Monsanto Seeds Its Pipeline

The agricultural biotech business is starting to look a lot like its pharmaceutical counterparts. Monsanto (NYSE: MON) is hooking up with small companies in research and development deals to try and keep potential technology from falling into the hands of rivals Syngenta (NYSE: SYT) and DuPont (NYSE: DD).

Its newest partnership, a five-year deal with Israel-based Evogene, is actually an expansion of a year-old partnership with the company. The duo are expanding the scope of their partnership to include discovering "genes related to yield, environmental stress and fertilizer utilization" -- basically anything that will help the plants grow faster and produce more. The scope of the research was previously limited to increasing nitrogen usage.

Evogene will do the initial discovery research to identify genes that could increase yields and then Monsanto will test the candidates in plants. For its efforts, Monsanto will pay Evogene $35 million over the course of the partnership and pay additional milestone and royalty payments for products that actually get developed. Monsanto is also taking an $18 million equity stake in Evogene, which trades on the Tel Aviv Stock Exchange, and later will purchase another $12 million worth of shares.

While bigger yields are definitely good news for farmers and Monsanto -- since seeds that provide better yields can fetch higher prices -- it is a bit tougher to predict the long-run ramifications for fertilizer players like Mosaic (NYSE: MOS) or PotashCorp (NYSE: POT).

Then again, these potential products are still years away from the fields, so there's no immediate concern for fertilizer producers. Investors just need to watch for upcoming surprises in biotech seed producers' pipelines.