(Rewrites throughout, updates Dow comments, adds analyst comments, adds seed company comments)
By Karl Plume
CHICAGO, Nov 25 (Reuters) - Dow Chemical Co expects environmental safety concerns about its new herbicide Enlist Duo to be resolved, the company said Wednesday, after the government asked a federal appellate court to pull regulatory approvals while the chemical's safety is re-examined.
The U.S. Environmental Protection Agency (EPA) approved Enlist Duo for sale and use in several U.S. states over a year ago. But the agency has since found its assessment of the product's two active ingredients was incomplete, according to EPA's court documents, filed late Tuesday with the U.S. Court of Appeals for the Ninth Circuit in California.
Enlist Duo is a new combination herbicide aimed at combating weeds that have become resistant to glyphosate -- a widely-used herbicide in the United States and the active ingredient of Monsanto Co's Roundup product.
Enlist Duo combines glyphosate with another herbicide, 2,4-D, and is meant for use on corn and soybeans that have been genetically altered to tolerate it.
The EPA wants to study the product further after it found that the company's Dow AgroSciences unit claimed the two active ingredients work better together, according to court documents. EPA said its study assumed the components did not have such "synergistic effects."
"The information suggests that EPA's analysis may have understated the phytotoxicity of the product," the EPA said in the court filing.
Dow Chemical said it has sent the EPA all of its data to provide further assurances for Enlist Duo. The company did not rule out changes to instructions for use on the existing product label.
Dow told Reuters on Wednesday it will respond to the EPA's petition by the court's Dec. 7 deadline and expects any questions to be resolved in time for U.S. farmers to use it next season.
The move by the EPA is tied to a lawsuit filed by U.S. farmer and environmental groups, who are trying to get the regulatory approval of Enlist Duo permanently overturned. The critics claim the EPA had not adequately analyzed the impact of 2,4-D before granting approval.
This current regulatory issue could create a problem for Dow and its plans to sell off its agribusiness division, at a time when mergers and acquisitions talk is roiling.
Dow said last month it would "review all options" for its farm chemicals and seeds unit, which has reported falling sales for nearly a year.
If new federal regulatory approvals for Dow's Enlist Duo are not eventually granted by the EPA, it could negatively impact Dow's EBITDA in 2020, Bernstein analyst Jonas Oxgaard wrote Wednesday, and reduce "the sales price of Dow ag by $2-$3 billion."
Regulatory delays could be a boon for Syngenta AG and Bayer CropScience, whose products compete against Enlist Duo, said Oxgaard.
Environmental groups cheered the EPA's move, as some research has linked the herbicide's component to declines in bee and butterfly populations and cancer risks in humans.
Seed companies that already have licensing agreements to use Enlist technology in their own products say they are unlikely to see much immediate impact.
Stine Seeds currently has no products on the market, said spokesperson David Thompson, while DuPont Pioneer ended a multiyear product development agreement with Dow in January, and does not have any seeds in the market containing Enlist technology, spokesperson Jane Slusark said.
Monsanto told Reuters its own next generation herbicide platform Xtend, which combines the herbicide dicamba with glyphosate, was unlikely to face similar problems.
"Monsanto's patent submissions have not made claims of synergistic activity between glyphosate and dicamba," Monsanto spokesperson Sara Miller said.
Dow Chemical's shares closed down 2.7 percent at $51.92 on Wednesday. (Additional reporting by Sneha Banerjee in Bengaluru and P.J. Huffstutter in Chicago.; editing by Sriraj Kalluvila and Diane Craft)