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News Release 51368 Leverkusen
Germany
Tel. +49 214 30-1
media.bayer.com
Address by
Werner Baumann,
(2018-1509e)
Ladies and Gentlemen,
Welcome to our press call and thank you for taking time to join us on short notice.
As you’ve likely seen from our press release, today the Supervisory Board of Bayer
AG reviewed and gave its support to a series of measures outlined by the Board of
Management.
With these measures, we are positioning Bayer’s portfolio and organization for the future,
sustainably strengthening our productivity and profitability. Today, we would like to explain
the background and substance of these measures, as well as take your questions. In
addition to today’s call, we will be sharing further information at our Capital Market’s Day
in London on December 5th. You will be able to follow this event online.
Before going any further, let me be clear: Today’s decisions were not made necessary by
the recent acquisition. And certainly not by glyphosate litigation in the United States. The
measures we’re taking today extend beyond the commitments we’ve made as part of the
integration. They represent the right step for our company. And they position us for the
future, as a leader across all of our core life science businesses.
Before outlining the measures in detail, I’d like to explain what we aim to achieve with
these measures – measures that will affect all areas of Bayer and strengthen two of
our core pursuits: innovation and value creation for our stakeholders.
We aim to focus our portfolio by concentrating on our leading, core life sciences
businesses. We aim to increase our productivity by pursuing best-in-class innovation
with a mindset that is informed by data, embraces external collaboration and is driven
by the latest in technology.
We will enhance the efficiency of our structures to ensure our ability to respond quickly
to customer needs, which will allow us to better address changing market dynamics,
like the rise of new technologies, the introduction of new competition and the ongoing
digital transformation.
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These actions will enhance our cost structure, strengthen our profitability and bolster
our long-term competitiveness. They will sharpen our focus on our leading businesses
in health and nutrition, two markets which are poised for sustainable growth and
aligned with global megatrends. And with that, they will safeguard our role in helping to
care for and feed a growing and aging world population.
Regarding our portfolio, we will exit our Animal Health business and are evaluating
available options. Our Animal Health business is well positioned in an attractive
industry which will continue to grow. The necessary investments to further develop this
business are however not available within Bayer given the priorities with our core
areas Pharmaceuticals, Consumer Health and Crop Science. Because of these
priorities, we are convinced that Bayer is no longer the best owner for Animal Health.
Beyond the planned changes to our portfolio, we aim to improve our profitability and
productivity with a series of efficiency and structural measures. Touching all areas of the
company, these measures will free up resources for innovation and growth.
Both the recent and upcoming changes to our portfolio make it necessary that we make
significant adjustments to the size and structure of our supporting functions and services.
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These adjustments will lead to a considerable improvement of our cost structure and will
enhance the competitiveness of Bayer as a whole. We are also convinced that a leaner
organization will help us become more responsive to changing markets and increase our
agility.
To continue our track record of successfully bringing innovative medicine to the market,
we are – in addition to the continued development of our pipeline – strengthening our
investment into collaborative research models and external innovations. We will adapt our
internal research and development activities accordingly. Our future innovation model in
Pharmaceuticals will follow a simple principle: Where an innovation comes from is less
important than how we turn it into benefit for customers and patients.
Actually, with this week’s FDA approval for our new cancer drug Vitrakvi™, we have a
great example of how successful innovation can come about through external
collaboration. That’s exactly how we want to move forward.
Additionally, within the hemophilia business, the introduction of a number of new products
has led to a significant increase in competition. In order to remain competitive in this
segment, we have decided not to utilize the factor VIII facility we have built in Wuppertal
in Germany. We will focus all recombinant factor VIII production in Berkeley in the United
States.
Through all these efficiency and structural measures, we anticipate annual contributions
of 2.6 billion euros from 2022 onwards. This includes 1 billion euros in synergies from the
integration at Crop Science, equal to the previously communicated 1.2 billion U.S. dollars.
Of these contributions, a portion will be reinvested in our core businesses. Over the next
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four years, we plan to dedicate a total of 35 billion euros to future investments in research
and development and capital expenditures.
All in all, we are expecting one-time costs at a factor of 1.7 times the annual savings. We
expect core earnings per share to increase by around 1 euro to 6,80 euros in 2019. We
target achieving a core EPS of around 10 euros in 2022. The Group EBITDA margin
before special items is targeted to increase to over 30 percent in the period through 2022.
We are aware of the gravity of these decisions and are grateful for the commitment and
dedication of our employees around the world. Just as we have in the past, we will treat
employees fairly and responsibly throughout the process.
Before we get to your questions, I would like to summarize why we are taking these steps
and how we are positioning ourselves for the future.
First: We are focusing on our core businesses in Pharmaceuticals, Consumer Health and
Crop Science.
Second: The changes we’ve made over the past years, as well as the changes to come,
demand broad and additional adjustments to the size and structure of our organization in
order to best serve our businesses and customers.
With these measures, we are positioning Bayer optimally for the future. We will become
more agile, more efficient, and better-equipped to lead in the life sciences, creating value
for all of our stakeholders.
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Thank you very much. I’m happy to take your questions.
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