Bayer HealthCare

Bayer HealthCare

Revenues 2012: €18.61 billion or $24.3 billion
Revenues 2011: €17.17 billion 

It's possible that Bayer is the only old-style conglomerate in the pharma business. Pharma may have grown up in the chemicals world, but most drugmakers sold off their chemicals divisions years ago. Bayer HealthCare does account for almost half of the German company's business, and it operates as a very discrete, autonomous unit. So, for a more apples-to-apples comparison with the rest of the drug industry, we consider that life sciences division as its own company.

Bayer HealthCare is no pure pharma player, however. Its consumer health business is growing fast, and now accounts for almost 42% of sales. And consumer health isn't just over-the-counter drugs. It includes animal health products, devices such as glucose meters, as well as the old stalwart, Bayer Aspirin.

Overall, sales growth at Bayer HealthCare amounted to 8%, or 4.2%, adjusted for currency effects. Pharma sales and consumer health sales each grew at about the same rate, with pharma pitching in €10.8 billion and consumer health, €7.81 billion.

That pharma growth is a key point. Bayer is one of the very few major drugmakers that managed to grow in prescription drugs last year. Roche ($RHHBY) and Johnson & Johnson ($JNJ) were the only other Big Pharma companies to post higher pharma sales in 2012 than in 2011.

CEO Marijn Dekkers

If CEO Marijn Dekkers has his way, Bayer HealthCare growth will amount to 6% per year over the next several years. Powering growth in its pharma business, he says, will be 5 new products that can deliver sales of more than €2.5 billion by 2015, and peak at €5.5 billion.

Two of those products have only recently been filed for approval. The other three--the anticoagulant Xarelto, the vision-loss treatment Eylea, and the colon cancer drug Stivarga--together brought in €376 million, or almost $500 million. Bayer launched the latter two last year; though Eylea has been on the market in the U.S. since 2011, it just won European approval in November. Bayer continues to test Xarelto in new groups of patients, hoping to add indications to its list. And Stivarga has already won an additional indication in the U.S. for patients with gastrointestinal stromal tumors.

In consumer health--divided into consumer care, medical products and animal health--the fastest-growing segment was consumer care, at 5.6%, to €3.85 billion. Animal health grew by 4.2%, adjusted, to €1.3 billion. The biggest-selling product in the unit was the Contour line of blood-glucose meters, which brought in €722 million, up 8.5% over 2011; second in line was the Advantage line of flea and tick treatments for pets, which brought in almost half a billion, a 10.6% increase over 2012. And Bayer Aspirin sold to the tune of €494 million.

Emerging markets now generate 33% of Bayer HealthCare's sales. Last year, Bayer's emerging-markets business grew more than 8%, to €6.176 billion. A marketing campaign and expanded distribution in China fueled 23% growth in China, making it Bayer's fastest-growing market. The company aims to continue pushing for higher sales in emerging markets, with Brazil and Russia high on its list.

All is not rosy at Bayer HealthCare, however. Pharma sales in Europe were mostly flat, as the company suffered from drug-price cuts and shrinking healthcare budgets. But its bottom line took a bigger hit from litigation. The company faces thousands of lawsuits claiming that its birth control pills Yaz and Yasmin caused serious blood clots and complications. In all, Bayer set aside about €1.2 billion to cover the costs of that litigation last year. By mid-February of 2013, the company had settled with some 4,800 plaintiffs in the U.S., for $1 billion.

The Yaz/Yasmin legal charges cut a 20% chunk out of Bayer's earnings before interest and taxes of €5.671 billion. Together with other special charges, the litigation reserves put earnings after special items at €3.96 billion, down almost 5% from 2011.

The fight over contraceptive safety isn't over, either. France recently suspended sales of Bayer's Diane-35 pill after four women died. Once again, the worry is blood clots. In announcing 2012 results, Dekkers said Bayer is confident about the contraceptives and their safety. The European Medicines Agency launched a review of Diane-35's safety, at France's request, in February 2013.

For more:
Bayer bucks pharma trend with 'remarkable' growth in new drugs
Bayer gambling $4B R&D budget on Xarelto, top blockbuster hopefuls
Bayer CEO touts Xarelto in Q3 pharma-sales growth
Bayer nails promising PhIII results for new PAH contender riociguat
Bayer CEO: Shortsighted price cuts lead to long-term pain

Bayer HealthCare