Aiming for big growth in top 5 meds, Bayer will stake an extra $600M on marketing, R&D

Bayer knows what a good launch can do; with blood thinner Xarelto and eye drug Eylea, it's had a couple of the recent best. Thanks to that pair of hot-selling meds, the German pharma raised the sales forecast for its new products by €2 billion late last week--and it's raising its marketing budget along with it.

Bayer HealthCare CEO Olivier Brandicourt

As Bayer announced Friday, Xarelto and Eylea led a group of 5 new drugs--which also includes cancer treatments Stivarga and Xofigo, and pulmonary arterial hypertension drug Adempas--to combined sales of €1.5 billion, taking the company's pharma sales up 9.4% for the year. As CEO Marijn Dekkers sees it, that growth will continue: He now expects the drugs to hit combined sales of €7.5 billion ($10.3 billion) or more at their peak, which Xarelto and Eylea will approach in 5-6 years.

That won't happen on its own, of course. "To maximize our growth opportunities, we plan for incremental €0.5 billion in marketing and R&D in 2014," Dekkers told investors on the earnings call. The company is also planning for more than 100 launch events during the year to help it toward a target of €2.8 billion in 2014 new product sales--"much more than we originally aspired for in 2015," Dekkers said. And Bayer will up its marketing and sales investments in emerging markets to top it off.

As Dekkers noted, R&D investments for the 5-pack will also continue, meaning Bayer may wind up with new patient populations in which to push those meds. Additional indications for Xarelto have played a key part in its sales development: After hitting the European stage in 2008 as a clot preventative for surgery patients, the drug didn't win its key approval there--to prevent stroke in atrial fibrillation patients--until December 2011.

Bayer has since picked up other approvals in Europe--like one in May to prevent heart attacks, stroke and death in acute coronary syndrome patients--and is going after other, bigger markets: It's currently studying how well Xarelto, combined with aspirin, can fend off heart attack, death and stroke in patients with coronary or peripheral artery disease. The score of new uses should help Bayer hit $3.68 billion in 2018 sales, analysts figure.

Eylea, too, has continued to trounce analyst estimates quarter after quarter. What started as a treatment for wet age-related macular degeneration is now an approved treatment for macular degeneration due to central retinal vein occlusion in Europe, and Bayer and partner Regeneron ($REGN) have racked up positive data to help them file for additional uses. Bayer scored late 2012 approvals in the EU and Japan, helping sales reach about €19 million. But by the time the first quarter of 2013 had closed, Bayer had another €49 million from Eylea revenue; it padded that total with another €73 million by June 30 for a first-half total of €122 million, or about $165 million.

"Operationally, we believe 2013 was a very successful year for Bayer," Dekkers said on the call. "… We have the right strategy in place, expect continued good growth momentum with our innovation, and are optimistic that we can also continue to deliver further growth and higher earnings in the future."

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