August 2005

Green Biotechnology
Peter Oakley
Member of the Board of Executive Directors
1 | Biotechnology & Markets

2 | Focus of BASF Strategy

3 | Research Platform

4 | Business Model

5 | Pipeline

6 | Beyond Green Biotechnology

 Biotechnology
Different Fields of Application

Green
Biotech Biotechnology for Agricultural Applications

White
Biotech Biotechnology for Industrial Applications

Red
Biotech Biotechnology for Pharma Applications

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 Green Biotechnology
Definitions

Biotechnology for Agricultural Applications:

Input Traits:
• The plant is modified to resist a certain insect, disease
or the application of a crop protection agent

Green Output Traits:

Biotech
• Agronomic Traits: The plant is modified to withstand
environmental stress (e.g. drought, cold) or to produce
higher yields
• Plants as Green Factories: The plant is modified to
produce a valuable ingredient (e.g. a specialty or bulk
chemical)

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 Green Biotechnology
1st, 2nd and 3rd Generation of Plant Biotech Traits

Examples:

• High oil content

Output Traits • Biopolymers
(Bulk Chemicals)

• Cold tolerance
Output Traits • Drought tolerance
(Agronomic Traits) • Salinity tolerance
• Yield increase

• Amino acids
Output Traits • Vitamins
(Specialty Chemicals) • Fatty acids

• Insect resistance
• Herbicide tolerance
Input Traits • Nematode resistance
• Fungi resistance

2005 2025
1st Generation 2nd Generation 3rd Generation
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 Green Biotechnology
Estimated Market Size of the Segments

Market
In billion USD Market* 1st Important
Potential*
2004 Launches
≥ 2025
Input Traits
1.6 3–8 ü
Output Traits
(Specialty Chemicals)
<1 >10 ~5 years

Output Traits
(Agronomic Traits)
<1 >10 ~8 years

Output Traits
(Bulk Chemicals)
<1 5 – 10 ~10 years

* only trait value excluding seed commodities (BASF estimates)

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1 | Biotechnology & Markets

2 | Focus of BASF Strategy

3 | Research Platform

4 | Business Model

5 | Pipeline

6 | Beyond Green Biotechnology

 Green Biotechnology
1st, 2nd and 3rd Generation of Plant Biotech Traits

BASF Focus

Output Traits
(Bulk Chemicals)

Output Traits
Output Traits
(Agronomic Traits)

• Insect resistance (BT)

Output Traits
• Herbicide tolerance
(Specialty Chemicals)

Input Traits

2005 2025
1st Generation 2nd Generation 3rd Generation
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 1st Generation of Input Traits
Herbicide Tolerance and Insect Resistance

Key learnings
• Monsanto introduced the first herbicide-tolerant soybean variety in 1996
and launched a corn borer-resistant corn variety in 1997
• Many companies paid an expensive price to enter the seed business as
‘me-too’ players loosing focus from their traditional core competences
• Monsanto continues to lead the market for input traits

è BASF decided to leapfrog the 1st generation of input traits and

focus on the 2nd and 3rd generations of input and output traits

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 Focus on 2nd and 3rd Generation

Input Traits
• Just a few market segments offer critical mass and
manageable risk to develop input traits that compete with
agrochemicals
• BASF pursues only selective investments on input traits

Output Traits
• Output traits offer great room for innovation and considerable
market potential
• Today competition takes place not in the seed market but in
the laboratories and patent offices
• This technology is fully complementary to innovative
agrochemicals

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 R&D Spending on Output Traits

Comparison of BASF and Top Seed Players in 2004*

In million USD
80

60

40

20

0
A BASF B C

* Source: Context Network

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1 | Biotechnology & Markets

2 | Focus of BASF Strategy

3 | Research Platform

4 | Business Model

5 | Pipeline

6 | Beyond Green Biotechnology

 Global Platform for Green Biotechnology
R&D Sites and Cooperations

• Part of global BASF

R&D Verbund since
1998
• BASF spends approx.
DNA LandMarks 70 million EUR p.a. on
ExSeed Genetics green biotechnology
North Carolina Plant Science Sweden • BASF employs >450
people in green
Metanomics biotechnology
SunGene
Limburgerhof
• Unique network of
individual companies
with low asset base

BASF Biotech R&D Units

External Cooperations
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What is BASF’s Approach
to Create a Competitive
Advantage in
Green Biotech?
 The Metabolic Network
Chemistry of Nature

• A cell is a complex
network of thousands
M1 of chemical reactions

E1 • In these reactions
thousands of enzymes
act as catalysts in the
G3 M2 M5 production of chemical
substances
E3 (metabolites)
E2 • The genes are respon-
M3 sible for producing and
steering these enzymes

E4
M Metabolite
Cell
M4 E Enzyme

G Gene

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 The Metabolic Network
Chemistry of Nature

• A change in one gene

leads to multiple
M1 changes in the
metabolic network
E1

G3 M2 M5

E3
E2 M Metabolite
M3 E Enzyme

E4 G Gene

Cell M
Increased production
of chemical substance
M4
Decreased production
M of chemical substance

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 Metabolic Profiling
Analytical Tool for Understanding the Metabolic Network

• Measuring changes:
Metabolic profiling is
an analytical process
that measures changes
of more than 1,000
important metabolites
in an organism quickly
and precisely
• Building a database:
BASF has modified a
model plant by knocking
out each of the more
than 30,000 genes and
built a database with
all resulting metabolic
profiles
• Setting the benchmark:
The platform is
unparalleled in industry
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 Conventional Gene Selection

Look at Plant Look at Yield

+
Transformation

Information
New Gene Selection

Conventional approach: 1) modify gene, 2) look at external plant attributes

and yield in the field, 3) decide on selection for further gene testing
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 BASF Method
Our Approach is Unique in the Industry

Look at Plant Look at Yield Look Inside

+ + 0 6.008.001 0.00
12.00
14.00
16.00
18.00
20.00
22.00
24.00
Transformation

Information
Scan proprietary library with advanced bioinformatics
and identify new genes

With metabolic profiling tool we greatly increase the efficiency and efficacy of
gene discovery activities
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 Summary Metabolic Profiling

• We see not only the plant, but also what is happening inside
• Switching off or addition of one gene leads to multiple changes in
the metabolic profile of a plant which we measure
• We have modified our model plant by knocking out each of the
more than 30,000 genes and built a database with all the resulting
metabolic profiles
• We have developed a powerful search engine to scan this ‘library’
for genes that trigger certain metabolic profiles
• With this tool we greatly increase the efficiency and efficacy of gene
discovery activities
• The platform is unparalleled in industry

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 BASF’s Competitive Advantage

Better Data
Higher Speed 1 major patent
application every
Lower Cost 5 days

Better Genes

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1 | Biotechnology & Markets

2 | Focus of BASF Strategy

3 | Research Platform

4 | Business Model

5 | Pipeline

6 | Beyond Green Biotechnology

 Business Model
BASF’s Approach to Green Biotechnology

1. BASF profits from the most advanced gene-

discovery platform in the industry and is
building a solid IP position

2. BASF develops the trait up to the successful

genetic transformation of the target crop

3. BASF markets its traits through seed partners

4. BASF generates and captures additional value

through unique position in key value chains
(understanding customer needs)

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 Seed Access Strategy

For commercial scale seed development, seed production

and seed marketing:

Output Traits Output Traits

for Specialty Chemicals for Bulk Chemicals & Agronomic
Traits
• Low acreage • large
Largeacreage
acreage
• High value
Higher per
value acre
per acre • low value
Lower perper
value acre
acre
Strategy: Strategy:
Strategy:
Through toll manufacturing Through value-sharingand
through value-sharing
with localtoll-manufacturing
through seed partners partnerships and license
license agreements with leading
with local seed partners agreements with leading
seed companies, profitingseed
from
companies, profiting
non-competitive fromofnon-
position
competitive
BASF in theposition of BASF in
seed business
the seed business
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1 | Biotechnology & Markets

2 | Focus of BASF Strategy

3 | Research Platform

4 | Business Model

5 | Pipeline

6 | Beyond Green Biotechnology

 Strong Early Stage Pipeline
in Green Biotechnology

Focus Areas

Animal Health & High Yield (Corn,

Nutrition Output Traits Canola, Wheat, Soy)
(Agronomic
Drought Tolerance
Human Health & Traits)
Nutrition (Corn, Canola, Wheat,
Soy)
Personal Care
High Oil (Canola, Soy)
Crop Health & Yield
Improved Amino
Stress Tolerance Output Traits Acid Profile (Corn)
(drought, cold, salinity) (Specialty & Amylose (Potato) Amylopectin (Potato)
PUFAs
Bulk Chem.)
Fungal Resistance Carotenoids
Nematode Resistance
Industrial Uses
(specialty & bulk chem.)
Input
Nematode Res. (Soy) Fungal Res. (Potato)
Traits

Discovery Stage I Stage II Stage III

Identifying Genes
Look for POC II* Early Prod. Dev. Adv. Prod. Dev.
& POC*
2 – 6 years 2 – 4 years 2 – 3 years 3 – 4 years

26 * POC = ‘Proof of Concept’ in model crop / POC II: ‘Proof of Concept in Target Crop’
 Output Trait Example: PUFAs
Plants as Factories

Today Tomorrow • PUFAs: poly-

unsaturated fatty acids
• This food ingredient
helps to prevent
cardiovascular diseases
• Recommendation:
1 to 2g per day
• Main source today:
fish and algae
• Project target is to grow
PUFAs in oilseed rape
• Proof of concept
in model crop was
achieved

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 Output Trait Example: Carotenoids
Plants as Factories

Proof of Concept in Tomato (Model Plant)* • Carotenoids are used:

- To give salmon its
Carotenoid Tomato: typical pink color
- As pigments for food
and beverages
• We produce carotenoids
through classical
chemical synthesis
• The production in plants
Standard Tomato: is cost-efficient
• We have full IP
protection to gene
sequence
• We hold a strong
position in the
carotenoids market
(Fine Chemicals
Division)
• Carotenoid market in
2004: >650 million USD
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 Output Trait Example: Drought Tolerance
Agronomic Traits

• Drought-tolerant crops
Gene for Proof of Concept Next Step: will benefit growers all
Drought Tolerance in Model Plant Transform around the world
Identified Achieved Target Crop
• Proof of concept
Gene Gene in model crop was
Trans- Trans-
fer fer
achieved
• Target crops for
development are:
corn, soybean, wheat
and canola

Moss With Without

New New
Gene Gene

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 Input Trait Example: Nematodes

• Nematode (hair worms)

infection leads to major
yield losses in soybeans
• No efficient treatment
with conventional plant
protection possible
• Biotech solution: modify
soybean roots
Larvae • First lead genes
identified. Nematode
Population reduced by
up to 80% in test
systems

“Hairy Roots” from Soybean Feeding Nematode

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1 | Biotechnology & Markets

2 | Focus of BASF Strategy

3 | Research Platform

4 | Business Model

5 | Pipeline

6 | Beyond Green Biotechnology

 Exciting Additional Potential
from Metabolic Profiling

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 Exciting Additional Potential
from Metabolic Profiling

Major Benefits

Analysing the impact • Reduce need for animal testing

Toxicology of chemicals on • Recognize tox issues very early
metabolic profiles

Analysing the impact • Predict wide array of diseases at early

stage with simple blood or urine test
Diagnostics of diseases on • Gain time / reduce treatment costs /
metabolic profiles save lives

• Identify best active ingredient at

Develop products that
Product early stage (target activity & tox)
trigger the most • Accelerate development and reduce
Development
desirable profile cost

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 Potential Fields of Application

Toxicology

• Pharma
• Agrochemicals
Diagnostics
• Food Ingredients
• Cosmetic Ingredients

Product è In 2003, we founded Metanomics

Development Health GmbH in Berlin to access
these market opportunities

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 Key Messages Green Biotechnology

• We set the right strategic priorities early

• With metabolic profiling we have built an unparalleled
gene-discovery platform
• With this platform we believe we find better genes faster
and more efficiently than our competitors
• We have a strong early stage pipeline that will continue
to grow
• Our platform has opened up completely new
opportunities with great potential in other industries

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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 to
be 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 include
those 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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