After suffering setbacks in the clinic and in court over the last week, Bayer’s ability to overhaul its corporate structure is becoming more constricted, one group of analysts contends.
Still, the German conglomerate is trying to keep its head up as it presses on with a strategic review under new CEO Bill Anderson.
Bayer’s very bad week started with the failure of its potential blockbuster-in-waiting asundexian to top Bristol Myers Squibb and Pfizer’s Eliquis in a phase 3 trial. In light of the blood thinner’s inferior efficacy, Bayer elected to stop the study early while continuing to advance the asset in stroke. Bayer is counting on new drugs like asundexian to offset the upcoming loss of exclusivity on its Johnson & Johnson-partnered med Xarelto.
Separately, a Missouri jury on Monday ordered Bayer to shell out $1.56 billion to four plaintiffs over claims the company’s Roundup weedkiller caused their cancer. Bayer has been battling Roundup litigation since the conglomerate’s ill-fated acquisition of Monsanto back in 2018.
After the setbacks, Bayer's share price fell by about 17.5% on Monday.
Now, Bayer’s ability to tweak its corporate structure—a goal slated for March 5, 2024—is “further” limited, analysts at ODDO BHF wrote in a note to clients Tuesday.
“With a much weaker pipeline in pharma, cash flow from other divisions may now be needed even more to further develop the pipeline and compensate for dwindling revenues from blockbuster drugs losing their exclusivity,” the analysts wrote.
Aside from Bayer’s pipeline woes, ongoing litigation risks in Bayer’s crop science division “might limit the company’s leeway” to spin off or sell the unit, the ODDO team added.
While Bayer may have to tighten its belt, its ability to transform its business structure shouldn’t be brought into question, Anderson told investors on a conference call Tuesday.
“Anything that affects our future cash flows just makes that a little tighter,” he said on the call. “The impact of these recent events doesn’t change what our strategic options are. It just may mean that some of those conditions are a little tighter than they otherwise would be.”
When asked about a potential separation of Bayer’s pharma, consumer health and crop science divisions, Anderson added, “I think that set of options remains the same.”
Bayer tapped Roche vet Anderson to head up the company earlier this year. With the appointment, he was immediately placed at the center of a debate about whether the conglomerate should spin off its consumer health or crop science divisions.
Two months before taking up the reins, Anderson said he’d spend his time “listening” and keep “an open mind” around the future direction of Bayer.
In August, opining on Bayer’s potential future structure, Anderson said “nothing was off the table,” telegraphing plans to communicate a detailed strategy and financial targets by 2024.
Ultimately, whatever structure Bayer adopts must support the goal of “speed, of innovation, of quality,” Anderson said at the time.