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Bayer (BAYRY) Strives for Increased Sales & Earnings Growth

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At the “Meet Management” investor conference, Bayer AG BAYRY announced that has its eyes on higher sales and earnings over the coming years across all its businesses. Interestingly, this comes just about a week after the German drugmaker signed an all-cash deal to acquire U.S. seed giant Monsanto Company MON for $66 billion. (Read more: Bayer to Boost Agriculture Suite with $66B Monsanto Buyout)

Life Science Looks Promising

Particularly, Bayer projects substantial sales and margin growth at its Pharmaceuticals business, mainly on the back of the recently launched products, for which the company now expects to see combined peak sales potential of more than €10 billion. Bayer expects its Pharmaceuticals business to achieve average annual sales growth of approximately 6% by the end of 2018 after adjusting for currency and portfolio effects. The company targets EBITDA margin before special items of about 32–34% at Pharmaceuticals in 2018.

Bayer raised its projection for the combined peak annual sales potential of the five recently launched pharmaceutical products from the previous figure of around €7.5 billion to more than €10 billion. The company now expects anti-coagulant Xarelto to achieve peak sales of more than €5 billion (previous expectation: approximately €3.5 billion) and eye drug Eylea to bring in sales of more than €2.5 billion (previous expectation: at least €1.5 billion). Further, the company projects peak sales of more than €1 billion (previous expectation: at least €1 billion) for cancer drug Xofigo and more than €0.5 billion (previous expectation: at least €0.5 billion) for pulmonary hypertension treatment, Adempas. However, the peak sales guidance for cancer drug Stivarga was unchanged at €1 billion.


Bayer boasts several promising candidates in its pipeline, six of which, as per the company, hold combined peak sales potential of at least €6 billion. These include vericiguat (worsening chronic heart failure), finerenone (diabetic kidney disease), vilaprisan (uterine fibroids), BAY-1841788 (prostate cancer), anetumab ravtansine (various types of cancer) and copanlisib (lymphoma). The company plans to launch at least 20 products by the end of 2023.

BAYER A G -ADR Price

Bayer aims to expedite innovation at the Consumer Health business mainly by pursuing regulatory approval for over-the-counter (OTC) status for products that were previously only available with a prescription (Rx-to-OTC switches) and through the development of new digital health offerings to consumers. The company intends to boost growth in key markets like the U.S., China, Brazil and Russia, along with focus on category-leading global brands, and thus execute brand strategies in a differentiated country-specific approach, customized for local market requirements. Bayer aims to boost average annual sales at Consumer Health by 4–5% by the end of 2018, after adjusting for currency and portfolio effects, while planning to achieve EBITDA margin of about 25% in 2018.

At the Crop Science business, Bayer projects a significant increase in margins post the acquisition of Monsanto, with the company targeting above-market average annual sales growth after adjusting for currency and portfolio effects. The combined entity is expected to provide integrated agriculture offerings and deliver enhanced solutions for the next generation of farming. EBITDA margin of the combined agricultural business is estimated to cross 30% after the third year of the closing of the transaction. The transaction is slated to close by the end of 2017.

In addition, Bayer intends to continue growing in the Animal Health business. The company aims to increase sales of this business by 4–5% yearly on average through the end of 2018. The company targets EBITDA margin of 23–24% in 2018.

We are pleased with the encouraging growth and earnings targets set by Bayer. Going forward, all eyes would be on the Bayer-Monsanto deal considering the kind of scrutiny these types of acquisitions attract from antitrust authorities.

FDA Approval for Kyleena

In a separate press release, Bayer announced that Kyleena – a new low dose levonorgestrel-releasing intrauterine system (LNG-IUS) – has gained FDA approval. Kyleena releases the lowest daily dose of the hormone levonorgestrel in an intrauterine system for up to five years of effective protection against pregnancy, using the smallest T-shaped body in an IUS available today. A launch in the U.S. is expected next month.

Bayer has also submitted a regulatory application in the EU for Kyleena.

Bayer carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the health care sector are Anika Therapeutics, Inc. ANIK and ANI Pharmaceuticals, Inc. ANIP. Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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