Bayer Pharma Sales Rise 6.4% Y/Y in Q2, Fuelled by Consumer Health Segment

Bayer HealthCare has reported encouraging financial results for the second quarter (Q2) of 2010, recording a 6.4% year-on-year (y/y) growth in sales on a reported basis. The growth was fuelled by both its pharma and consumer health division which respectively grew 4.3% and 10.3% y/y to reach 2.7 billion euro (US$3.53 billion) and 1.5 billion euro. Bayer's pharma business expanded in emerging markets but considerably fell in North America, because of safety concerns on Yaz and on the divestments of cancer drugs MabCampath/Campath, Fludara and Leukine to U.S. partner Genzyme. On the expense side, research and development expenditure was up 12.7% y/y in the second quarter to stand at 747 million euro while selling expenses, and general and administration expenses respectively increased 11.1% and 127% y/y. The group's operating income—calculated by IHS Global Insight as net sales minus cost of goods sold, selling, R&D, and general and administration expenses—increased 14.4% y/y over the second quarter to attain 1.3 billion euro. Bayer achieved a net income of 525 million euro, down 1.3% y/y, over the period but reported a net income of 1.218 billion euro in the first half of 2010, up 27.3% y/y.

Sales of Bayer's women's healthcare and general medicine rose 3.9% y/y in the second quarter to attain 1.7 billion euro despite a reported 11.1% y/y decrease in revenues from the Yaz/Yasmin/Yasminelle family franchise. Bayer's flagship family was hurt by a lower demand for Yaz on safety concerns and by an intensified generic competition in the United States. Sales declines experienced by the contraceptive drugs made the Yaz family franchise lost its top position among Bayer's portfolio to the advantage of the multiple sclerosis (MS) drug Betaferon/Betaseron (interferon beta 1b) which however saw its sales fall by 5.6% y/y due to intensified competition in Europe, particularly in the United States and Germany. On the positive side, cancer drug Nexavar (sorafenib) and blood-clotting medication Kogenate (recombinant Factor VIII) reported record growth during the second quarter with respective rises of 26.5% and 29.3% y/y in net sales. The unusual rise experienced in sales of Kogenate are attributable to higher volumes ordered in North America and Asia-Pacific, partly resulting from fluctuations in the ordering schedule of Bayer's distribution partner. The medication grew 10.5% y/y during the first half of 2010 to 482 million euro. Sales were also driven by a good performance of its antibiotic Avalox/Avelox whose sales grew 28.3% y/y, the second fastest growth after Kogenate over the second quarter, to attain 118 million euro.

Meanwhile, Bayer's consumer healthcare business continued to record impressive growth, advancing by 10.3% y/y in the reported currency to 1.557 billion euro in the second quarter. All regions contributed to this increase with North America playing a significant role in this good performance.

Outlook and Implications

Bayer HealthCare has adjusted its sales forecast following the surprise market entry of a generic competitor to Yaz at the beginning of June 2010 in the United States (see Germany: 16 June 2010: Bayer Sues Teva, Barr over Generic Contraceptive Pill Gianvi). The group is now expecting pharmaceutical sales to remain stable on a currency and portfolio adjusted basis while its consumer health business is expected to grow faster than the market. Overall, healthcare revenues are anticipated to slightly grow, from a previous 3% growth anticipated. The generic competitor to Yaz is marketed by Teva (Israel) under the name Gianvi (drospirenone + ethinyl estradiol). Teva launched Gianvi in mid-2010 in the United States, breaking the deal which tied up its subsidiary Barr Pharmaceuticals to Bayer since 2008. Under the agreement in question, Teva—through its subsidiary Barr—obtained the right to launch an authorised generic version of Yaz as of July 2011. Teva is targeting a global market worth over US$1.5 billion with its oral contraceptive Gianvi.

The former best-selling product of Bayer is facing significant challenges in the coming months with the generic entry of Gianvi and the high number of lawsuits pending in the United States. About 2,700 lawsuits were recorded as of 10 July 2010, increasing concerns over a thrombosis risk linked to contraceptives containing drospirenon