In 2018, Bayer faced challenges from patent expirations and debt from the Monsanto acquisition. However, strategic investments in promising new products like Nubeqa and Kerendia have shifted the outlook from a “patent cliff” to a manageable “patent dent.” Despite setbacks, including a halted study for Asundexian, Bayer is reorganizing its operations under a new initiative, Dynamic Shared Ownership, while focusing on growth and innovation across its diverse sectors.
Revisiting Bayer’s Pharmaceutical Strategy
In 2018, Bayer welcomed Mr. Oelrich back to the fold as a board member and leader of the Pharmaceuticals division. At that time, the company faced a daunting challenge: a looming “patent cliff” threatened the end of patent protections for key blockbuster medications, paving the way for cheaper generic alternatives. To make matters worse, Bayer had few successors in its product pipeline. Did this daunting scenario give you pause?
Indeed, Bayer was navigating two significant challenges: the substantial debt incurred from the Monsanto acquisition and the impending patent expirations for two critical revenue generators—Xarelto, a blood thinner, and Eylea, an eye injection—set to expire in 2024 and 2025. However, I was assured by the then-CEO that there would be continued investment in the pharmaceutical sector, and with about five years at my disposal, I was confident that we could effect meaningful change.
Transforming Challenges into Opportunities
And indeed, we have turned the tide. Instead of facing a “patent cliff,” we are now looking at a manageable “patent dent.” As we approach the expiration of patents for the aforementioned products, we are well-positioned to maintain stable revenues rather than experiencing a sharp downturn. Our success stems from strategic investments in products nearing market readiness as well as early-stage developments, alongside the optimal utilization of our existing portfolio.
What are the key drivers behind our new revenue streams? We have five promising products in the pipeline. Nubeqa, designed for prostate cancer treatment, is projected to generate over 1.5 billion euros by 2024 and could be the fastest-growing product in Bayer’s history. Kerendia, aimed at treating kidney insufficiency, contributed approximately 0.5 billion euros last year, and we are actively expanding its applications. These two drugs are already offsetting the anticipated decline in Xarelto’s revenue, which previously stood at around 4 billion euros annually.
As for the remaining three products, Eylea has demonstrated unexpectedly positive results in higher dosage studies, allowing us to foresee stable revenues even as patent protections expire. Additionally, we have two new drugs from acquisitions: Elinzanetant, which offers non-hormonal relief for menopausal symptoms, and Acoramidis, set to treat heart failure, launching in Europe in 2025.
Instead of lamenting the loss of two blockbuster products, we are now focused on the exciting potential of five new ones, even if that sentiment isn’t widely recognized.
Navigating Setbacks and Future Prospects
However, we did face a significant setback in November 2023 when we had to halt a clinical study for Asundexian, an anticoagulant intended to succeed Xarelto, due to disappointing results. We had always maintained that our growth trajectory would continue regardless of Asundexian’s outcomes. While it would have undoubtedly accelerated our growth, we are still pursuing a second study for alternate applications of Asundexian, with results expected in the third quarter. We remain hopeful that the drug may still meet blockbuster criteria. Setbacks are an inherent part of the pharmaceutical landscape.
In terms of geographical realignment, Bayer Pharmaceuticals has shifted from its previously European-centric focus. We lacked rights to Xarelto and Eylea in the U.S., leaving us underrepresented in the world’s most critical market across research, production, and sales. Now, we hold full rights to our new products in the U.S., contributing to swift revenue growth that helps cushion the impact of Xarelto’s decline in Europe and China.
Looking ahead, major acquisitions are not on the horizon for the next two to three years. The pharmaceuticals division has invested between 8 and 10 billion euros in external deals over the past five to six years. Given our current debt levels, debt reduction will take precedence, although we do have a small budget for acquiring additional licenses.
As Bayer’s new CEO, Bill Anderson, pushes for a reorganization known as Dynamic Shared Ownership (DSO), aimed at reducing bureaucracy and hierarchies, thousands of jobs will be affected. While I cannot provide specific numbers on job cuts in our division, it’s important to note that our workforce has expanded significantly in the U.S. due to recent acquisitions, while reductions in Europe are also occurring as a response to the changing landscape.
Overall, the DSO initiative seeks to streamline operations and has resulted in forming about ten “Micro Enterprises” within my division. These entities, akin to speedboats, will operate with their own financial frameworks while remaining integrated with Bayer’s broader objectives. Such changes will be implemented collaboratively with employee representatives, ensuring that transitions are manageable and beneficial for all involved.
As Bayer operates across three distinct sectors—agrochemicals, pharmaceuticals, and consumer health—the prospect of splitting the company has often been discussed by shareholders. However, our focus remains on leveraging our diverse strengths to drive innovation and growth across all divisions.