Summary

• Bayer AG is a German multinational pharmaceutical and life sciences company.
• The company operates in over 100 countries worldwide and employ over 100,000 people.
• R&D expenses amounted to 6.2 billion euros.
• Bayer AG is the parent company of the Bayer Group

Bayer AG (US OTC: BAYRY, XE:BAYN) is a German multinational pharmaceutical and life sciences company with core competencies in healthcare and agriculture. They operate in over 100 countries worldwide and employ over 100,000 people.

Recent Developments

Bayer introduces agricultural system for direct-seeded rice.¹

October 16, 2023; Bayer announced the introduction of its direct-seeded rice (DSR) system at the 6th International Rice Congress in Manila. Moving from transplanted puddled rice cultivation to direct-seeded rice can help farmers to reduce water use by up to 40 percent, greenhouse gas emissions (GHG) by up to 45 percent and reduce farmers’ dependence on scarce and costly manual labor by up to 50 percent. The introduction of the DSR system is fully in line with Bayer’s recently announced approach to regenerative agriculture which will enable farmers to produce more while restoring more.

Driven by these advantages, DSR has the potential to be transformational with 75 percent of total rice fields in India expected to switch to this cultivation method by 2040, in comparison to roughly 11 percent today. By 2030, Bayer plans to bring the DSR system to one million hectares in India, supporting over two million early-adopter smallholder rice farmers through its DirectAcres program.

Already underway, DirectAcres has seen considerable success with 99 percent of indian farmers achieving successful plant establishment and 75 percent a higher return on investment compared to rice grown using the conventional transplanted method. Bayer plans therefore to introduce DirectAcres in other rice growing countries in Asia Pacific, starting with the Philippines in 2024.

Bayer to partner with Twist Bioscience to accelerate drug discovery.²

October 5, 2023; Bayer AG has entered into an antibody discovery, option, and license agreement with Twist Bioscience Corporation, a company offering high-quality synthetic DNA using its silicon platform.

The company’s “Library of Libraries”, a collection of synthetic antibody libraries that harness innovative structural and developability features to cover a wide range of antibody drug targets, is tailored to address specific challenges in antibody discovery.

It has the potential to increase the probability of success of antibody discovery programs across indications and focus areas.

Under the terms of the agreement, Twist will receive payments connected with the initiation of research and will be eligible to receive fees associated with research activities. The antibody leads discovered under the collaboration that enter clinical development qualify for certain success-based clinical and commercial milestone payments as well as royalties from product sales. In total, Twist is eligible to receive up to USD 188 million in clinical and commercial milestone payments plus royalties. In return, Bayer receives exclusive rights to license the antibodies for commercialization in all global territories.

Financial Highlights

Third Quarter 2023 Results

Group sales came in at €10,342 million in the third quarter of 2023 (Q3 2022: €11,281 million; reported: –8.3%), and were therefore in line with the prior-year period on a currency- and portfolio-adjusted basis (Fx & portfolio adj.; –0.2%). There was a negative currency effect of €742 million (Q3 2022: positive currency effect of €940 million). Sales in Germany amounted to €512 million (Q3 2022: €576 million).³

EBITDA before special items

Group EBITDA before special items decreased by 31.3% to €1,685 million. This figure included a negative currency effect of €31 million (Q3 2022: €78 million). Crop Science registered a decline in EBITDA before special items that was mainly due to the fall in prices for its glyphosate-based products. Earnings were also diminished by a mainly inflation-related increase in the cost of goods sold. EBITDA before special items at Pharmaceuticals decreased, mainly due to the product mix and higher R&D expenses after adjusting for currency effects, special items and depreciation/amortization/impairments. Consumer Health recorded a decline in EBITDA before special items that was primarily driven by currency effects. The Group EBITDA margin before special items came in at 16.3%.

Depreciation, amortization and impairments

Depreciation, amortization, impairment losses and impairment loss reversals led to net expenses of €4,930 million (Q3 2022: €1,097 million). Of this amount, intangible assets accounted for amortization, impairment losses and impairment loss reversals of €4,481 million (Q3 2022: €679 million), and property, plant and equipment accounted for depreciation, impairment losses and impairment loss reversals of €449 million (Q3 2022: €418 million). The company recorded net impairment losses of €4,025 million (Q3 2022: €169 million), of which €3,978 million (Q3 2022: €147 million) was attributable to intangible assets. Due to a sharp rise in capital market interest rates, it became necessary to conduct impairment testing. This resulted in the recognition of noncash impairment losses of €3,951 million on intangible assets in the Crop Science Division due to interest rates.

A total of €3,954 million in impairment losses, net of impairment loss reversals, was recorded as special charges (Q3 2022: special gains of €3 million).

EBIT and special items

EBIT of the Bayer Group came in at minus €3,594 million (Q3 2022: €1,199 million). This figure included net special charges of €4,303 million (Q3 2022: €153 million) that mainly related to the impairment losses in the Crop Science Division mentioned above and were primarily allocated to the line item Other operating expenses. EBIT before special items decreased by 47.6% to €709 million (Q3 2022: €1,352 million).

Net income

After a financial result of minus €703 million (Q3 2022: minus €598 million), income before income taxes amounted to minus €4,297 million (Q3 2022: €601 million). The deterioration of the financial result was largely due to higher interest expense as a result of rising interest rates. After income tax expense of €280 million (Q3 2022: €49 million) and accounting for noncontrolling interest, net income amounted to minus €4,569 million (Q3 2022: €546 million).

Core earnings per share decreased by 66.4% to €0.38 (Q3 2022: €1.13), mainly due to the decline in earnings at the Crop Science Division.

Full Year 2020 Results

Sales of the Bayer Group rose to €50,739 million. Sales at Crop Science advanced by 15.6% (Fx & portfolio adj.) to €25,169 million, with business up in all regions. The company registered double-digit percentage gains in Latin America and Europe/Middle East/Africa, and also posted significant growth in North America and Asia/Pacific. Sales at Pharmaceuticals rose by 1.1% (Fx & portfolio adj.) to €19,252 million. Strong performance by Eylea™, its radiology business and the new products Nubeqa™ and Kerendia™ offset declines due to factors such as additional tender procedures in China. Sales at Consumer Health advanced by 8.4% (Fx & portfolio adj.) to €6,080 million, with gains registered in all regions and categories. In particular, the business with cough and cold products benefited from continuously elevated cold incidence rates following the lifting of protection and hygiene measures, as well as the return of mobility. In the Reconciliation, sales increased by 2.9% to €238 million.

EBITDA came in at €13,515 million in 2022 (2021: €6,409 million). Depreciation, amortization, impairment losses and impairment loss reversals led to net expenses of €6,503 million (2021: €3,056 million), with intangible assets accounting for €4,691 million (2021: €1,482 million) and property, plant and equipment for €1,812 million (2021: €1,574 million). Impairment losses and impairment loss reversals led to net expenses of €2,554 million (2021: net gains of €684 million), with intangible assets accounting for an expense of €2,332 million (2021: gain of €741 million).

EBIT before special items rose by 26.9% to €9,257 million (2021: €7,295 million). EBIT amounted to €7,012 million (2021: €3,353 million) after net special charges of €2,245 million (2021: €3,942 million) that were mainly attributable to the aforementioned impairment losses and impairment loss reversals recorded at the Crop Science Division. Core earnings per share were up significantly year on year, at €7.94 (2021: €6.51; +22.0%), driven by the strong earnings contribution from the Crop Science Division.

Business Segments

Crop Science is the world’s leading agriculture enterprise, with businesses in crop protection, seeds and traits, and digital farming. The company offer a broad portfolio of high-value seeds, improved plant traits, innovative chemical and biological crop protection products, digital solutions and extensive customer service for sustainable agriculture. The company market these products primarily via wholesalers and retailers or directly to farmers. In addition, the company market pest and weed control products and services to professional users outside the agriculture industry. Most of its crop protection products are manufactured at the division’s own production sites. Numerous decentralized formulation and filling sites enable the company to respond quickly to the needs of local markets. The breeding, propagation, production and/or processing of seeds, including seed dressing, take place at locations close to its customers, either at its own facilities or under contract.

Pharmaceuticals concentrates on prescription products, especially for cardiology and women’s healthcare, and on specialty therapeutics focused on the areas of oncology, hematology, ophthalmology and, in the medium term, cell and gene therapy. Bayer has established a strategic unit for cell and gene therapy spanning the entire value creation chain – from research and development to marketing and patients. The division also comprises the radiology business, which markets diagnostic imaging equipment and digital solutions together with the necessary contrast agents. The company's portfolio includes a range of key products that are among the world’s leading pharmaceuticals for their indications. The prescription products of its Pharmaceuticals Division are primarily distributed through wholesalers, pharmacies and hospitals.

Consumer Health is a leading supplier of nonprescription (OTC = over-the-counter) medicines, nutritional supplements, medicated skincare products and other self-care solutions in the categories of pain, cardiovascular risk prevention, dermatology, digestive health, allergy, and cough & cold. The products are generally sold by pharmacies and pharmacy chains, supermarkets, online retailers and other large and small retailers.

Company Overview

Bayer is a life science company and a global leader in healthcare and nutrition. The company help prevent, alleviate and treat diseases. Bayer AG is the parent company of the Bayer Group. The Bayer Group comprised 354 consolidated companies in 83 countries. On December 31, 2022, the company employed 101,369 people worldwide. In Germany, the company had 22,569.⁴

Facilities

Administrative sites

• Basel, Switzerland
• Berlin, Germany
• Leverkusen, Germany (headquarters)
• Monheim am Rhein, German
• St. Louis, USA

Research and development sites

• Crop Science
• Chesterfield, USA
• Frankfurt am Main, Germany
• Monheim am Rhein, Germany

Pharmaceuticals

• Berlin, Germany
• Whippany, USA
• Wuppertal, Germany

Consumer Health

• Basel, Switzerland
• Gaillard, France
• Whippany, USA

Production sites

• Crop Science
• Dormagen, Germany
• Luling, USA
• Vapi, India

Pharmaceuticals

• Bergkamen, Germany
• Berlin, Germany
• Leverkusen, Germany

Consumer Health

• Grenzach, Germany
• Lerma, Mexico
• Myerstown, USA

Products and Brands

References

1. ^ https://www.bayer.com/media/en-us/bayer-introduces-agricultural-system-for-direct-seeded-rice-with-potential-to-reduce-greenhouse-gas-emissions-and-water-use-by-up-to-40-percent/
2. ^ https://www.bayer.com/media/en-us/bayer-to-partner-with-twist-bioscience-to-accelerate-drug-discovery/
3. ^ https://www.bayer.com/sites/default/files/2023-11/bayer-quarterly-statement-q3-2023.pdf
4. ^ https://www.bayer.com/sites/default/files/2023-02/Bayer-Annual-Report-2022.pdf