The takeover of Monsanto is a disaster for Bayer. Now the drug business is expected to generate increasing sales. But it is precisely in this sector that sales are dwindling – even with the bestseller aspirin.
Aspirin Company – Bayer CEO Werner Baumann only needed two words to explain his company to the US President. Back then, in January 2018 in Davos, Baumann was sitting with other top German managers at a dinner with Donald Trump; everyone in the group introduced themselves briefly. The name aspirin took off – the US President confessed to taking one dose of aspirin a day.
At that time, Baumann was still full of hope for his major transatlantic project. Two years later, the good mood has evaporated: The takeover of the US company Monsanto by Bayer is increasingly turning out to be a disaster. A few days ago Baumann admitted that the problems in the agricultural business with pesticides and seeds are bigger than expected. The consequences: Depreciation in the billions, an austerity course, possibly further job losses. Bayer shares lost double digits.
And now? In the future, the business with over-the-counter and prescription drugs should ensure growth. Of all things. For a long time, the divisions were overshadowed by the agricultural business. It also depends on the classic aspirin.
Less colds from Corona
The only problem is: In the corona crisis, sales of many drugs are falling. The bestseller aspirin is also suffering. Cold and pain preparations have recently been less in demand. In addition, the patents of important Bayer drugs will expire in a few years – sales are likely to decline. Sufficient supplies are not in sight. A cracker like aspirin used to be is missing. The situation hurts.
The pill with the active ingredient acetylsalicylic acid, invented in 1897, has been reliably generating sales and profits for more than 100 years. Over time, Bayer has repeatedly launched variants of its successful product. Aspirin is available as chewable and effervescent tablets, also as granules, with and without caffeine. There is aspirin available without a prescription for colds and pain, prescription for the prevention of heart attacks, in Spain with a raspberry flavor, in Italy also as a suppository. Bayer markets its super drug as “Genuine Bayer Aspirin” in the USA and as “Aspirine du Rhone” in France.
The share of sales is manageable: all aspirin products together should generate around one billion euros – with annual sales of 43.5 billion euros, this corresponds to a share of two to three percent.
But aspirin is also a symbol for the Leverkusen-based group – and a highly profitable one at the same time. Baumann confirmed this to Trump in Davos. The Bayer boss did not name a number. The Bitterfeld plant alone produces several billion aspirin tablets each year.
But demand seems to have decreased recently – after strong business at the beginning of the year.
Bayer does not publish any figures on the sales development of aspirin. But in the corresponding categories, for over-the-counter cold preparations and pain relievers to which the aspirin products are assigned, sales in the second quarter were down on the previous year: for cold preparations by 17 percent, for pain relievers by six percent.
The corona crisis is to blame. Since the virus began to circulate, people have avoided social contact, which reduces the risk of catching a cold.
“Everything except disinfectants, vitamin and immune preparations as well as skin care is currently struggling with losses,” says Tobias Brodtkorb, managing director of the Sempora consultancy, which specializes in the pharmacy market.
Bayer is not only feeling the corona crash with over-the-counter drugs, but also with prescription drugs. Two of the three top drugs are affected: The Eylea eye medicine was used less because many operations were postponed during the lockdown. The Mirena IUD, a contraceptive product, also brought in significantly less money – young American women in particular visited their gynecologists less often.
Other funds have been struggling with declining sales for some time and have passed their zenith. Betaferon for multiple sclerosis, for example, was Bayer’s top-selling product just a few years ago, with annual sales exceeding one billion euros. In the end it was only 457 million. The competition has caught up a lot.
Billions in sales break down
Things recently went well for the anticoagulant Xarelto, currently Bayer’s most successful product. The prescription Aspirin Cardio, which prevents heart attacks, saw sales increase slightly in the second quarter.
Bayer is now hoping that the corona effect will subside as soon as possible, that medical practices and clinics will fill up again quickly. So that the drug business gets going again and can deliver the expected sales. Baumann has already promised “growth in investments” at Pharma. “Acquisitions” and “in-licensing”, the acquisition of drugs that have not yet been approved, should also be possible.
Sales of aspirin are also expected to increase – after all, the financial outlay is limited. Internally, the brand is considered to be a “surefire success” and a “cash cow”. Almost every German knows the product.
There have been some smaller acquisitions recently. Bayer recently acquired the British biotech company Kandy Therapeutics, which aims to alleviate menopausal symptoms in women who are not given hormones. The final test phase is scheduled to begin next year.
So-called in-licensing for promising drugs that are about to be approved can be expensive – prices reach high single-digit billions. Money that Bayer doesn’t necessarily have. The only thing left for the group to do is to invest in early phases when success cannot really be foreseen.
From the middle of the decade, the patents of the two top drugs Xarelto and Eylea will also expire. Xarelto recently had annual sales of more than four billion euros, Eylea more than two billion. After the patent expires, the manufacturers of copycat drugs can get involved – the revenues of the original suppliers then regularly collapse. “Sales in the pharmaceuticals business at Bayer will then fall by a double-digit rate,” predicts Markus Mayer, who heads the research department at Baader Bank.
Bayer sees itself as “well positioned” in the pharmaceuticals business; around 50 projects are in clinical trials on humans. The cancer drugs darolutamide for prostate cancer and Vitrakvi, which is used for a rare genome change, have now been approved. Vericiguat (heart failure) and Finerenone (kidney disease) are about to be approved.
All of this does not really convince Mayer: “The new preparations are not suitable to replace the top drugs Xarelto and Eylea.” And a drug that is revolutionizing the pharmaceutical world, such as aspirin at the time, does not seem far and wide in sight.
More on the subject: Bayer is now the takeover target – and could be smashed