Critics of Bayer’s $66 billion Monsanto deal have said it would hurt the German drugmaker’s pharma ambitions. Bayer itself isn’t worried about that.
Tuesday, CEO Werner Baumann worked to tamp down those worries with a slate of new growth forecasts for Bayer's blockbuster meds. The company now sees its recently launched pharma products reaching peak sales of more than €10 billion.
That's a big leap from Bayer's previous target of €7.5 billion for the group, which comprises next-gen anticoagulant Xarelto, eye blockbuster Eylea, pulmonary arterial hypertension therapy Adempas and cancer-fighters Stivarga and Xofigo.
The way Bayer sees it, those 5 products should help its pharma unit generate average annual sales growth of about 6% by the end of 2018. That same year, Bayer is aiming to increase its EBITDA margin for the business to between 32% and 34%.
And new CEO Baumann is confident about the meds coming up the pipeline, too. Six of Bayer’s prospects have combined sales potential of at least €6 billion, he said, including candidates for diabetic kidney disease, chronic heart failure and prostate cancer.
It’s the pipeline situation that has worried some of the analysts who aren’t too keen on the Monsanto deal. As Bernstein’s Ronny Gal wrote last week, the merger is a “lost opportunity to build the pharma pipeline.” Bayer doesn’t have the money to invest in both crop science and pharma at the same time, Gal figures, and with patent expirations approaching, it “can’t wait to de-lever before investing in pharma,” either.
BMI Research’s Craig Smith has voiced similar concerns, cautioning that “this deal could significantly weaken” Bayer’s “capacity to grow within the pharmaceuticals space”--especially considering that the Leverkeusen-based company already spends less than its Big Pharma peers do on R&D.
Bayer, however, also has other businesses on the healthcare side that it expects to contribute--including the lagging consumer health unit, which it predicts will see average annual sales growth of between 4% and 5% by the end of 2018. The company also wants “to continue growing the animal health business,” a division that’s popped up in near-constant divestment rumors over the past few years.
Even with the near-term growth promised on the pharma side, company’s recent integration track record may have some investors fretting. Joining hands with Merck’s consumer unit has been a bumpy road, and Bayer is still feeling its effects: The drugmaker says it underestimated the risk from emerging markets volatility related to the 2014 purchase, and the company saw stronger business disruption during the integration than it anticipated, Reuters reported Tuesday.
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