Bayer's desired Monsanto buy could hurt its pharma, OTC ambitions: Analyst

Bayer is making big moves to bulk up on the agricultural side. But that’s not such good news for its pharma unit, one analyst believes.

The way BMI Research’s Craig Smith sees it, Bayer’s proposed merger with agrochemical giant Monsanto would take a toll on its pharma division. If such a deal comes to fruition, “over half of Bayer’s business will represent agribusiness, threatening the company’s key growth drivers--namely pharmaceuticals and consumer healthcare,” he told in-PharmaTechnologist.

He sees the move potentially “diverting funds away from R&D activities” for those key business segments”--and considering that Bayer already “devotes marginally smaller funds to R&D” than its Big Pharma peers, “this deal could significantly weaken their capacity to grow within the pharmaceuticals space.”

Bayer’s consumer health position could be at risk in particular, Smith figures. The German company--which has said repeatedly that it’s going for the No. 1 position in the worldwide OTC arena--has already seen its acquisition of Merck’s consumer portfolio make a slower-than-anticipated start. And the company also watched a different player grab the coveted top spot in the market last year, when GlaxoSmithKline and Novartis teamed up to form an industry-leading OTC joint venture. Pfizer, Sanofi and Johnson & Johnson are all in the mix, too, “making significant inroads in the industry,” Smith said.

On the pharma side, Bayer’s Big 5 new drugs have been providing major firepower as of late, and the hotshot meds are counting on R&D dollars to keep expanding. The company is currently working to secure a label expansion for cancer newcomer Stivarga, and blood thinner Xarelto--competing against a pair of tough rivals from Boehringer Ingelheim and a Pfizer/Bristol-Myers Squibb team--is relying on its extensive clinical trial network to keep it ahead of the pack.

Investors don’t need to fret, though--yet. Monsanto shot down Bayer’s $122 per share offer last week, though word has it the Leverkeusen-based company may be nearly ready to sweeten its all-cash bid.

- read more from in-PharmaTechnologist

Special Reports: Pharma's top 10 M&A deals of 2014 - Bayer/Merck Consumer Health | The top 15 pharma companies by 2014 revenue - Bayer

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