Dow & BioDuro Enter Research Deal - Analyst Blog


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Dow AgroSciences LLC, a wholly owned subsidiary of The Dow Chemical Company ( DOW ), entered into a three-year research deal with PPD's China-based drug discovery company, BioDuro.

The collaboration aims to generate novel molecules for synthesizing and testing fungicides, insecticides and herbicides across a variety of crops. The companies did not disclose any financial terms of the agreement.

The two companies are expected to utilize BioDuro's expertise in medicinal chemistry and biochemistry and Dow AgroSciences' agrochemical capabilities in the collaboration aimed for an agrochemical discovery.

With the best research team of BioDuro, Dow AgroSciences intends to develop its research capabilities while providing its customers with innovative solutions. On the other hand, BioDuro aims to develop novel molecules with advanced research in the agrochemical industry.

Recently, Dow released its fourth-quarter 2011 results. The company earned 25 cents per share, missing the Zacks Consensus Estimate of 32 cents per share as well as earnings of 47 cents per share in the prior-year quarter. However, including one-time charges, the company reported a loss of 2 cents per share, compared with earnings of 37 cents per share in the year-ago quarter.

Though total revenue in the quarter inched up 2% to $14.1 billion, it was below the Zacks Consensus Estimate of $14.4 billion. Sales increased across all operating segments and geographic areas, except Electronic and Functional Materials. Volumes declined 3% year over year, but were flat excluding the impact of divestitures. For full-year 2011, sales increased 12% to $60 billion. 

Dow did not provide any financial guidance. However, the company anticipates that it will continue facing challenges from Western Europe in the near term.

The company did not forecast much improvement in market conditions for the first quarter of the year, but it has projected that economic recovery will gain momentum in the second quarter and the remainder of the year. The company expects to meet its short and long-term targets irrespective of the economic conditions.

The company expects its downstream, market-driven businesses to continue to capture value from improving North American feedstock dynamics. Dow expects ethylene industry operating rates to tighten over the next several years, driving margin expansion. The company will keep its focus on generating enough cash flow while repaying its shareholders and funding organic growth.

DOW faces stiff competition from EI DuPont de Nemours & Co. ( DD ), which released its fourth-quarter 2011 results on January 24, 2012 delivering earnings of 35 cents per share compared with 50 cents in the year-ago quarter.

Currently, DOW has a Zacks #3 Rank on its shares, which translates to a short-term (1 to 3 months) '"Hold' rating. However, we are maintaining a long- term (more than 6 months) "Neutral" recommendation on the shares.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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