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Despite a portfolio of hundreds of other products, Bayer is still best known as the company that developed the mother of all pharmaceuticals, Aspirin, over 115 years ago. Almost incredibly, Aspirin remains one of Bayer's top-selling products today, with sales still in excess of $1bn annually. It was until recently part of a vast portfolio of different products ranging from polyurethane to flea control, and from antibiotics to insecticides. However, in recent years the group's massive size proved more of a liability than an asset and Bayer has restructured into a collection of smaller and more efficient operating units, several of which have been split off as independent businesses, while the core company refines its focus on life sciences. The acquisition of domestic rival Schering in 2006 strengthened Bayer's drug portfolio, creating a national champion in Germany's pharmaceutical industry. However that position is coming under increasing pressure from fast-expanding rival Boehringer Ingelheim. Partly in response, the group sought to expand its already substantial consumer healthcare business, where Aspirin is partnered by other world-renowned brands including Alka-Seltzer, Aleve and Canesten. In 2014, Bayer agreed to buy the OTC division of Merck & Co for $14.2bn. It subsequently announced plans to spin-off one of its three existing arms, polymers division Bayer MaterialScience, as a separate company. Two years later it pulled off a bold takeover bid for crop sciences rival Monsanto for a final price of $63bn in cash. That deal was finally approved in Apr 2018, 18 months after it was agreed. It has proved disastrous. Almost immediately after completion, a US jury found that Monsanto's Round-up weedkiller caused cancer, leading to a flood of further lawsuits.
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After several years of repositioning, during which it was overtaken by American and British pharmaceutical developers, Bayer aggressively developed its healthcare business in the 2000s through the acquisitions of Roche consumer healthcare and German competitor Schering. The latter deal made the group a clear champion in the German market, and provides a stronger platform for growth elsewhere in Europe. Bayer restructured in 2002 to form four legally independent operating companies. One of these, the chemicals division, was spun off in 2005. Another, the former Bayer MaterialScience, began its route to independence in 2015 under the new name of Covestro. That leaves two main businesses under the group umbrella: Bayer HealthCare and Bayer CropScience. The group celebrated its 150th anniversary in 2013.
The most widely-known part of the group's business is Bayer HealthCare. It is Germany's leading company in this industry, and strengthened its position further during 2006 with the acquisition of local rival Schering. The business is currently divided into four main segments of prescription pharmaceuticals; OTC consumer care; animal health; and medical care devices and products.
Bayer Pharmaceuticals manufactures and markets prescription drugs to treat a variety of cardiovascular, infectious, central nervous system and respiratory diseases as well as immune system and metabolic disorders. Combined sales were €16.85bn in 2017. The portfolio is broad, but until the addition of Schering, lacked any blockbuster products. The biggest-selling prescription pharmaceutical from Bayer's original portfolio is the blood clotting agent Kogenate, sales of which had been slipping for several years until being stabilised by the introduction of follow-up product Kovaltry in 2016. Combined sales in 2017 were €967m. Nexavar, a treatment for kidney and liver cancer, generated €834m. The product is co-marketed by Onyx Pharmaceuticals in the US. Other important products include cardiovascular drug Adalat (€648m), recombinant and respiratory antibiotic Avelox/Avalox (€333m), and oral diabetes treatment Glucobay (€563m).
More than 100 years after its discovery, Aspirin enjoyed a new lease of life when it was revealed to have a beneficial effect on sufferers of cardiovascular disease, and a pharmaceutical form (Aspirin Cardio) developed by Bayer is widely prescribed by doctors to heart attack sufferers. As a result, combined sales of the OTC and prescription forms of Aspirin are still in excess of €1bn. The prescription version of Aspirin, known as Aspirin Cardio, saw a further increase in sales in 2017 to €581m.
Another significant product is Cipro/Ciprobay, a powerful antibiotic mainly used to combat urinary tract infections. It is also one of the few treatments for anthrax, with the result that sales spiked in 2001 to just under €2bn following a terrorist threat in which spores of the disease were sent through the US postal system. Cipro's US patent expired in 2004, with the result that sales have fallen sharply.
Schering added a selection of important new areas to Bayer's coverage. That group had specialised in four main areas of gynaecology, oncology, diagnostic imaging and specialised therapeutics. As a result, Bayer is a global leader in women's health and the worldwide #1 in oral contraceptives. Traditionally, its most important product was the leading German contraceptive pill Yasmin, together with low-dose derivatives Yaz, Beyaz and Yasminelle. Sales grew sharply following the Schering takeover, more than doubling to a total of $1.6bn in 2008. However, the group took a blow in the US that year after a court overturned its patent on Yasmin, allowing for the introduction of a generic competitor. This has been impacted in 2013 and 2014 by the introduction of generic competition in the US and more recently Europe, as well as concerns regarding circulation problems associated with Yasmin. As a result, combined sales continued to fall in 2017, slipping to €648bn.
Other important products from Schering included the contraceptive device franchise Mirena. This has been expanded with the introduction of other devices under the overall Mirena banner, including Skyla/Jaydess and more recently in 2016 Kyleena. Combined sales were €1.13bn in 2017. Jadelle is a contraceptive implant, sold at a discount in developing markets in a partnership with the Bill & Melinda Gates Foundation. The group also works with the Gates Foundation in developing markets on other initiatives such as tropical disease control. In 2013, the group acquired US company Conceptus, whose Essure procedure is the only approved non-surgical method of permanent birth control.
Another Schering product is the multiple sclerosis treatment Betaferon/Betaseron. Sales have been in slow decline since a peak in 2012, falling to €651m in 2017.
To strengthen its pharmaceutical operations, Bayer has established a number of alliances with other companies in recent years. In 2003, it launched Levitra, an erectile dysfunction drug it developed to compete directly with Pfizer's Viagra, through a worldwide marketing partnership with GlaxoSmithKline. However, Levitra's sales proved disappointing and GSK sold back to Bayer marketing rights in all markets except the US in 2005.
The group's most successful recent launch, and now its top-selling product overall, is the anticoagulant Xarelto, first approved for launch in several markets in 2008. It is co-marketed in the US by Johnson & Johnson. Sales more than tripled in 2012 and then again in 2013. Annual double-digit increases since then lifted sales to €2.93bn for 2016. Another big success was macular degeneration treatment Eylea, launched in 2012. Sales topped €1bn for the first time in 2015, rising to €3.3bn in 2017. All sales are generated outside the US, where the product is still sold by its original developer Regeneron.
Another new launch in 2012 was Stivarga for colorectal cancer (sales of €315m in 2017), followed in 2013 by Adempas for pulmonary hypertension (€295m). The latter is co-marketed in the US by Merck & Co. At the end of 2013, the group agreed to acquire Norwegian pharmaceutical group Algeta for around $2.87bn. Bayer was already Algeta's marketing partner for Xofigo, a potential blockbuster drug for the treatment of prostate cancer. Sales were €408m in 2017. Other newly approved products include Gadavist/Gadovist, an imaging agent for the detection of renal artery disease. Sales for 2017 were €365m.
Bayer groups Xarelto, Eylea, Xofigo, Stivarga and Adempas as its five key growth products, and in 2017 raised predictions of peak revenues from the combined collection to €10bn. The figure for 2017 was €6.20bn.
The consumer health division of Bayer is divided into three separate operating units. Bayer Consumer Care is one of the world's leading suppliers of OTC medications (after Pfizer and GlaxoSmithKline) with combined sales of €5.86bn in 2017. It markets a variety of remedies for pain, stomach ailments, colds and fungal infections, with brands led by the painkiller Aspirin. OTC sales for 2017 were €462m. Aspirin is marketed in the US under the Bayer brandname, in Latin America as Aspirina and in others as Aspirin or Aspirine. However it does not have rights in several markets, including the UK. The group's #2 OTC product is the analgesic Aleve, sold mainly in the US. Sales have risen strongly in recent years because of manufacturing problems at arch-rival and former market leader Tylenol. As a result, Bayer is now the US #1 in internal analgesics with combined retail sales. Aleve is the #2 analgesic after Advil; Bayer-brand is #4. Aleve is marketed in other countries under different names including Flanax and Apronax. Bayer reported net revenues from the brand of €375m.
Until 2004 Aleve was marketed in the US along with Midol and Mycelex through a joint venture co-owned by Roche. That year, Bayer agreed to purchase Roche's entire OTC healthcare division, as well as the Swiss company's 50% stake in the US joint venture, for €2.4bn. As a result of the Roche purchase, Bayer's consumer care portfolio swelled to house several significant European brands including infant skincare ointment Bepanthen (sales of €379m), Rennie indigestion tablets; Feminax analgesic, haemorrhoid treatment Germoloids and caffeine supplement Pro-Plus. Other Bayer brands include stomach remedies Alka-Seltzer (also extended into allergy relief, sales of €244m), Talcid and Phillips' Milk of Magnesia, all available in a wide variety of forms and flavours; and fungal infection treatment Canesten (sales of €278m). The group acquired Topsun, a Chinese marketer of western-style cough and colds remedies in 2007.
However the group's best-known speciality (after Aspirin) is probably vitamins. It markets various vitamins and mineral supplements under main brand One-A-Day (sales of €222m), as well as Elevit (€189m), Supradyn, Sanatogen, Berocca and Redoxon; and kids' vitamins under the Flintstones, Bugs Bunny and Scooby-Doo licenses. TruBiotics is a line of probiotic supplements introduced in 2014 under the One-a-Day banner. Combined retail sales in the US of its vitamins were $334m in 2014 (IRI ye Aug 2014 in GHQ), equivalent to around 20% local share.
In 2012, Bayer announced plans to acquire US healthcare company Schiff Nutrition, maker of vitamins and nutritional supplements including the brands MegaRed, Move Free and Airborne, for $1.2bn. However, within a matter of days that bid was trumped by a higher offer from Reckitt Benckiser. Bayer refused to raise its price and walked away from the deal. The group got its own back in 2014 in the auction of Merck & Co's consumer healthcare division. It trumped a rival offer from Reckitt Benckiser to acquire the business for $14.2bn. This deal substantially boosted Bayer's portfolio, especially in the US. Merck's brands include Claritin, Afrin decongestants, Coppertone (€208m) and Bain de Soleil suncare and North America rights to Dr Scholl's footcare products (€211m 2017). (Reckitt Benckiser owns the Scholl brand elsewhere). Claritin is the overall leader in the US allergy sector, and now Bayer's top-selling OTC product with sales of €585m in 2017. Also in 2014, the group acquired Dihon Pharmaceutical Co of China, makers of OTC dermatology products and traditional herbal medicines including Kang Wang and Dan E Fu Kang.
The group continues to own Bayer Animal Health, which markets health care products for livestock and pets. Its biggest product is flea control brand Advantage / Advantix / Advocate, with sales of €488m in 2017. Other products include Seresto flea and tick collars for companion animals (€218m), Baytril for infectious disease in livestock and pets, and parasite control treatment Drontal. The group sold its Baygon household insecticide and Autan insect repellent products to SC Johnson in 2002. Animal health revenues were €1.57bn in 2017. Bayer was the #5 in animal health in 2014 with an estimated 7% of the global market.
In 2019, Bayer agreed to merge its animal health division into rival Elanco for a total of $7.6bn in cash and stock.
Bayer's other two major operating businesses are more industrial in nature. Bayer CropScience was formed in 2002 from the acquisition of Aventis Crop Science. It is the world leader in crop protection and pest control, #1 in insecticides, seed treatments and environmental sciences; #2 in fungicides and #3 in herbicides. Revenues were €9.58bn in 2017. In an extraordinarily bold development, Bayer's newly appointed CEO launched a takeover bid for US seeds and chemicals giant Monsanto in summer 2016 for a whopping $62bn in cash. Perhaps surprisingly, after several months of negotiation, a higher offer of $66bn was accepted, though completion is dependent on regulatory and shareholder approval. That finally came in Spring 2018, but was almost immediately followed by the first of what are expected to be numerous lawsuits alleging that Monsanto's Roundup and Range Pro weedkillers cause cancer.
Two other units sat under the umbrella of Bayer consumer health for several years. The group's diabetes and diagnostics products were previously aligned in a separate division. That business was broken up in 2006 with the sale of the professional diagnostics products, including the Advia range, to Siemens, for around €4.2bn. Bayer retained its Ascensia diabetes monitoring products, now marketed primarily under the Contour name, and strengthened this business soon afterwards with the acquisition of US company Metrika, makers of A1CNow+ portable monitoring systems. Combined revenues from what is now known as Bayer Medical Care were €2.36bn in 2014. In 2015, though, Bayer agreed to sell the diabetes business, including Contour monitoring devices, to Panasonic Healthcare for €1.02bn.
The former Bayer MaterialScience, now known as Covestro, is one of the world leaders in the manufacture of thermoplastics, rubber, polyurethane and other synthetics, used in the manufacture of products as varied as footballs, CDs, vehicle tires and bodies, fabrics and appliance casings. Revenues in 2016 were €11.83bn. Bayer issued an IPO of part of Covestro's equity at the end of 2015, and a series of further sales and placements had reduced its remaining shareholding to just under 25% by the end of 2017.
Part of the MaterialScience division's polymer business was spun off along with Bayer Chemicals at the beginning of 2005 as a separate company, renamed Lanxess. The group continues to co-own with Lanxess a joint venture which provides various management and logistics services to chemicals manufacturers.
Combined group revenues for 2014 rose 5% to a record €42.24bn. Attributable net income rose 7% to €3.43bn. Europe accounted for 37% of revenues (and Germany around 12%). There was a further increase for 2015 to €46.09bn, and then to €46.77bn for 2016. Net income for 2016 rose by 10% to €4.53bn. North America contributed 27% of revenues, and the US alone 24%, or €11.3bn. Germany is still the #2 market at €4.81bn in 2016, narrowly ahead of China at €4.60bn.
As a result of the deconsolidation of Covestro, revenues for 2017 slipped back to €35.0bn while net income jumped almost 62% to €7.3bn.
Friedrich Bayer was already an experienced trader in natural dyes by the time he established his own factory in 1863 to manufacture synthetic dyes from coal-tar. These offered superior purity and colour and by the time Bayer died in 1880, leaving the business to his sons, the factory was thriving. Later the company diversified into pesticides and eventually pharmaceutical products. Salicin, a natural substance found predominantly in willow leaves, had been recognized for centuries as a remedy for fever and pain. In 1897, a Bayer chemist, Felix Hoffmann, developed a stable powder derived from salicin and tested it successfully on his father's rheumatism. Two years later Bayer launched the powder in soluble form as Aspirin, which rapidly became the world's first "blockbuster" drug. Rather less admirable was another product, introduced in 1898 as a cure for morphine addiction. This product was marketed as Heroin, actually a brandname invented by Bayer, until it was discovered that the new drug was in fact more addictive than the substance it was designed to cure. The company's rights to the name were subsequently confiscated.
Nevertheless, the massive global success of Aspirin allowed Bayer to expand rapidly, and the company set up a number of international offices, including a factory in North America. (In fact, Bayer had taken its first inroads into the US as early as 1865 when it acquired a interest in a dye factory in New York). In 1909 the company also developed the first form of cheap synthetic rubber, which experienced massive demand as the motoring industry boomed. But with the outbreak of World War I, Bayer began to develop less beneficial products, including the first poison gas used in the trenches. When America entered the war in 1917 the US government confiscated Bayer's North American assets and trademarks and sold them (for $5m) to local company Sterling Winthrop.
In 1925, Bayer and a group of other German chemical businesses including Hoechst and BASF joined forces as IG Farben Trust, creating the country's biggest industrial conglomerate. The group's operations spanned every form of chemical research including photographic materials and pharmaceuticals. The Bayer chemicals business was especially involved with the development of the first polyurethane, and developed the first sulfonamide antibiotic, Prontosil, a miracle drug of the 1930s. The company was also allowed to reestablish links with Sterling Winthrop in the US. Still prohibited from using the Bayer trademark in the US, it formed Bayer of Canada in 1935. However war intervened once again, and IG Farben became deeply involved with the Nazi war effort. It was one of several companies which developed and manufactured the infamous Zyklon B poison gas used in the concentration camps.
In 1945, the allies broke up IG Farben, re-establishing most of the original companies, while their various photographic interests were combined as Agfa, under Bayer's management. Back in North America, Bayer of Canada was confiscated and placed under Sterling's control. During the 1960s, Bayer once again expanded around the globe, developing a wide range of dyes and synthetic plastics. The Bayer trademark was still controlled in North America by Sterling Health, so the German company re-entered the US in 1954 through a dye and pesticides joint venture with Monsanto (which it bought out in 1967). In 1964, Agfa merged with Belgian company Gevaert, and was later bought back by Bayer.
In 1978, Bayer ventured back into the US pharmaceutical industry, acquiring Miles Laboratories, a company which had enjoyed considerable success with Alka-Seltzer, an effervescent alkaline tablet first invented 50 years earlier, and widely used as a remedy for aches and pains as well as alcoholic over-indulgence. Miles became the company's principal US operation, acquiring in turn a number of other healthcare businesses. Bayer also acquired US imaging business Compugraphic in 1989, as well as Canadian rubber company Nova's Polysar in 1990 (now Bayer Sarnia). In 1994, following the acquisition of Sterling Health by SmithKline Beecham, Bayer paid $1bn to reacquire rights to the Bayer and Aspirin brands in the US, as well as another OTC product, Phillips' Milk of Magnesia, first invented by Dr Charles Phillips in 1873.
In 1996, Bayer bought Monsanto's US rubber compounds business for $580m, and formed a joint venture with Swiss pharma business Roche to market its OTC drugs in the US. In 1998, non-core divisions, including a food ingredients business and the Agfa photocopier company were sold off, and the rest of Agfa was floated. Instead, the group acquired US diagnostics business Chiron for $1.1bn, and took a 14% stake in research company Millennium Products. Also that year, Bayer teamed up with SmithKline Beecham to launch a new cholesterol lowering drug. Known as Baycol in the US and Lipobay internationally, this was widely regarded as the group's most important product for several years.
In 1999, Bayer, BASF and Hoechst agreed to combine their textiles operations to form the world's leading dye manufacturer. Bayer also bought US rubber-maker Lyon Chemicals for $2.5bn. But the group came under increasing pressure from shareholders to restructure, or dispose of parts of its business. In particular it was pressed to demonstrate that its healthcare division could hold its own in the rapidly consolidating pharmaceutical industry. In 2000 the group began disposing of its interests in some industrial activities, selling its stake in joint venture Erdolchemie to partner BP Amoco, and reducing its shareholding in dye-manufacturing joint venture DyStar.
Following a series of anthrax terror attacks in the US in late 2001, Bayer jumped into the public eye as the only company to produce large quantities of a suitable anthrax treatment. Yet although the company benefited initially from a huge uplift in sales of Cipro, it soon found itself accused of profiteering from the tragedy, and several US politicians called for the patent to be overruled. Late in the year Bayer substantially boosted its position in the agrochemicals sector with the acquisition for €7.2bn of Aventis CropScience. Bayer sold several of its insecticides to SC Johnson to win clearance for the deal. However, the company was also dealt a huge blow when it was obliged to withdraw Baycol/Lipobay in all markets after evidence of serious side effects in patients who took the cholesterol-lowering medicine in combination with another fat-reducing drug, gemfibrozil. By mid-year the drug had been linked to more than 1,000 cases of health defects, including as many as 100 deaths. Families of several people who died after taking the drug began legal action against Bayer's US subsidiary. The first case to come to court ended in good news for Bayer, when an individual claim for $650m in damages, was dismissed. Although the group has not acknowledged any liability in these cases, it had settled almost 3,000 Baycol lawsuits by the beginning of 2005, at a cost of more than $1bn. More than 6,100 lawsuits are still pending, although only around 100 of these are expected to lead to a settlement.
During 2004, Bayer spun off two new biotech respiratory drugs into a separate company, Aerovance, controlled by private equity groups including Apax; and agreed to sell its Bayer Biologicals unit, which makes blood and plasma products, to investment funds Cerberus and Ampersand Ventures for around $590m. That unit was renamed NPS BioTherapeutics.
In 2006, Bayer waded into the bidding battle between German drug companies Merck and Schering, offering €16.3bn to acquire the latter company. (This Merck and Schering have no connection with the US companies Merck & Co and Schering-Plough). Bayer and Schering's respective drugs divisions were merged mid-year under the name Bayer Schering Pharma.
Last full revision 18th October 2017
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