Bayer expects gloomier 2023 as lower glyphosate sales bolster breakup advocates' case

Just as the calls for a business separation grow louder at Bayer, the company’s weedkiller performance is bolstering the argument with dramatically declining sales.

Bayer has slashed its 2023 sales guidance by 2.5 billion euros on both ends. It’s now expecting its full-year haul to come in between 48.5 billion euros and 49.5 billion euros on a currency-adjusted basis, the German conglomerate said Monday.

A “significant further decline” of its glyphosate-based Roundup business, including price drops and lower volumes, drove the grim outlook, Bayer said. The herbicide was the centerpiece of Bayer’s disastrous Monsanto buyout, closed in 2018 at a price of $63 billion.

Struggling glyphosate sales could give Bayer another push toward a breakup, a lasting proposition that recently gained steam after the company replaced former CEO and Monsanto proponent Werner Baumann with pharma veteran and ex-Roche executive Bill Anderson.

Anderson officially took the reins on June 1 and has kept the split-up idea on the table. During a media briefing in April, Anderson acknowledged some investors’ demands for a split and said he was going to “have an open mind,” according to Reuters.

Earlier this month, German markets news service Platow Brief reported that Anderson was already working on plans to spin off Bayer’s agriculture business into a standalone public company. A spinoff is the company’s preferred solution for the unit, Platow’s editor-in-chief Frank Mahlmeister told Fierce Pharma at the time, citing an unnamed source.

Stripping crop sciences from Bayer could let Anderson focus on its pharma business, which had a tough first quarter because of Xarelto price reductions and patent expirations in certain markets. Eylea, the company’s second-largest product, is also experiencing a slowdown amid tough competition.

Meanwhile, Bayer has laid out big sales expectations for prostate cancer drug Nubeqa and kidney disease therapy Kerendia. But the company still has some ways to go to beef up its pharma pipeline.

The glyphosate line has caused Bayer a lot of trouble over the years. Tens of thousands of lawsuits from individuals claiming Roundup caused their cancers have dogged the company. Back in 2020, Bayer inked a settlement worth up to $10.9 billion to resolve existing and future Roundup allegations in the U.S. But not all plaintiffs have bought in, and Bayer is fighting similar lawsuits in other countries.

Meanwhile, Bayer shareholders have lost a fortune after the Monsanto deal as Bayer’s stock price have been roughly halved since the middle of 2018. A breakup would give each business better equity value, advocates for spinning off Bayer’s crop science department have argued.

The glyphosate business has disappointed after a surge in demand in 2022. As pricing pressure mounted, sales from glyphosate-based products declined by 688 euros, or 50%, in the first quarter compared with the same time last year. At that time, Bayer said its 2023 group sales would likely come at the lower end of its outlook.

Now, Bayer said it expects to record an impairment of about 2.5 billion euros, mainly because of the glyphosate business, in the second quarter. Before that, Bayer already took first-quarter special charges of 431 million euros, which primarily comprised an impairment loss from glyphosate.

Bayer’s reduced projection for glyphosate didn’t come as a surprise, BMO Research analyst Joel Jackson pointed out in a Tuesday note, although he had expected the company’s seed products to fill in the gap as they had in the first quarter. FMC Corporation, another insecticide producer, also lowered its full-year sales expectations earlier this month, Jackson pointed out.