Bayer, Germany: how to reposition the pharmaceutical business under the shadow of glyphosate?
Investors were very disappointed with Bayer’s performance report released on the 5th. Its share price fell more than 7% on the Frankfurt Stock Exchange, ranking first in the decline of DAX index shares. On the same day, the German chemical pharmaceutical giant also announced its fourth major M & A in a year. This shows that under the negative impact of glyphosate problem, the company is promoting the expansion of its drug research business through acquisition.
Bayer Group, headquartered in Leverkusen, reported on the 5th that affected by the provision for special expenses related to glyphosate litigation (3.9 billion euros), the group had a net loss of 2.33 billion euros in the second quarter. Bayer has provided more than 10 billion euros in reserves for glyphosate litigation last year. So far, the negative impact related to Bayer’s acquisition of Monsanto is expected to basically end.
Bayer’s sales in the first half of the year increased by 1.2% to 23.18 billion euros, of which the sales growth in Asia Pacific region was 4.9%, faster than that in Europe (1.9%) and North America (still negative growth). Bayer also raised its annual sales growth forecast to 6% from the previous 3%.
Bayer Group’s overall loss in the first half of the year was nearly 250 million euros, which was much lower than the loss of 8 billion euros in the same period of the previous year. However, compared with other large German listed companies that frequently released far higher than expected second quarter performance reports recently, Bayer’s performance report on Thursday disappointed investors.
On Thursday, Bayer’s shares on the Frankfurt Stock Exchange plunged 7.60%, not only ranking first in the decline of DAX index shares, but also the highest trading volume of the day. At present, Bayer’s share price is close to 46 euros per share, and its market value is less than 40% of the much smaller Merck group, and only more than half of the German biotechnology company that successfully developed the new crown mRNA vaccine.
Bayer CEO Werner Bowman said on Thursday that the sales momentum of all businesses is expected to remain optimistic. He also highlighted the latest investments in the pharmaceutical sector.
On the same day, Bayer announced that it would acquire American biotechnology company video at a price of up to US $2 billion. The California based company specializes in identifying new binding sites in disease-related proteins and is carrying out preclinical projects based on this technology.
In Bayer’s view, video technology is an ideal supplement to Bayer in the field of pharmaceutical chemistry. The head of Bayer’s pharmaceutical department said that this will enable Bayer to “develop first-class candidate drugs, so as to increase the value of Bayer’s product portfolio”.
It is understood that before Bayer made an offer, video had prepared for an initial public offering. Bayer now pays $1.5 billion directly to its owners and will pay another $500 million based on some development results. The company will be managed as an independent department within Bayer pharmaceutical.
This is Bayer’s fourth research-oriented pharmaceutical acquisition in less than a year. A few weeks ago, the group strengthened its research and development capacity in cancer drugs based on the coupling technology of radioactive atoms and active components molecules by taking over Noria treatment and PSMA treatment companies in the United States.
Last October, Bayer acquired ask biology, an American company specializing in gene therapy, which greatly strengthened its position in the field of gene and cell therapy. In August 2020, Bayer acquired Kandy therapy, a British company, which is studying a drug to treat menopausal symptoms.
German industry experts pointed out that under the shadow of glyphosate problem, Bayer is promoting the expansion of its drug research business through acquisition. Through the recent acquisition, Bayer’s platform strategy is clearer. The group’s goal is to acquire expertise that can be used in a wide range of diseases and to broaden R & D channels on a relatively large scale.
The acquisition of video is in line with this strategy. It is said that the biotechnology company has developed a so-called chemotherapeutic protein technology, which can identify proteins particularly accurately to find possible targets of therapeutic agents.
Jeff Hatfield, the boss of video, said that 90% of disease-related proteins cannot be affected or blocked by therapeutic agents at present. However, with its new technology, hundreds of new attack targets have been identified.
For Bayer, the new round of acquisition is also to reserve the pharmaceutical business after 2024, when its current best-selling anticoagulant xarelto and ophthalmic drug eylea will lose patent protection. The acquisition aims to provide a basis for extensive renewal and expansion of the scope of drugs over the next five years.
Recently, the company’s drug kerendia for renal failure was approved in the United States. The launch of the new anti-cancer drug nubeqa is also progressing smoothly, exceeding expectations. In the first half of 2021, Bayer Group’s drug sales increased by 3.8% to 8.86 billion euros, of which the growth rate in the second quarter reached 12.1%. This puts Bayer back in the middle of the industry.