Bayer (Germany)

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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, Bayer expanded its already substantial consumer healthcare business, where Aspirin is partnered by other brands with a global reputation including Alka-Seltzer, Aleve and Canesten. In 2014, it 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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Bayer website

Brands

Aspirin Ascensia Contour
Alka-Seltzer Kogenate
Canesten Talcid
One-A-Day Yasmin
Adalat Bayer Crop Science
Cipro Avelox
Advantage Levitra
Aleve Midol
Rennie Supradyn
Glucobay Betaferon

Recent stories from Adbrands Update:

Adbrands Daily Update 21st 2019: Bayer continued to shed assets, finalising terms for the transfer of its animal health unit to former Lilly subsidiary Elanco. Negotiations have been ongoing for more than six months since Bayer first mooted the divestment last year. An independent company since earlier this year, Elanco Animal Health will acquire Bayer's equivalent business for a total value of $7.6bn in cash and stock. The deal is expected to complete mid-2020. Combined sales from the merged company will be around $4.8bn, closing the gap with market-leading Zoetis. Bayer has a sizeable collection of veterinary products for food animals, but is perhaps most widely known for its companion animals products including the flea treatments Advantage/Advocate and Seresto. The deal will significantly enhance Elanco's presence in the latter segment.

Adbrands Daily Update 23rd Jul 2019: Bayer made further changes to its OTC portfolio. Following on from the sale of Coppertone, it has also agreed to divest the Dr Scholl footcare brand, which it owns in North America and Latin America only. (Reckitt Benckiser controls the brand elsewhere, where it is marketed as Scholl). The buyer is private equity fund Yellow Wood Partners, which is paying $585m for the business, a little over twice its annual sales last year. Yellow Wood also owns a collection of other beauty brands including Freeman, Real Techniques and Body Benefits.

Adbrands Daily Update 14th May 2019: Beiersdorf is bolstering its portfolio with the acquisition of iconic American sun care brand Coppertone from Bayer. The price tag is $550m, equivalent to a little over twice the brand's annual sales of around $215m. First introduced in 1944, Coppertone was America's first homegrown sun cream. It was acquired by Bayer in 2014 as part of the Merck & Co consumer health portfolio.

Adbrands Daily Update 13th May 2019: Bayer suffered another stinging defeat in its legal battles over weedkiller Roundup. This is the company's third consecutive loss out of three cases which have so far reached a verdict. Only another 13,337 to go. This time, the jury awarded a crushing $2bn penalty in punitive damages, significantly higher than the two previous verdicts of around $80m each. Bayer has filed appeals against all three. The next case will come to trial in August.

Adbrands Daily Update 26th Mar 2019: Already each facing substantial legal challenges for other products, Bayer and Johnson & Johnson tooks steps to settle a lawsuit over the anticoagulant Xarelto. The drug was developed by Bayer and is co-marketed in the US by J&J. Some 25,600 claims have been filed so far alleging that Xarelto caused severe and sometimes fatal bleeding episodes in some patients. Only six cases have come to trial so far, all of which have been won by the two companies, but they have taken the decision to settle all the remaining cases. "Bayer continues to believe these claims are without merit and there is no admission of liability under the agreement," the company said. "However, this favourable settlement allows the company to avoid the distraction and significant cost of continued litigation." A fund of $775m, split equally between the partners, will settle "virtually all" of the current caseload, allowing Bayer to focus on the legal challenges to its weedkiller Roundup and J&J to continue its defence of its talcum powder.

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Background

Free for all users | see full profile for current activities: 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.

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. See full profile for current activities


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