German conglomerate Bayer AG announced its third-quarter results, showing a 10.7% y/y increase in sales at group level, while in the first three quarters, sales at the largest division in the group, HealthCare, rose 24.3% y/y.
IHS Life Sciences perspective | |
Implications | The most dynamic growth within the HealthCare division came in the sales of new pharmaceuticals, such as ophthalmology drug Eylea and oncology medicines Stivarga and Xofigo. |
Outlook | As Bayer's new group structure takes shape and it continues its transformation into an exclusively life-sciences enterprise, it can be expected that its product portfolio will expand on increased investment in research and development. |
Bayer group sales up 10.7% y/y in Q3
Major German chemical conglomerate Bayer AG has announced its financial results for the third quarter of 2015. The Bayer group continued to show very positive growth across all its business segments, with group net sales increasing 10.7% year on year (y/y) in the third quarter to EUR11.036 billion (USD12.078 billion). Considering the first three quarters of the year (January-September), growth was even more dynamic, at 14.6% y/y. reaching EUR35.005 billion.
HealthCare sales up 24.3% y/y in January–September
Bayer HealthCare, the largest division in terms of sales, which includes Pharmaceuticals (prescription pharmaceuticals) and Consumer Health (over-the-counter medicines), saw an increase in net sales of 19.2% y/y on a reported basis in the third quarter; if this growth figure is adjusted for foreign exchange (FX) and portfolio effects, it converts to 8.3% y/y. In the first three quarters of 2015, Bayer HealthCare's net sales increased by 24.3% y/y on a reported basis, to EUR17.063 billion, although on an FX and portfolio adjusted basis, this growth was 7.9% y/y.
Pharmaceuticals division sales up 15.9% y/y in January–September
Sales of the Pharmaceuticals division of HealthCare increased by an impressive 14.6% y/y in the third quarter and 15.9% y/y in the first three quarters – or 11.7% y/y and 10.0% y/y respectively, on an FX and portfolio-adjusted basis. The very strong growth in the Consumer Health division of HealthCare was mainly due to the addition to its portfolio of new products from the recently acquired consumer health portfolio of Merck & Co. (United States).
Bayer group (and HealthCare division) financial results, Q3 and January-September 2015, mil. EUR | ||||
Q3 2015 | % change y/y | January-September 2015 | % change y/y | |
Group net sales | 11,036 | 10.7 | 35,005 | 14.6 |
-HealthCare | 5,651 | 19.2 | 17,603 | 24.3 |
--Pharmaceuticals | 3,482 | 14.6 | 10,174 | 15.9 |
--Consumer Health | 2,169 | 27.5 | 6,889 | 39.4 |
Cost of goods sold | 4,956 | 2.0 | 15,744 | 8.0 |
Selling expenses | 2,927 | 13.5 | 9,024 | 20.3 |
R&D expenses | 1,041 | 20.1 | 3,023 | 20.0 |
General administration expenses | 509 | 30.8 | 1,530 | 25.0 |
Operating income* | 1,603 | 25.9 | 5,684 | 20.4 |
Operating margin** | 14.5 | 1.7pp higher | 16.2 | 0.7pp higher |
R&D as a % net sales | 9.4 | 0.7pp higher | 8.6 | 0.4pp higher |
Net income | 999 | 20.9 | 3,497 | 9.2 |
Source: Bayer AG | ||||
New products show strongest sales growth
As emphasised by Bayer, sales of new products were particularly decisive in the strong growth in the Pharmaceuticals division, and HealthCare in general, although the top-selling product remained the well-established oral anticoagulant Xarelto (rivaroxaban), which saw strong sales gains in all Bayer HealthCare's main markets, increasing on a reported basis by 37.7% y/y to EUR1.602 billion. More remarkable growth came, however, in the sales of a newer product - ophthalmology drug Eylea (aflibercept), which saw a sales increase of 61.9% y/y on a reported basis, to EUR874 million. As Bayer stated, this was mainly due to approvals for new indications for Eylea in the European Union and Japan. Other new products with strong sales increases were oncology drugs Stivarga (regorafenib), which saw reported growth of 46.6% y/y, to EUR236 million, mainly due to positive business in the United States, and Xofigo (radium-223), sales of which rose 46.9% y/y on a reported basis, to EUR188 million, on good figures from the European Union and the United States.
Bayer HealthCare Pharmaceuticals, best-selling drugs, January-September 2015, mil EUR. | |||
Name of drug | January-September 2015 | % change | Fx adjusted % change |
Xarelto (rivaroxaban) | 1,602 | 37.7 | 37.1 |
Eylea (aflibercept) | 874 | 61.9 | 57.1 |
Kogenate (recombinant factor VIII treatment) | 869 | 7.5 | 0.7 |
Mirena (levonorgestrel) product family | 742 | 24.9 | 9.8 |
Nexavar (sorafenib) | 661 | 15.8 | 6.1 |
Betaferon / Betaseron (interferon beta-1b) | 634 | 0.8 | -9.2 |
Yaz/Yasmin/Yasminelle (drospirenone + ethinyl estradiol) | 538 | -5.6 | -5.0 |
Adalat (nifedipine) | 481 | 10.6 | 0.8 |
Aspirin Cardio (acetylsalicylic acid) | 393 | 10.4 | 2.3 |
Glucobay (acarbose) | 381 | 22.9 | 4.1 |
Avalox/Avelox (moxifloxacin) | 294 | 3..2 | -3.5 |
Stivarga (regorafenib) | 236 | 46.6 | 29.3 |
Xofigo (radium-223) | 188 | 46.9 | 27.5 |
Levitra (vardenafil) | 165 | -12.7 | -13.7 |
Fosrenol (lanthanum carbonate) | 131 | 7.4 | 3.1 |
Total | 8,189 | 19.4 | 12.0 |
Proportion of Pharmaceuticals sales | 80% | - | - |
Source: Bayer AG | |||
Outlook and implications
Clearly, the acquisition of Merck & Co.'s consumer health portfolio has had an important impact on the growth of Bayer HealthCare's sales, helping to achieve such impressive double-digit growth figures in the first three quarters. As regards the performance of the Pharmaceuticals division, although Bayer has stressed the importance of new products with regard to sales growth, it is perhaps the strong sales growth of older products – including type-2 diabetes treatment Glucobay and the Mirena family of hormone-release intrauterine products – that is the most striking aspect of its results.
Bayer continues to have a very positive outlook in terms of its product pipeline for prescription pharmaceuticals, as it continues its transition to a purely life-sciences based enterprise. In August, the group announced that from the beginning of 2016, it would begin operating under a new structure, with three divisions – Pharmaceuticals, Consumer Health and Crop Science. This reflects the spinning off of the Material Science division, and its transformation into the new entity Covestro, which is now legally separate from the other Bayer divisions.
Thus, Bayer can be expected to continue to place even more emphasis on its Pharmaceuticals division, which will receive increased research and development (R&D) funding, backed by a steady income stream from the expanded Consumer Health division.