It’s no surprise that blood thinner Xarelto and vision drug Eylea drove Bayer’s pharma growth again this quarter—they have been for a long time. But cancer drugs Nexavar and Stivarga and hemophilia therapy Jivi unexpectedly held firm despite intense competition.
Both Nexavar’s and Stivarga’s increases were attributed to a volume jump in China, which delivered “significant overall growth,” Bayer said. The company's pharmaceuticals brought in €776 million in China for the quarter, a 24% surge year over year, executives said during a Thursday earnings call.
While analysts expected the older Nexavar would lose sales in Q1, it actually turned up 13.6% year-over-year growth, reaching €184 million ($205 million) and beating consensus by 20.3%, Bernstein analysts said. Stivarga, a dual VEGFR2-TIE2 inhibitor, hasn’t been living up to Bayer’s expectations as a member of its “Big Five” growth prospects—but in Q1, its €97 million sales came in 26.0% above the Street’s expectations.
Both Nexavar and Stivarga joined the country’s National Reimbursement Drug List in recent years, and it is not just these two cancer therapies that got some help from China this quarter. Xarelto, which Bayer markets outside the U.S., grew 15% to €937 million, even as its U.S. partner Johnson & Johnson continues to face a tough fight against Pfizer and Bristol-Myers Squibb’s Eliquis.
Though still a relatively small part of the franchise, China's Xarelto sales about doubled to €75 million, also thanks to its addition to the insurance list, pharma chief Stefan Oelrich said during the Thursday call.
“We’re striving to go toward sales of €3 billion by 2022 in China, and we realize this is not a walk in the park,” Oelrich said. He laid out a two-pronged strategy. First, continuing to push on innovation and getting onto reimbursement lists quickly to jump-start volume growth—which has proven effective with the three drugs above. And it's looking at what to do with the established business in the long haul.
Bayer’s hemophilia franchise, including factor VIII drugs Kogenate and newer entrant Jivi, held its ground against Roche’s fast-growing Hemlibra. Although Bayer’s sales of €214 million were basically flat compared to the same quarter last year, it actually surpassed consensus by 19%.
Good news for Bayer’s pharma business, but as Bernstein’s analyst Wimal Kapadia put it: “We would not expect to see continued momentum in these older franchises.”
Still, analysts piled onto Bayer’s crop business on the call. The franchise has caused the German conglomerate a lot of headaches since the gigantic Monsanto merger carried over lawsuits that allege the Roundup weedkiller caused cancer.
As of April 11, Roundup lawsuits have mounted to 13,400, up from 11,200 in February. CEO Werner Baumann again stressed that the number of the plaintiffs doesn’t reflect the merits of their cases, but there’s no denying Bayer’s recent defeats in court.
In the first Roundup ruling, a California state jury awarded a school groundskeeper $289 million in total damages, which was later reduced to $78 million by the judge. Now, Bayer has asked an appellate court to throw out the $78 million altogether.
“Bayer continues to believe that it has meritorious defenses and intends to defend itself vigorously in all of these lawsuits,” the company said in a statement.
Nevertheless, Baumann will likely face angry investors at Bayer's annual meeting Friday, as shares have dropped about 30% since the first California verdict. At the meeting, Bayer’s largest shareholder, BlackRock—which holds 7.2% of voting rights—reportedly plans to cast a negative vote on management’s performance last year. Top proxy advisers Glass Lewis and Institutional Shareholder Services have both recommended a vote of no confidence in Baumann’s management team.
To channel more resources to its life sciences business, Bayer is in the process of a large overhaul that will offload some foot and sun care consumer products and its animal health business.
Following an evaluation of its options, the company said its primary choice now for the animal franchise is a sale—not a spinoff—but it will also “continues to consider all value-maximizing options.”
While animal health didn’t perform well in Q1—its €421 million in sales was 2% below consensus—Baumann on the call said interest is “high and broad” and it’s a “highly competitive process.”