The New Bayer Seeks Life Sciences Heights


From DCAT Value Chain Insights (VCI)

By Patricia Van Arnum posted 05-17-2016 13:26

  

Having successfully floated its material sciences business, Covestro, Bayer is now positioned as a pure-play life sciences company with projected 2016 sales in its life sciences business of approximately EUR 35 billion ($40 billion). So what is behind the new Bayer? DCAT Value Chain Insights (VCI) takes an inside look.

Bayer took on a new corporate structure in January 2016 with three divisions: pharmaceuticals, consumer health, and crop science, and a separate business unit, animal health. So where does the company's pharmaceutical business stand, and how will the other pieces of its life sciences activities evolve? DCAT Value Chain Insights examines the latest.


Werner Baumann Chairman, Board of Management, Bayer AG
 

Dieter Weinand
Member, Board of Management, Bayer AG, and Head, Pharmaceuticals Division

The new Bayer
Bayer's focus on life sciences is being led by Werner Baumann, who became chairman of the board of management of Bayer AG on May 1, 2016, succeeding Marijn Dekkers. From October 1, 2014, until his appointment as chairman of the board of management, Baumann was chief strategy and portfolio officer and also responsible for the Europe, Middle East and Africa Region. Between April 2015 and the end of December 2015, Baumann was additionally chairman of the board of management of Bayer HealthCare AG. With the company's new corporate structure, effective in January 2016, the company also named new heads of its divisions. Beginning in January 2016, Dieter Weinand was named a member of the board of management of Bayer AG and head of the Pharmaceuticals Division, headquartered in Berlin, Germany. From August 1, 2014, until his appointment to the board of management of Bayer AG, Weinand was a member of the Bayer HealthCare Executive Committee and head of the Pharmaceuticals Division. On the board of management, he is also responsible for the region North America. Erica Mann was named a member of the board of management of Bayer AG and head of the Consumer Health Division, headquartered in Basel, Switzerland. Liam Condon was named a member of the board of management of Bayer AG and head of the Crop Science Division, headquartered in Monheim, Germany. He is also responsible for the Animal Health Business Unit.

Bayer's former MaterialScience subgroup, renamed Covestro, became legally and economically independent on September 1, 2015, and Covestro AG was floated on the stock market in October 2015. Bayer currently still owns around 69% of Covestro. 

With the new structure, Bayer's pharmaceuticals business is the largest piece of the new Bayer, accounting for nearly 45% of the company's total life sciences' revenues on a pro forma basis in 2015, followed by crop science (30%), consumer health (18%), and its animal health business unit (4%). In 2015, Bayer posted overall life sciences pro forma revenues of EUR 34.34 billion ($38.72 billion). Pharmaceuticals accounted for EUR 15.31 billion ($17.26 billion), crop science EUR 10.37 billion ($11.69 billion), consumer health EUR 6.08 billion ($6.85 billion), and animal health EUR 1.49 billion ($1.68 billion) .

The Pharmaceuticals Division focuses on prescription products, mainly consisting of women’s healthcare and cardiovascular health products; and specialty medicines in oncology, hematology, and ophthalmology. The division also comprises the radiology business, which markets diagnostic imaging equipment and contrast agents. In 2015, Bayer sold its diabetes care business to Panasonic Healthcare Holdings. 

The Consumer Health Division markets mainly nonprescription products in the dermatology, dietary supplement, analgesic, gastrointestinal, cold, allergy, sinus and flue, foot care, sun protection, and cardiovascular risk prevention categories. Bayer boosted its consumer healthcare business with two key acquisitions in 2014: the $14.2 billion acquisition of the consumer care business of Merck & Co. in 2014 and and the China-based consumer healthcare company Dihon Pharmaceutical.

The Crop Science Division has businesses in seeds, crop protection, and non-agricultural pest control and has two operating units: Crop Protection/Seeds and Environmental Science. The Animal Health Business Unit offers products and services for the prevention and treatment of diseases in companion and farm animals. There has media speculation that Bayer may be interested in pursuing an acquisition of Monsanto as part of its crop-protection strategy and divesting its animal health business. As of press time on May 18, no such moves had been announced. Note: Bayer later confirmed in a press statement on May 19 that it was in private discussions with Monsanto regarding a proposed acquisition. 

In 2015, Bayer's recently launched pharmaceutical products are the company's strongest growth drivers. Reported pharmaceutical sales increased 9.9% in 2015 to EUR 13.7 billion ($15.5 billion). Recently launched products--the anticoagulant Xarelto (rivaroxaban), the eye care medicine Eylea (aflibercept), the cancer drugs Stivarga (regorafenib) and Xofligo (radium 223 dichloride), and Adempas (riociguat), a drug to treat pulmonary hypertension, achieved combined growth of 42% in 2015 on a currency adjusted basis to EUR 4.2 billion ($4.7 billion). Table I outlines Bayer's top-selling products in 2015. 

Table I: Bayer Top-Selling Pharmaceutical Products
Product: Product (Proprietary Name) Percentage Change,
2015 over 2014
 2015 Sales    
Xarelto +34.1% EUR 2.252 Bn
($2.539 Bn)
Eylea+ +61.8% EUR 1.228 Bn
($1.385 Bn)
Kogenate +4.1% EUR 1.155 Bn
($1.302 Bn)
Mirena product family +18.2% EUR 968 M
($1.092 Bn)
Nexavar +15.4% EUR 892 M
($1.006 Bn)
Betaferon/Betaseron +0.1% EUR 824 M
 ($929 M)
Yaz/Yasmin/Yasminelle -8.1% EUR 706 M
 ($796 M)
Adalat +7.7% EUR 633 M
($714 M)
Aspirin Cardio +7.8% EUR 524 M
($591 M)
Glucobay +18.1% EUR 523 M
($590 M)
Avalox/Avelox -0.5% EUR 379 M 
($428 M)
Stivarga +39.7%

EUR 313 M
($353 M)

Xofigo +63.7% EUR 257 M
 ($290 M)
Levitra -7.8%    EUR 226 M 
($255 M)  
Cipro/Ciprobay -4.7% EUR 182 M
($205 M)
Bn is billions; M is millions. Currency exchange as of May 18, 2015 (1 EUR = $1.127)
Source: Bayer AG/Bayer Healthcare

In addition to striking a deal with Merck & Co. for its consumer care business of Merck in 2014, Bayer also formed a collaboration with Merck in prescription drugs in the field of soluble guanylate cyclase (sGC) modulators. Bayer plans to strengthen its development options in its cardiology business with the global co-development and co-commercialization agreement, which has already been approved by the relevant antitrust authorities. Merck & Co., Inc. will make payments of up to $ 2.1 billion to Bayer. These include an up-front payment of $1 billion, which is to be paid shortly after completion as well as revenue-based milestone payments of up to $1.1 billion for future combined sales of certain jointly developed substances, including the pulmonary hypertension treatment Adempas (riociguat).

Bayer: recent manufacturing investment
On the manufacturing front in its pharmaceutical business, key production sites for Bayer are in: Bergkamen, Germany (active ingredient production); Berkeley, California (active ingredient production based on biotechnology); Berlin, Germany (formulation and packaging); Leverusen, Germany (formulation and packaging); Turku, Finland (formulation and packaging of intrauterine systems); Weimar, Germany (formulation and packaging); and Wuppertal, Germany (active ingredient production). 

In 2014, Bayer announced an investment of more than EUR 500 million ($564 million) at its sites in Wuppertal and Leverkusen, Germany, Bayer will establish additional capacities for the manufacturing of the recombinant factor VIII (rFVIII) hemophilia products that are currently in development. The investigational therapy options for hemophilia patients, a plasma protein-free rFVIII (BAY 81-8973) and a long-acting rFVIII (BAY 94-9027), are both currently in clinical trials.. As part of this investment Bayer will create about 500 new jobs at its sites in Leverkusen and Wuppertal by the year 2020.

The investigational plasma protein-free product BAY 81-8973 is an upgrade of the currently marketed Kogenate FS/Kogenate Bayer product and will be produced without the addition of any components of animal or human origin. Bayer’s approved hemophilia A therapy product Kogenate FS/Kogenate is manufactured exclusively in Berkeley, California. Establishing an additional supply source in Germany will help the company to prepare for production of the anticipated new therapy options and address the growing demand in this therapeutic area, according to the company.

Also, in 2014, Bayer HealthCare announced it will invest around EUR 100 million ($113 million) to increase the production capacity of its plant in Beijing, China, in preparation for further demand of its products in the country. The planned capacity expansion is designed to ensure a reliable supply of products to meet the domestic demand for Bayer  products, including the company’s cardiovascular and anti-diabetes products. The expansion will include logistics areas for fully automated material handling, analytical laboratories, and high-speed packaging lines.

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