UPDATED: Bayer spending $2.7B on capacity expansion, outgoing CEO says

Bayer CEO Marijn Dekkers

Everyone is wondering is what kind of M&A action Bayer's new CEO might jump into as soon as he takes over May 1. But Bayer will also be laying out some serious money for manufacturing, as outgoing leader Marijn Dekkers explained to analysts last week following the company's earnings release.

While lots of other drugmakers have been looking to trim back manufacturing, Bayer has been expanding its network around the world. Dekkers said that in addition to big outlays in R&D in 2016, "we are continuing to build up new production capacity for our products." That includes $2.7 billion (€2.5 billion) in fixed assets, Dekkers told analysts, and another $437 million (€400 million) in tangible assets.

A company spokesman explained some of that is going to expansions in Bayer's crop sciences operations, but a significant amount is also directed at pharma projects including building out a 1.4 billion yuan ($213 million) plant in Majinpu in the Yunan province of China. It completed the first phase of that project in January.

At 111,534 square meters (1,200,542 square feet), it is Bayer's second largest over-the-counter products manufacturing site in the Asia-Pacific. The facility was started by OTC specialist Dihon in 2014 in 2013 and Bayer took it over after its buyout of the Chinese company in 2014 in a deal that brokerage M.M. Warburg estimated at about €500 million ($680 million). Additional work is needed that will allow Bayer to start manufacturing Dihon's key traditional Chinese medicine product, Dan E Fu Kang, a gynecological medicine for women's health indications including dysmenorrhea.

Bayer is also investing €100 million to expand another China plant, this one in Beijing. That expansion will make it the largest pharmaceuticals packaging site in Bayer HealthCare's global production network, the German drugmaker said at the time.

Also on the list, the spokesman said, is its Berkeley, CA, facility that is focused on developing new treatments for hemophilia, where last year it said it would spend $100 million on upgrades. There also is a $700 million project for new hemophilia-focused manufacturing operations in Germany.

- read the Seeking Alpha transcript here (reg. req.)