Bayer's Pharma Division Roars Back: Saving the Year and Easing Investor Woes
Drug industry propels Bayer beyond year-end dip - investors breathe a sigh of relief
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Bayer kicked off the new year with a minor setback, yet it wasn't as grim as anticipated, partly due to its Pharma division. Despite the cloud hanging over U.S. trade policies, Bayer—a pharmaceutical and agricultural behemoth faced with numerous challenges—is faring better than anticipated. The adjusted operating result took a dip of over seven percent to around 4.1 billion euros, but it wasn't as steep as analysts had predicted. Bayer CEO, Bill Anderson, stood firm by the company's forecast and offered a modicum of hope about potential hurdles posed by higher U.S. import tariffs, though uncertainty lingers.
Without the ambiguity surrounding the continuation of pharmaceutical products' exclusion from increased import duties, the outlook for the Pharma division could have been brighter. Bayer's shares soared as much as 11 percent, propelling it to the top of the German benchmark index, DAX. Analysts at Deutsche Bank regarded it as positive that Bayer surpassed expectations and held on to its outlook amid trade uncertainties. Nevertheless, they advised caution, given the steep fall in results and ongoing high risks in the agricultural sector.
The CropScience division experienced a 10 percent year-on-year decrease in operating income, while the Pharma sector reported increased revenues. The slide in sales of the previous blockbuster, Xarelto, was countered by robust advancements from the kidney drug Kerendia and the eye drug Eylea. Bayer's revenue remained constant at last year's level of 13.7 billion euros. Following tax and minority interests, Bayer's earnings plummeted by 35.1 percent to 1.3 billion euros.
Looking ahead, the board predicts the adjusted operating result to dip to 9.5 to 10 billion euros by 2025, marking the third consecutive year of profit decline. The anticipated negative currency impact is now three percentage points, not two.
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With years of turmoil, Bayer has been grappling with billions in legal costs arising from lawsuits against the U.S. firm Monsanto, acquired in 2018. Over 181,000 lawsuits claim that herbicide glyphosate causes cancer. Bayer denies these allegations and enjoys the support of the U.S. Environmental Protection Agency. However, local U.S. courts often rule in favor of plaintiffs. Around 67,000 cases remain for settlement, requiring around six billion dollars in provisions.
Anderson aims to reduce this legal risk and cut down Bayer's high debt levels by year-end 2023. A novel organizational model and cost-cutting program are designed to pare expenses and expand the Pharma division to regain growth momentum. The division's operating income surged by 13.4 percent in the initial quarter. "Our new organizational structure enables us to achieve more with less," declared the CEO.
Bayer Results, TecDAX, Company, Pharmaceutical Sector, Glyphosate
Source: ntv.de, jwu/rts/DJ/dpa
Footnote:Strong performance in the first quarter was driven by demand for cancer drugs, particularly Bayer's hormone therapy drug for prostate cancer, Nubeqa, as well as other products like Kerendia for chronic kidney disease and Eylea for eye conditions.
Despite the strong showing in the pharmaceutical sector, Bayer's overall sales remained flat in Q1 2025, reflecting a mixed performance across its other divisions.
The Crop Science and Consumer Health divisions are experiencing varied expectations, with Crop Science potentially seeing a slight decline and Consumer Health expected to grow.
Bayer has affirmed its full-year 2025 outlook at constant currencies, anticipating the pharmaceutical division to perform at the higher end of its previously shared sales and profitability guidance range. However, the division's overall sales are projected to see a slight decline of -4% to -1% for the full year due to challenges such as patent expirations affecting products like Xarelto.
To support its Pharma division's growth momentum, Bayer plans to implement a cost-cutting program and reorganize its structure, as outlined in the community policy. This restructuring includes vocational training programs aimed at enhancing efficiency and fostering innovation, using technology along the way. The optimistic outlook includes the pharma division's anticipated strong performance in the general-news sector, with potential hurdles posed by patent expirations and challenges in other divisions. On the sports field, Anderson aims to reduce legal risk and cut down debt by year-end 2023.
