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Bayer 2018: Acquisition achieved

Written by: | chris.truelove@medadnews.com | Dated: Tuesday, October 23rd, 2018

 

With U.S. antitrust approval of Bayer’s acquisition of Monsanto, the company is looking ahead.

 

 

 

 

 

Bayer AG
51368 Leverkusen, Germany
Telephone: +49 214 30-1
Website: bayer.com

 

Best-Selling Rx Products

Product 2017 Sales 2016 Sales
Xarelto    $3,727 $3,309
Eylea    $2,125 $1,836
Mirena  $1,272 $1,179
Kogenate, Kovaltry  $1,093 $1,318
Nexavar    $943 $983
Betaseron/Betaferon $736 $829
Adalat    $732 $705
Yasmin, Yaz,   
Yasminelle
$732 $766
Aspirin Cardio    $657 $608
Glucobay    $636 $582

All sales are in millions of dollars and were translated
using the Federal Reserve Board’s average rate of
exchange in 2017: EUR 1.1301 = $1.00

Financial Performance

  2017 2016
Revenue $39,570 $39,489
Net income $9,147 $5,454
Diluted EPS $9.50 $6.15
R&D expense $5,090 $4,978
  1H 2018 1H 2017
Revenue $21,041 $20,787
Net income $3,118 $4,236
Diluted EPS $3.46 $4.23
R&D expense $2,600 $2,476

All figures are in millions of dollars,
except EPS, and were translated using
the Federal Reserve Board’s average rate
of exchange in 2017: EUR 1.1301 = $1.00

 

 

2017 was a year of ups and downs, according to Bayer CEO Werner Baumann. But the second half of 2018 saw the company achieve its objective of acquiring the agricultural company Monsanto.

“We saw many advances, but also experienced setbacks,” Baumann says. “We received new approvals, formed new collaborations and celebrated encouraging successes. But we also had to deal with unexpectedly high inventories in our Crop Science Division in Brazil and with the weak business development of our Consumer Health Division, which meant we had to adjust our guidance during the year.”

CEO Werner Baumann: “Clear focus and long-term perspective – that is the way we run our company.”

Overall, sales and earnings in 2017 “remained only on a par with 2016,” Baumann says.

One of the things affecting Bayer’s 2017 share price and earnings was the then-impending acquisition of the crop science company Monsanto. The transaction was finally completed June 7, 2018, for $63 billion dollars including debt.

“The acquisition of Monsanto brings together two strong and highly complementary businesses: Bayer’s innovative chemical and biological crop protection portfolio and Monsanto’s exceptional expertise in the field of seeds and traits,” Baumann says. “We are now a leader in the agricultural industry with a clear commitment to innovation and sustainability – for the benefit of our customers and society.”

According to executives, in addition to leveraging the company’s employees’ extensive expertise in agriculture, Bayer now also has the strongest portfolio of seed and crop protection products for a wide range of crops and indications, the best research and development platform, and the leading digital farming business.

In 2017, Bayer also benefited from the long-term realignment across the rest of its portfolio, Baumann says. “Since the IPO of Covestro in October 2015, we have been aiming to sell our shares step by step and to achieve full separation from Covestro in the medium term.”

During 2017, Bayer reduced its direct interest in Covestro from 64.2 percent to 24.6 percent, generating cash inflows of around €4.7 billion ($5.3 billion). “Bayer’s strategic foresight has proved successful and we also have had a lucky hand,” Baumann says.

Even with the attention paid to the Monsanto acquisition, Bayer has not ignored the company’s human healthcare aspect. In November 2017, Bayer reached another long-term decision by in-licensing two development candidates from Loxo Oncology. Larotrectinib (product code LOXO-101) and LOXO-195 are being investigated in global studies for the treatment of patients with cancers harboring tropomyosin receptor kinase (TRK) gene fusions, which are genetic alterations across a wide range of tumors resulting in uncontrolled TRK signaling and tumor growth.

“Both these candidates complement our existing oncology portfolio,” Baumann says. “Moreover, it shows that we are keeping our word because we have always emphasized that we will continue to invest in our other businesses regardless of the acquisition of Monsanto.”

Baumann asserts that Bayer is run through “clear focus and long-term perspective.”

“We have aligned our business activities to the main societal challenges in the fields of health and nutrition, and we are convinced that we are able to provide substantial and sustainable solutions, based on the highest standards and our responsibility to humankind and the environment,” he says.

Bayer’s corporate purpose, “Science for a better life,” conveys the company’s aspiration. “It is an aspiration that brings us together across borders and business activities,” Baumann says.

The company aims to address societal challenges such as the increased illnesses of aging populations through research and innovation. “Our Pharmaceuticals Division has dedicated itself to this task and also made progress in 2017,” Baumann says.

 

Financial & product performance

Bayer achieved total sales of €35.02 billion ($39.57 billion) in 2017, slightly more than in 2016. Income after income taxes for 2017 totaled €8.09 billion ($9.15 billion) and diluted earnings per share were €8.41 ($9.50). The company spent €4.5 billion ($5.09 billion) on R&D in 2017, 2.2 percent more than in 2016.

In the first half of 2018, the company achieved revenue of €18.62 billion ($21.04 billion), 1.2 percent more than in the same period last year. Income after income taxes was €2.76 billion ($3.12 billion) compared to €3.75 billion ($4.24 billion) during first-half 2017. Diluted earnings per share from continuing and discontinued operations were €3.06 ($3.46) versus €3.74 ($4.23) in the same period last year. R&D expenses totaled €2.3 billion ($2.6 billion), 5 percent more than in the first half of the previous year.

The Pharmaceuticals Division achieved 2017 sales of €16.85 billion ($19.04 billion), 2.6 percent more than in 2016. Executives say this performance was driven by another significant increase in sales of Bayer’s key growth products Xarelto, Eylea, Xofigo, Stivarga, and Adempas, which advanced by more than 16 percent to over €6 billion ($6.78+ billion). “This is a very encouraging development,” Baumann says.

First-half 2018 Pharmaceuticals sales were €8.3 billion ($9.37 billion), 3.2 percent less than in first-half 2017.

Bayer’s top 10 pharmaceutical product lines in 2017 sales were Xarelto; Eylea; Mirena; Kogenate and Kovaltry; Nexavar; Betaseron/Betaferon; Adalat; Yasmin, Yaz and Yasminelle; Aspirin Cardio; and Glucobay.

The Mirena product family of birth-control devices recorded sales of €1.13 billion ($1.27 billion) in 2017, 8 percent more than in 2016.

The blood thinner Xarelto achieved sales of €3.3 billion ($3.73 billion), an increase of 12.6 percent from the previous year. In the first half of 2018, the product generated €1.71 billion ($1.93 billion), an increase of 7.6 percent from first-half 2017. Executives say sales in the 2018 period were driven by higher volumes in Europe, Japan, and China, as well as increased license revenue in the United States from partner J&J.

Eylea, for treating age-related macular degeneration and diabetic macular edema, had 2017 sales of €1.88 billion ($2.13 billion), 15.7 percent more than in 2016. Eylea sales in the first half of 2018 reached €1.04 billion ($1.18 billion), 15.5 percent more than in the same period last year. The increase in first-half 2018 was primarily due to expanded volumes in Europe, Japan, as well as the product’s differentiated clinical profile.

The intrauterine birth control product known as Mirena generated €1.13 billion ($1.27 billion) in 2017, 8 percent more than in 2016. Mirena product family sales in the first half of 2018 amounted to €593 million ($670 million), slightly more than the total in first-half 2017.

Next in 2017 sales were the hemophilia products Kogenate and Kovaltry, which generated a combined €967 million ($1.09 billion), 17.1 percent less than in 2016. Sales in first-half 2018 totaled €427 million ($483 million), 20.2 percent less than in the same period last year.

The cancer drug Nexavar produced 2017 sales of €834 million ($943 million), a decrease of 4.1 percent versus the 2017 performance. Sales in first-half 2018 fell to €355 million ($401 million), down 18.6 percent from same-time 2017. The product has experienced intensified competitive pressure in the U.S. and Japan, which is weighing on performance.

Intensified competitive pressure pushed down 2017 sales of the cancer drug Nexavar to €834 million ($943 million).

The multiple sclerosis drug Betaseron/Betaferon was the company’s sixth best-selling product in 2017, with sales of €651 million ($736 million), 11.3 percent less than in 2016. First-half 2018 sales continued to exhibit a decline, dropping to €272 million ($307 million), 23.6 percent less than in the same period last year. Company executives say the decline was mainly due to the competitive U.S. market environment.

Adalat, for treating hypertension, was Bayer’s seventh best selling drug in 2017. The product recorded €648 million ($732 million) in sales, 3.8 percent more than in 2016. Sales in first-half 2018 were €341 million ($385 million), a 1.2 percent year-over-year decrease.

The Yasmin, Yaz and Yasminelle family of oral contraceptives shared the same sales performance as Adalat in 2017 at €648 million ($732 million), 4.4 percent less than in 2016. In first-half 2018, these products generated €311 million ($351 million), 5.2 percent less than in the same period during 2017.

Aspirin Cardio generated 2017 sales of €581 million ($657 million), 8 percent more than in 2016. First-half 2018 sales of €287 million ($324 million), were down 5.9 percent.

The diabetes drug Glucobay generated sales in 2017 of €563 million ($636 million), 9.3 percent more than in 2016. In the first half of 2018, the product recorded sales of €319 million ($361 million), 7.4 percent more than in the same period of last year. Bayer executives say the 2018 performance was driven by expanded volumes in China.

In September, Bayer announced a change in leadership for the Pharmaceuticals business, when the Supervisory Board appointed Stefan Oelrich to the company’s board of management. He succeeds Dieter Weinand as head of the Pharmaceuticals Division as of Nov. 1, 2018. Weinand is leaving the company for family reasons. Oelrich was a member of the executive committee of Sanofi with responsibility for the global diabetes and cardiovascular business. He previously had a long career in Bayer’s Pharmaceuticals business.

Bayer’s Consumer Health business reported 2017 sales of €5.86 billion ($6.62 billion), 2.9 percent less than in 2016. Executive say the company is addressing “long-term developments” with the division.

“There is a trend toward self-care, which is being further strengthened by individualization and digitalization,” Baumann says. “People are becoming more aware of the importance of exercise and preventive medicine, and are realizing that they need to do something for their own health.”

Although the Consumer Health business is well-positioned to address this trend, 2017 was still a difficult year operationally, executives say. “Competition in the United States in particular has had an impact on our business, as has a regulatory decision taken in China,” Baumann says.

During the first six months of 2018, Consumer Health sales totaled €2.82 billion ($3.19 billion), 10.2 percent less than in the first half of 2017.

The division’s leading product is the OTC antihistamine Claritin. Sales totaled €585 million ($661 million) in 2017, down 3.3 percent, which management attributed to intensified competition in the United States and Japan. However, sales developed positively in China.

In the first half of 2018, Claritin sales fell 12 percent year-over-year to €307 million ($347 million). According to Bayer, the decline was driven by a change in ordering behavior in China and a significantly late start to the U.S. season.

Bayer’s trademark OTC Aspirin generated €462 million ($522 million) in 2017, about the same amount as in 2016. First-half 2018 sales were €202 million ($228 million), 8.6 percent less than during first-half 2017. The 2018 performance was due primarily to anticipated temporary supply disruptions.

2017 sales of the Bepanthen/Bepanthol line of wound and skin care products grew 4.7 percent to €379 million ($428 million). Bayer execs attributed the lift to “gratifying” sales gains particularly in Europe/Middle East/Africa, and especially in Germany. First-half 2018 sales grew 1 percent compared with the same period in 2017, reaching €197 million ($223 million).

Sales of the analgesic Aleve declined 9.9 percent in 2017 to €375 million ($424 million), which executives attributed to intense competition in the United States. In the first half of 2018, Aleve sales were €169 million ($191 million), 7.7 percent less than in first-half 2017.

Sales in 2017 of the Canesten line of skin and intimate health products grew 3.3 percent to €278 million ($314 million), a development that was mainly attributable to a positive business performance in China and the United Kingdom. First-half 2018 sales came in at €121 million ($137 million), 16 percent less than in the first half of the previous year.

The Alka-Seltzer product family’s 2017 sales declined 3.6 percent against the previous year, to €244 million ($276 million). In the first half of 2018, sales were €93 million ($105 million), 18.4 percent less than in first-half 2017.

Sales of One A Day vitamins were €222 million ($251 million) in 2017, the same as in 2016. Sales in first-half 2018 were €96 million ($108 million), 12.7 percent less than in the same period last year.

Sales of Dr. Scholl’s foot care products declined 10.2 percent in 2017 to €211 million ($238 million). Management says this was due to the repositioning of the brand, and the success that followed this move was not sufficient to fully offset the associated inventory reduction. First-half 2018 sales were €103 million ($116 million), 3.7 percent less year-over-year.

Sales of Coppertone sunscreen were 5 percent lower in 2017, to €208 million ($235 million), primarily as a result of intensified competition in the United States and Brazil. First-half 2018 sales totaled €157 million ($177 million), down 13.7 percent due to the late start to the suncare season and the persistently intensive competitive pressure in the United States.

The prenatal vitamin Elevit generated 2017 sales of €189 million ($214 million), up 8.3 percent from 2016 due mainly to steady demand in Asia/Pacific. Elevit’s sales in the first half of this year were €104 million ($118 million), 8.3 percent more than in the same 2017 period, due to the Asia/Pacific demand.

To focus on the company’s core OTC business, Bayer signed an agreement on July 27, 2018, to divest the Consumer Health prescription dermatology business to LEO Pharma A/S. The business is being transferred in two steps: on Sept. 4, 2018, for the United States, and in the second half of 2019 for all other markets. The portfolio being divested comprises prescription brands including Advantan, Skinoren, and Travocort. The purchase price amounts to €58 million ($66 million) for the U.S. business and €555 million ($627 million) for the rest of the global business.

In another move to bolster the business, in August 2018 Bayer appointed Patrick Lockwood-Taylor as regional president, Consumer Health, North America. Lockwood-Taylor was CEO of The Oneida Group, and before that role, he was VP of Personal Health Care North America and Global Digestive Wellness at Procter & Gamble.

“Patrick has a passion for innovation and an understanding of how to meet the needs of consumers and customers to accelerate growth,” says Heiko Schipper, a member of Bayer’s Board of Management and president of Consumer Health. “His diverse experience, proven track record of collaborating with retail partners and leadership in times of change make him ideally suited to lead our important North American business in a time of unprecedented industry change.”

Lockwood-Taylor succeeds Natalie Bartner. He reports directly to Heiko Schipper and is a member of the Consumer Health Executive Committee.

Company executives say business development in Bayer’s Crop Science Division in 2017 was shaped by the difficult situation in Brazil, where several factors led to unexpectedly high inventories of crop protection products. Sales were €9.58 billion ($10.82 billion), 3.4 percent less than in 2016. In first-half 2018, sales were €5.87 billion ($6.64 billion), 11.1 percent more than in first-half 2017. This was mainly to a positive portfolio effect of 10.3 percent, or €543 million ($614 million), from the Monsanto acquisition.

According to Bayer management, the Animal Health business delivered a positive performance during 2017 with sales of €1.57 billion ($1.78 billion), 3.2 percent more than the 2016 result. In first-half 2018, sales amounted to €867 million ($980 million), 2.6 percent less year-over-year.

 

R&D and pipeline progress

“Having a long-term perspective also means continuously investing in the future,” Baumann says. “Our company has kept investment at a high level, spending €4.5 billion on research and development in 2017.”

According to Baumann, the company’s Pharmaceuticals Division made progress in 2017. For example, in February, a Phase III clinical trial involving rivaroxaban – the active ingredient in Xarelto – in combination with Aspirin was ended ahead of schedule due to the drug’s outstanding efficacy. “This combination can substantially reduce the risk of serious diseases such as heart attack or stroke,” Baumann says.

Bayer has continued advancing the pharmaceutical pipeline in 2018. In August, Bayer announced that FDA approved Jivi (BAY94-9027, antihemophilic factor [recombinant] PEGylated-aucl) for the routine prophylactic treatment of hemophilia A in previously treated adults and adolescents 12 years of age or older. The initial recommended prophylactic regimen for Jivi is twice weekly with the ability to dose every five days and further individually adjust to less or more frequent dosing based on bleeding episodes. The FDA also approved Jivi for on-demand treatment and the perioperative management of bleeding in the same population. This approval is based on results from the Phase 2/3 PROTECT VIII trial, which demonstrated bleed protection and safety of up to a median of 1.9 years (range of 0-2.6 years). Jivi is the third FDA-approved hemophilia A treatment in Bayer’s Hematology portfolio.

“As a physician who treats hemophilia A patients with a range of individualized needs, Jivi’s approved dosing allows me to adjust frequency based on their bleed episodes to maintain protection from bleeds, which is a serious concern among patients,” says Mark Reding, M.D., PROTECT VIII lead investigator and associate professor of medicine at the University of Minnesota. “Jivi is a welcome option that addresses a growing patient need to integrate treatment with personal lifestyles.”

Jivi works by replacing the reduced or missing factor VIII (FVIII) in adults and adolescents 12 years of age or older with hemophilia A. Through the drug’s site-specific PEGylation, Jivi has a half-life of 17.9 hours that delivers sustained levels in the blood.

Bayer submitted marketing authorization applications for BAY94-9027 for the treatment of hemophilia A in the European Union and Japan. In September, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency recommended BAY94-9027 for the marketing authorization for the treatment and prophylaxis of bleeding in previously treated patients 12 years of age or older with hemophilia A. The product also received approval in Japan.

In August, the European Commission approved a regimen of Xarelto 2.5 mg twice daily plus acetylsalicylic acid (75-100 mg once daily) for the prevention of atherothrombotic events in adult patients with coronary artery disease (CAD) or symptomatic peripheral artery disease (PAD) at high risk for ischemic events. The first country where Xarelto is planned to become available for these patients is Germany.

Bayer’s top-selling medicine Xarelto in 2017 generated €3.3 billion ($3.73 billion), an increase of 12.6 percent from the previous year.

The EU approval is based on data from the Phase III COMPASS study, which showed that rivaroxaban vascular dose, 2.5 mg twice daily, plus ASA 100 mg once daily reduced the risk of the composite of stroke, cardiovascular death and heart attack by 24 percent (relative risk reduction) compared with acetylsalicylic acid 100 mg once daily alone in patients with CAD or PAD.

In May 2018, Bayer announced that FDA accepted the new drug application (NDA) submitted by the company’s collaboration partner Loxo, and granted Priority Review for larotrectinib for the treatment of adult and pediatric patients with locally advanced or metastatic solid tumors harboring a neurotrophic tyrosine receptor kinase (NTRK) gene fusion. The FDA set a target action date of Nov. 26, 2018, under the Prescription Drug User Fee Act (PDUFA).

“TRK fusion cancer is not limited to any organ or site of the body and occurs in both adults and children,” says Scott Fields, M.D., senior vice president and head of oncology development at Bayer’s Pharmaceutical Division. “The Priority Review designation for larotrectinib may help bring this treatment option to patients, facing a high unmet medical need, as soon as possible.”

The investigational TRK inhibitor arotrectinib is undergoing clinical development for the treatment of patients with cancers that harbor a neurotrophic tyrosine receptor kinase gene fusion. Growing research suggests that the NTRK genes can become abnormally fused to other genes, producing a TRK fusion protein that can lead to the development of solid tumors across multiple sites of the body.

In August, the European Commission approved a new treatment approach for Eylea to enable clinicians to combine proactive treatment with early extension of the injection interval for patients with neovascular age-related macular degeneration (nAMD). The new regimen allows clinicians already in the first year of treatment to extend patients’ individual injection intervals based on visual and/or anatomic outcomes.

The new approach is based on results from the ALTAIR study, in which after 52 weeks, 57 percent of patients had their next regularly scheduled Eylea injection at an interval of 12 weeks or more. Treatment intervals up to 16 weeks between injections have been studied. Patients participating in the study gained an average of up to 9.0 letters, including 50 percent of participants who gained 10 or more letters of vision at week 52, as measured on the Early Treatment Diabetic Retinopathy Study (ETDRS) eye chart. These results were largely maintained during the second year, demonstrating the sustainability of this proactive approach.

“Neovascular age-related macular degeneration can have a devastating impact on a patient’s life beyond the vision loss it causes,” says Dr. Michael Devoy, head of Medical Affairs & Pharmacovigilance of Bayer’s Pharmaceuticals Division and Bayer chief medical officer. “This new treatment regimen for Eylea has the potential to reduce the number of injections and clinic visits to less than four in the second year for certain neovascular AMD patients, while still maintaining strong visual outcomes and the ability to see, this means that patients can spend more time doing what matters to them.”

The company has also been expanding its presence in the China market. In July, Bayer received approval in China for Kovaltry for the treatment of children and adults with hemophilia A. In June, Eylea was approved by the Chinese regulatory authorities for the treatment of visual impairment due to neovascular (wet) age-related macular degeneration (wAMD). This is the second indication for Eylea to be approved in China following the February decision to approve the drug for treating visual impairment due to diabetic macular edema.

The wet AMD treatment Eylea – one of Bayer’s key growth prescription drugs – generated 2017 sales of €1.88 billion
($2.12 billion).

Bayer has broadened some research partnerships. In June 2018, the company expanded a strategic alliance with Broad Institute of MIT and Harvard by launching the joint Precision Cardiology Laboratory. The laboratory will pursue novel scientific insights to enable the development of new therapies for patients with cardiovascular diseases such as heart failure.

“The Broad Institute is an important and strategic partner for Bayer enabling us to deepen our understanding in the area of cardiovascular diseases and we are looking forward to extending our collaboration even further,” says Dr. Joerg Moeller, a member of the executive committee of Bayer’s Pharmaceuticals Division and head of Research and Development. “Joint laboratories are a novel partnering model for industry and academia and will bring Bayer and Broad Institute cardiovascular research to the next level.”

Located at the Broad Institute in Boston, the Precision Cardiology Laboratory will bring scientists from both organizations into one laboratory working side by side, enabling the joint team to faster translate concepts from the lab into clinical trials and bring new therapeutic treatments to patients more quickly than traditional research partnerships. The Precision Cardiology Laboratory’s goal is to develop high-resolution, single-cell maps of cardiovascular tissues in human and animal models. Using tissue samples donated by healthy individuals as well as people suffering from cardiovascular disease, researchers will build datasets to accelerate insights into heart failure.

Additionally in June, Bayer and MD Anderson Cancer Center announced a collaboration for the development of novel cancer treatments. The goal of the five-year collaboration agreement is to accelerate the development of novel targeted treatments based on patient or tumor characteristics for which current therapies have not shown satisfactory clinical efficacy. Bayer will contribute early stage as well as clinical assets from its development pipeline for further clinical development at MD Anderson Cancer Center. The MD Anderson Cancer Center will bring in its translational and clinical expertise to help accelerate ongoing and future clinical trials.

 

Withdrawal of Essure from U.S.

Bayer has voluntarily discontinued U.S. sales of Essure for business reasons, as announced in July 2018. Executives say this decision is based on a decline in U.S. sales of Essure in recent years and the conclusion that the Essure business is no longer sustainable. Essure is the only FDA-approved non-incisional form of permanent birth control.

“The benefit-risk profile of Essure has not changed, and we continue to stand behind the product’s safety and efficacy, which are demonstrated by an extensive body of research, undertaken by Bayer and independent medical researchers, involving more than 200,000 women over the past two decades,” company leadership states.

According to Bayer, several factors have contributed to declining interest in Essure among women in the United States including decreased use of permanent contraception overall, increased reliance on other birth control options such as long-acting reversible contraceptives (LARCs), and “inaccurate and misleading publicity about the device.”

“The health and safety of the patients who rely on our products is our top priority,” Bayer executives say. “Most importantly, we want to let the many women who have chosen Essure for their reproductive health know that our decision to discontinue sales is for business reasons, and not for any safety or efficacy concerns about Essure. Essure’s safety profile has remained consistent over time. Women who currently have Essure in place may continue to confidently rely on the device, and Bayer will continue to support women with Essure and their healthcare providers.”

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