IHS Global Insight Perspective | |
Significance | Bayer Healthcare's revenues for the first quarter of 2011 rose by 7.7% year-on-year, as pharmaceutical business continues to face regulatory and generic challenges. |
Implications | The revenues were driven by leading brands such as Kogenate and Betaferon, as Nexavar continues strong upward growth. |
Outlook | The results are better than the disclosed top-line outlook of low- to mid-digit growth, on account of the performance of the consumer health division. Including currency effects, the pharmaceutical business showed only marginal growth. This division is likely to continue to struggle as global reform rollouts progress over the course of the year, inclusive of the domestic market. |
Sales of German firm Bayer AG's healthcare group increased by 7.7% year-on-year (y/y) to reach EUR4.17 billion (USD6.19 billion) over the first quarter of 2011. Unsurprisingly, the consumer health business drove growth, with sales of EUR1.52 billion and growth of 13.4% y/y over the same period, owing to generic competition for contraceptive Yaz (drospirenone + ethinyl estradiol) in the US market, and austerity reforms in various countries—including its domestic market of Germany—affecting the pharma division. Revenue growth from the pharmaceutical business, however, remained positive, with growth of 4.7% y/y (currency adjusted 0.9% y/y growth), at EUR2.65 billion over the three months in question.
Geographically speaking, the Asia Pacific region reported the highest y/y growth for the first three months of the year, at 27.4% (EUR850 million), boosted by an increase in prescription drug sales in China and Japan. As indicated before, generic competition has seen North America report the lowest y/y growth over the period, at -5.1% (EUR1.08 billion). The European and Rest of the World (Latin America, Africa, and Middle East) healthcare businesses grew by 4.8% y/y (EUR1.6 billion) and 18.2% (EUR644 million), respectively.
Expenditure wise, cost of goods sold, selling expenses, and general and administrative expenses grew by 10.8%, 9.2%, and 4.7% y/y respectively for the Bayer Group over the indicated period. Although research and development (R&D) expenses grew by 2.8% y/y at EUR737 million, R&D expenses as a percentage of sales declined slightly, by 0.8 percentage points (pp).
Operating profit for the Bayer group stood at EUR1.67 billion, an increase of 36.3% y/y, while net profit stood at EUR684 million, an increase of 8.4% y/y. Bayer Healthcare's earnings before interest, tax, depreciation, and amortisation stood at EUR1.14 billion, an 11% y/y increase.
Bayer: 2011 Financial Results (EUR mil.) | ||
2011 | % Change Y/Y (reported) | |
Bayer Group's Sales | 9,415.0 | 13.20 |
Bayer HealthCare's Sales | 4,166.0 | 7.70 |
- Pharmaceuticals | 2,649.0 | 4.70 |
- Consumer Health | 1,517.0 | 13.40 |
Cost of Goods Sold | 4,437.0 | 10.84 |
Selling Expenses | 2,147.0 | 9.20 |
R&D Expenses | 737.0 | 2.80 |
General and Administration Expenses | 424.0 | 4.70 |
Operating Income * | 1,670.0 | 36.32 |
Operating Margin ** | 17.7 | 3.00 pp higher |
R&D As % of Net Sales | 7.8 | 0.80 pp lower |
Net Income | 684.0 | 8.40 |
* IHS Global Insight estimate: net sales minus cost of goods sold, selling, R&D, and general and administration expenses ** IHS Global Insight estimate: operating income as a percentage of net sales Source: Bayer AG | ||
Kogenate (anti-haemophilic factor recombinant) was the leading revenue generator for the pharma business during the first three months of the year. Betaferon (interferon beta-1b) came second with a y/y decrease of 3.2%, in contrast with 2010, when it occupied the leading position. The Yaz portfolio revenues decreased by 15.7% y/y, while cancer drug Nexavar (sorafenib) continues to report strong sales, with a growth rate of 11% y/y in the first quarter of 2011.
The consumer health division's sales for the quarter were boosted by brands such as Contour (blood glucose monitor) and Aspirin (paracetamol).
Bayer: 2011 Sales of Leading Products (EUR Mil.) | |||
Brand | 2011 | % Change Y/Y (reported) | % Change Y/Y (comparable) |
Kogenate | 283 | 16.0 | 13.0 |
Betaferon | 274 | -3.2 | -5.0 |
Yaz/Yasmin/Yasminelle (drospirenone + ethinyl estradiol) | 242 | -15.7 | -18.3 |
Nexavar | 172 | 11.0 | 7.2 |
Adalat (nifedipine) | 157 | 7.5 | -0.1 |
Avalox/Avelox (moxifloxacin) | 147 | 8.9 | 4.7 |
Mirena (levonorgestrel) | 143 | 0.0 | -1.8 |
Aspirin Cardio (acetylsalicylic acid) | 90 | 23.3 | 18.7 |
Glucobay (acarbose) | 88 | 11.4 | 5.3 |
Levitra (vardenafil) | 82 | -4.7 | -7.4 |
Ultravist (iopromide) | 75 | 10.3 | 8.5 |
Cipro/Ciprobay (ciprofloxacin) | 59 | -21.3 | -24.9 |
Magnevist (gadopentetate dimeglumine) | 45 | -11.8 | -14.5 |
Iopamiron (iopamidol) | 44 | 12.8 | 3.6 |
Dianette (cyproterone acetate + ethinylestradiol) | 41 | 10.8 | 6.3 |
Total | 1,942 | 2.2 | -1.3 |
Proportion of Pharmaceutical Sales | 73% | - | - |
Source: Bayer AG | |||
Outlook and Implications
Bayer AG has increased its earnings-per-share outlook to 15% y/y growth, owing to the well performing crop sciences business. However, Bayer Healthcare's outlook remains constant at a low- to mid-single-digit percentage after adjusting for currency and portfolio effects in 2011. The quarter has set the stage for the forthcoming quarters and beyond, with the Japanese approval submission for key drug Xarelto (rivaroxaban), while at the same time announcing prospective revenue-dampening clinical trial results showing the drug with a higher risk of bleeding when compared with Lovenox (enoxaparin) for the prevention of venous thromboembolism in hospitalised patients with acute medical illness. Meanwhile, emerging markets are set to play a bigger role in company revenues, with estimates that sales from these markets will have doubled to EUR10 billion by 2015.