Bayer's animal and consumer health units look weaker, yes. But don't expect selloffs: CEO

Bayer sign
Analysts have called for a breakup at Bayer so that its pharma business can grow. (Bayer)

Industry watchers have suggested that breaking up Bayer is a good option for its pharmaceutical business. Now, a gloomier 2018 outlook for the company's animal health and consumer units might have just padded the arguments for those split-up advocates.

For the first full quarter since Bayer sealed its gigantic Monsanto acquisition, consumer health did well and posted sales of €1.30 billion ($1.46 billion), in line with analyst expectations. But both the segment’s best-selling product, antihistamine Claritin, and analgesic aspirin, declined. On the other side of the coin, animal health sales plummeted 15% year over year to €304 million and also came below analysts’ consensus.

Though the German company reaffirmed its 2018 full-year outlook, CEO Werner Baumann admitted on an English-dubbed Tuesday call with reporters that “achieving the goals for animal health and consumer health […] appears to be increasingly ambitious.” But the chief executive immediately warned that looking at those divisions separately “is not connected with any strategic considerations” for them.

Free Daily Newsletter

Like this story? Subscribe to FiercePharma!

Biopharma is a fast-growing world where big ideas come along daily. Our subscribers rely on FiercePharma as their must-read source for the latest news, analysis and data on drugs and the companies that make them. Sign up today to get pharma news and updates delivered to your inbox and read on the go.

Bernstein analyst Wimal Kapadia has previously suggested that Bayer should sell its animal health business, which could fetch around €6 billion to €7 billion. Kapadia’s rationale is based on a bear outlook for Bayer’s pharma franchise in the long term and the calculation that its share price is trading at a steep conglomerate discount.

RELATED: Is Bayer's first sell-off here? Animal health may be up for grabs as Monsanto weighs on pharma

In the third quarter, sales from Johnson & Johnson-partnered oral anticoagulant Xarelto jumped 18.8% on adjusted terms, reaching €933 million and topping analysts’ consensus by 6.5%. Bayer attributed the increase to higher volumes, particularly in Germany and China. Eye drug Eylea’s €541 million haul was also in line with consensus, according to data from Bernstein.

However, as Kapadia saw it, other marketed drugs, including cancer therapies Stivarga and Xofigo, pulmonary hypertension drug Adempas and new hemophilia launch Jivi, were all less exciting. With a lack of potential blockbusters, Kapadia figured Bayer could use the money from an animal health sale to beef up its pipeline.

Last month, rumors emerged Bayer was indeed weighing its options for the animal franchise, but Baumann has publicly stood by the company’s diverse portfolio. “As before, we have animal health, pharmaceuticals, plant (science) and consumer (health). In terms of profitability, the individual divisions can hold their own against stock-market listed companies,” he recently said, as quoted by Reuters.

RELATED: No surprise Bayer's taking a hard line against Roundup cases—it's got plenty of experience

Meanwhile, the $63 billion Monsanto buyout has also brought along a headache that has weighed on Bayer—and its shares—recently. The number of plaintiffs accusing Monsanto’s Roundup weedkillers of causing cancer has risen from 8,700 at the end of August to 9,300 as of Oct. 30, the company disclosed in its third-quarter release.

On the call with reporters, Baumann again argued that the product was safe, saying the company intends "to defend ourselves vigorously in all of these lawsuits.” The company is also appealing a verdict by a San Francisco judge that Monsanto acted with malice, and it assured investors that the single case is not binding for other proceedings.

Suggested Articles

Traditional generics bigwigs Teva, Mylan, Sandoz, Amneal and Endo have lost out to a group of six competitors in terms of U.S. weekly prescriptions.

Roche’s Tecentriq scored some big wins lately, including a pair of first-in-class approvals. But in other cancers, it's decided to pull the plug.

Biosims haven't worked, experts say. Instead, it's time to for an independent body to set fair biologic prices after the drugs lose exclusivity.