Wrestling inflation, COVID-19 and the Ukraine conflict, Bayer stocks up to evade future manufacturing bottlenecks: CEO

With hands in pharmaceuticals, consumer health and crop sciences, Bayer has multiple businesses to fall back on in hard times. But that also means the company is exposed to the current confluence of COVID-19, inflation and the Ukraine conflict on multiple fronts.

While the German conglomerate achieved gains across all three sectors for the third quarter of 2022, “we too have to contend with the current unfavorable business environment,” Bayer CEO Werner Baumann told investors on a conference call Tuesday.

Given the volatile situation around the globe, Bayer’s “top priorities” at the moment are locking down raw materials and supply chain stability, Baumann said. To that end, the company is continuing to build up inventory to “mitigate the impact of supply bottlenecks,” he said.

Bayer is also working closely with contract manufacturers and suppliers to strengthen its supply chain, the company said.

Meanwhile, Baumann also flagged “energy supply risks” in Germany, where Bayer is angling to wean itself off Russian gas completely by the end of 2022.

Baumann’s macroeconomic caveat came as his company logged a group sales increase of 5.7% to 11.28 billion euros (about $11.28 billion) in the third quarter. On the pharmaceutical front, Bayer’s prescription armamentarium grew revenues 2.9% to nearly 5 billion euros ($4.95 billion). Bayer’s new launches Kerendia, a kidney drug, and Nubeqa, a cancer medication, continued to come into their own for the quarter, with sales of the latter med nearly doubling to 127 million euros.

Bayer’s Regeneron-partnered eye drug Eylea also drove growth for the quarter, with the German drugmaker recording 811 million euros in sales for the period, a 4% increase.

While Bayer’s meds enjoyed upward momentum in cancer as well as eye and kidney diseases, its pharma growth was blunted by tender procedures in China, especially surrounding the oncology med Nexavar and the oral blood thinner Xarelto, Bayer said in an earnings release. The drugs’ worldwide sales slipped 54% and 8.1%, respectively.

While inflation and supply constraints have taken a particularly hard toll on smaller biotechs this year, Big Pharma players like Bayer aren’t immune.

In late September, the trade group Medicines for Europe—which represents major generic drug makers like Teva, Novartis’ Sandoz unit and Fresenius’ Kabi business—asked European officials to roll out measures to lower energy costs for the bloc’s copycat medicines sector.

The lobbying group warned that aside from the economic pressures inherent to Europe’s generics industry, the COVID-19 pandemic and the war in Ukraine had presented a slew of new problems for manufacturers in the form of “dramatically increased” inflation, soaring raw material and transportation costs, and record-high energy prices.

Earlier this year, meanwhile, Bayer’s German compatriot Merck KGaA warned that Russia’s invasion of Ukraine plus fresh pandemic lockdowns in China could subject its 2022 financial forecast to “increased uncertainty and volatility.”

The same month Merck KGaA issued its warning, generics juggernaut Viatris cautioned that the situation in Ukraine—which had spurred “trade controls, sanctions, supply chain and staffing challenges” among other economic pressures—could “negatively impact our financial results in future periods,” the company said in a press release at the time.