Another record year for Bayer — good progress with the acquisition of Monsanto.
Bayer reported “a very successful year” in 2016, both strategically and operationally.
“We again posted a record operating performance — and are making good progress with the agreed acquisition of Monsanto as well,” Werner Baumann, management board chairman, said on Wednesday at a financial news conference in Leverkusen, Germany.
Pharmaceuticals posted encouraging sales and earnings growth. Consumer Health recorded sales growth on a currency- and portfolio-adjusted basis (Fx & portfolio adj.), while earnings were down. At Crop Science, currency- and portfolio-adjusted sales and clean EBITDA remained steady despite the persistently difficult market environment.
Animal Health posted currency- and portfolio-adjusted sales growth, while earnings were on a par with the prior-year level. Covestro raised earnings sharply, while sales attained the prior-year level after adjustment for currency and portfolio effects.
“We have every reason to be optimistic about the future and started the new business year well,” said Baumann. He raised the prospect of further growth in sales and earnings in 2017. Bayer last year took a strategic step forward with the agreed acquisition of Monsanto, said Baumann. “This transaction is the perfect fit for our strategy of seeking leadership positions with our Life Science activities in attractive, innovation-driven markets.”
Once the businesses have been combined, Bayer would be able to create substantial additional value in the long term through more innovation, stronger growth and greater efficiency, according to the company. At a special meeting in December 2016, Monsanto’s stockholders approved the transaction. Bayer has also made progress in the necessary antitrust proceedings and has already applied for clearance from some two-thirds of around 30 authorities. Bayer and Monsanto are working closely with the authorities. Bayer remains confident of closing the transaction before the end of 2017.
Sales of the Bayer Group increased in 2016 by 1.5 percent (Fx & portfolio adj. 3.5 percent) to EUR 46,769 million (2015: EUR 46,085 million). Net income improved by 10.2 percent to EUR 4,531 million (2015: EUR 4,110 million), and core earnings per share from continuing operations by 7.3 percent to EUR 7.32 (2015: EUR 6.82).
Operating cash flow from continuing operations climbed by 20.8 percent to EUR 8,259 million (2015: EUR 6,836 million). “Here we benefited mainly from the improved earnings situation and a decrease in additional cash tied up in net current assets,” CFO Johannes Dietsch said. Net financial debt declined by 32.5 percent in 2016, to EUR 11.8 billion. Cash inflows from operating activities and the issuance of mandatory convertible notes were set against cash outflows for dividends and negative currency effects.
Pharmaceuticals and Consumer Health
Sales of prescription medicines rose by 8.7 percent (Fx & portfolio adj.) to EUR 16,420 million (2015: EUR 15,308 million). “Sales at Pharmaceuticals advanced by a gratifying amount. We expanded business markedly in all regions,” said Baumann.
The oral anticoagulant Xarelto, the eye medicine Eylea, the cancer drugs Xofigo and Stivarga, and the pulmonary hypertension treatment Adempas posted total combined sales of EUR 5,413 million (2015: EUR 4,231 million). Sales of Xarelto climbed by 30.8 percent on a currency-adjusted basis (Fx adj.), due particularly to expanded volumes in Europe and Japan. Bayer also posted significant gains for its license revenues — recognized as sales — in the United States, where Xarelto is marketed by a subsidiary of Johnson & Johnson. Sales of Eylea again advanced strongly (Fx adj. plus 33.0 percent). The product developed especially well in Europe, Canada and Japan.
Among the other leading pharmaceutical products, the hormone-releasing intrauterine devices of the Mirena product family posted significant sales growth of 8.8 percent (Fx adj.), thanks in particular to positive price development in the United States and the launch of the new low-dose intrauterine device Kyleena. The MRI contrast agent Gadavist/Gadovist once again grew strongly (Fx adj. plus 19.7 percent), due especially to a significant expansion of volumes in Japan and the United States.
Sales of Aspirin Cardio for the secondary prevention of heart attacks benefited from an improved business situation in China and Latin America, gaining 7.4 percent (Fx adj.). Sales of the multiple sclerosis treatment Betaferon/Betaseron declined (Fx adj. minus 9.9 percent), however, due mainly to weaker business performance in Europe and the United States.
EBITDA before special items of Pharmaceuticals advanced by 13.8 percent to EUR 5,251 million (2015: EUR 4,616 million). The substantial growth in earnings was largely attributable to our very good business development. Much higher investments in research and development and negative currency effects of around EUR 65 million had an opposing effect.
Sales of self-care products (Consumer Health) advanced by 3.5 percent (Fx & portfolio adj.) to EUR 6,037 million (2015: EUR 6,076 million). “This development largely mirrored that of our competitors,” explained Baumann. The division achieved significant gains in Latin America and Asia/Pacific on a currency-adjusted basis, and Europe/Middle East/ Africa contributed to sales growth with a slight increase. Sales in North America came in at the prior-year level.
Business with the prenatal vitamin Elevit saw particularly encouraging development (Fx adj. plus 17.2 percent), posting double-digit growth rates in Asia/Pacific and Europe/ Middle East/Africa. Bayer achieved significant growth of 13.4 percent (Fx adj.) with the skin and intimate health brand Canesten thanks to expanded volumes in all regions.
Sales of the Bepanthen/Bepanthol wound healing and skin care products advanced by a strong 9.2 percent (Fx adj.), particularly in Europe. By contrast, business with the antihistamine Claritin receded overall (Fx adj. minus 2.6 percent). Sales in Asia/Pacific were down against the strong prior year due to intensified competition and to price controls for prescription medicines in Japan. The gratifying increase in the United States due to a product line extension with ClariSpray only partly offset this effect.
EBITDA before special items of Consumer Health declined by 3.1 percent to EUR 1,411 million (2015: EUR 1,456 million). Earnings were diminished by a higher cost of goods sold and negative currency effects of approximately EUR 65 million. These factors were largely compensated by the positive development of sales and cost synergies.
Animal Health—Strong Growth from Seresto
Sales of the Animal Health business advanced by 4.8 percent (Fx & portfolio adj.) to EUR 1,523 million (2015: EUR 1,490 million). The North America and Asia/Pacific regions developed especially positively due to higher demand. The Seresto™ flea and tick collar posted very strong sales growth of 55.4 percent (Fx adj.) that resulted chiefly from increased demand in the United States and Europe.
Currency-adjusted sales of the Advantage family of flea, tick and worm control products were level with the previous year. EBITDA pre exceptionals was virtually flat year on year (plus 0.6 percent) at EUR 349 million (2015: EUR 347 million). Positive earnings contributions from volume and price increases stood against higher selling expenses and a higher cost of goods sold. Earnings were also diminished by a negative currency effect of about EUR 10 million.
Note: EUR 1 = $1.05 on February 22, 2017
(Source: Bayer AG)
Filed Under: Drug Discovery