to make
better-informed decisions and recommendations.
Our new Arc farm intelligence platform predicts insect pressure
one week in advance with more than 90% confidence for key insects.
It raises the game in predictive modelling and analytics, enabling
our team to provide advisers and growers with advice and insights
faster and easier. Feedback has been overwhelming in Greece and
Brazil, where Arc was deployed across 400,000 cotton ha on boll
weevils and fall armyworms in Bahia state. It is being piloted in
various other countries, including Spain and the US. In fact, we
recently announced a new pilot for real-time pest mapping and
predictive forecasts of diamondback moth populations in brassica
crops in California.
We also have other technologies under Precision Ag. Our 3RIVE 3D
application system is an at-plant crop protection delivery system
that efficiently covers more ground in less time with fewer
refills, saving water, fuel, labour and time. Another great
technology is PrecisionPac, an innovative dispensing system that
minimises waste with customer blends specific to each grower's
field size and weed spectrum.
SR: Many big players are moving towards outcome-based
pricing models and risk-sharing models with farmers. Do such
measures play a role in FMC's near-term future?
MD: We are aware of one or two players in the industry that are
looking at outcome-based pricing models. There are many successful
pricing models in the industry. At FMC, we tend to price based upon
the product value and use. For example, the diamides provide
exceptional value to specialty crop growers. Our pricing reflects
the value those growers derive from using products powered by
Rynaxypyr or Cyazypyr.
SR: How does a chemicals-based company such as FMC
incorporate sustainability in its vision? What is FMC doing towards
making crop protection and agriculture in general more
sustainable?
MD: For leading chemical-based companies, sustainability must
play an integral role in every aspect of the enterprise. It is not
good enough to develop a sustainability strategy that merely
resides on the sidelines. To be impactful to the organisation -
where it can really make a difference throughout all aspects of the
company - sustainability must be ingrained in the company's culture
and seamlessly flow throughout how the company is run. That means
new molecules in our pipeline are extensively assessed for their
sustainability profiles and will not progress through discovery and
development if they do not meet our standards. It also means
conducting product stewardship and sustainability assessments on
current products that considers six criteria: food expectations,
health expectations, land competition, climate change, scarce
resources, and environmental consciousness.
Sustainability is integral to how we operate our plants, from
ensuring we work to meet or exceed our targets for water, energy,
and waste, to driving process safety improvements. I think it's
also important to acknowledge that sustainability must extend
beyond those traditional areas of environment, safety and
stewardship.
SR: Can regulatory bodies susceptible to politics and public
opinion (especially in the EU) be convinced that conventional
agriculture using chemical ais can also be the way towards
sustainability?
MD: Regarding the convincing of key stakeholders that
agriculture using traditional chemistries can be sustainable, this
is something I think our industry has improved on over the years.
But we can do better. Regulators are important partners in a
lengthy process of introducing new products that are safe,
sustainable, and deliver the results growers need. We need to show
our stakeholders that crop protection chemistries are among the
most highly regulated products in the world and are tested
following rigorous standards and using sound science to ensure
their safety for people, wildlife and the environment.
When it comes to feeding a growing world population, traditional
chemistries and conventional farming play a very important role.
Organic farming that uses biological products is also important,
and clearly there are parts of society that want to see more food
produced organically. We acknowledge this. But in my view, it's not
an either/or scenario. Until organic farming can produce crop
yields that are typical of conventional methods, we will need to
ensure both approaches - organic and conventional farming - are
supported and can thrive for global food security.