Daily Management Review

Criticisms after Monsanto Deal Soothed by Bayer, Claims Expected Rise in Sale of Top Selling Drugs


09/20/2016




Criticisms after Monsanto Deal Soothed by Bayer, Claims Expected Rise in Sale of Top Selling Drugs
Following the announcement of its $66 billion takeover of Monsanto, there were criticism by a large section of the company  investors that the attention of German drug maker Bayer would get divided between the two companies which could result I the company neglecting in its pharmaceuticals business.
 
However assuring the criticizers and investors, the company has announced that the sale target for its top performing drugs have been enhanced as the company sees a higher annual peak sales potential than previously targeted for its two best-selling drugs.
 
Compared to a previous year figure of an average of about 3.5 billion for its stroke prevention pill Xarelto, Bayer visualizes that when the drug would be sold in the market jointly with Johnson & Johnson, the average annual peak sale of  the same drug would increase to a value of more than 5 billion euros ($5.6 billion).
 
On the other hand, after jointly developing with Regeneron, for the eye medicine Eylea,  Bayer had previously recorded an average annual sale of at least 1.5 billion from the drug. Now after the merger, the company expects that the drug would potentially bring in more than 2.5 billion euros.
 
In recent times, the group's prescription drugs unit has been somewhat underpinned by cancer drug Xofigo and pulmonary hypertension treatment Adempas. However after the takeover of  Monsanto, Bayer expects that the sale of the prescription drugs unit would go up from 30.1 percent last year to 32-34 percent of sales in 2018 in terms of the earnings before interest, taxes, depreciation and amortisation (EBITDA), adjusted for special items.
 
With respect of its much smaller nut profitable animal health unit, Bayer said that it can also see an increase.
 
The company is of the view that its sales adjusted for currency swings growing by between 4 and 5 percent by the end of 2018 for its consumer health division. Till this time the performance of the division has been boosted by the acquisition of brands from Merck & Co. and even then the figure for the division of the company was 24 percent in 2015.
 
Bayer has essentially "underestimated the country risk from Emerging Markets volatility," the company said in its presentation slides.
  
While talking about the Chinese non-prescription drugs unit that Bayer had acquired in 2014, the company said that "stronger business disruption than anticipated during the integration of Merck Consumer Care and Dihon in China".
 
"2018 EBITDA guidance for Pharma and Animal Health may ... offer some upside against consensus, though the consumer margin guidance may disappoint slightly," Jefferies analysts said in a note to investors.
 
After the announcement by the company assuring the investors, there was a rise of 1.5 percent in the value of the shares of Bayer  in premarket trading at brokerage Lang & Schwarz. This happened at a time when the overall German market was seen little changed ahead of the official market open at 0700 GMT
 
(Source:www.reuters.com) 






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