Tuesday - November 9, 2021
News Conference Call for the Third Quarter of 2021

Address by Werner Baumann and Wolfgang Nickl

Chairman of the Board of Management / Chief Financial Officer

(Please check against delivery)


Werner Baumann:

Ladies and gentlemen,

I would also like to wish you all a warm welcome to today’s conference call. Together with Wolfgang Nickl, I will start by summarizing the most important developments in the third quarter of 2021.


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We delivered strong operational performance in the third quarter, with both sales and earnings up significantly. All divisions showed strong growth momentum.

Our agricultural business posted exceptionally strong growth compared with the prior-year period, mainly due to volume and price increases in North America. And we're also seeing a good start to the season in Latin America.

Our pharmaceuticals business also achieved strong growth, benefiting in particular from major gains for our ophthalmology drug Eylea™.

Our Consumer Health Division also posted very good sales figures in all regions and product categories. Demand continued to rise, especially for our nutritional supplements.

Based on the good performance in the third quarter, we are today updating our 2021 outlook again, after having already upgraded it in August. This confirms our good business performance.

We also made good progress with the launch and development of new products in the third quarter.

At Crop Science, we launched a whole host of new products, achieving a great deal of success in the process. For example, we've launched new soybean seeds in North America and Brazil, as well as crop protection innovations for corn cultivation.

At Pharmaceuticals, we are seeing encouraging progress with our product launches and the further development of our pipeline. In the third quarter, we launched Kerendia™ in the United States. It is the first drug of its kind for patients with chronic kidney disease and type 2 diabetes.

We also obtained EU approval for Verquvo™, our product for the treatment of chronic heart failure, in the third quarter. This marks a further milestone in the global market launch of that product. We are also progressing well with our cancer drug Nubeqa™, which has achieved promising growth, especially in the United States. In addition, we have initiated a Phase III trial in the clinical development of Elinzanetant™, a product for menopausal women. We believe all these medicines are blockbuster candidates, with each having a peak sales potential of more than one billion euros.

We also acquired the U.S. company Vividion in the third quarter. As a result, we are now in a position to develop novel chemical compounds that address target proteins that could not previously be addressed. This considerably strengthens our pharmaceuticals business – with positive effects on numerous therapeutic areas.

There's also been some good news about Xarelto™: The European Patent Office has reversed a first instance decision and maintained our patent on the most widely used, once-daily administration of Xarelto™ until mid-January 2026 – and thus almost two years longer than previously anticipated. At country level, the option to challenge the patent remains.

At Consumer Health, too, we launched additional innovations under the umbrella of our well-known product brands. One example here is the global launch of Bepanthen Derma™, which was successfully advanced in several countries.

Beyond that, we are also intensively pursuing highly ambitious sustainability goals here at Bayer. Take our climate protection endeavors, for example.

As you know, we are committed to becoming carbon neutral in our own production operations by 2030. This means that by 2029, we will reduce our own emissions by 42 percent. And I can also tell you that we’re on track to meet our reduction targets for 2021.

In addition to investing in more efficient facilities and building technologies, we are also extensively harnessing renewable energy sources. As of the end of the third quarter, we have this year concluded agreements covering around 400,000 megawatt hours of green energy.

Furthermore, as part of the LEAF Coalition, we’ve worked with governments, NGOs and other companies to mobilize over one billion dollars worldwide to protect rainforests in Asia, Africa and Latin America. Our endeavors here are helping to ensure that the goal of the ongoing global climate summit – ending global deforestation – can be achieved.

As we’ve previously outlined, we are also aiming to improve access to family planning, especially in low- and middle- income countries. As part of this commitment, we've recently announced plans to build a new production facility in Costa Rica and expand our existing plant in Finland.

Both sites are set to produce long-acting, reversible contraceptives in the future. Totaling 400 million euros, these new investments in Costa Rica and Finland really are a milestone as we work toward meeting our sustainability target of providing 100 million women with access to modern contraception by 2030.

Innovation, performance and sustainability – these are the cornerstones of our company’s long-term alignment. I'll touch on this again in a moment. But first, I’d like to hand over to Wolfgang Nickl, who will take you through the third-quarter figures and the outlook for the full year 2021.


Wolfgang Nickl:

Thank you, Werner. I'd also like to wish you all a warm welcome to today's conference call.


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Let me start with the third-quarter figures for the Group as a whole before I move on to the business performance in our three divisions. Please note that all the sales growth figures I mention are adjusted for currency and portfolio effects unless explicitly stated otherwise.

Bayer achieved double-digit growth in both sales and earnings in the third quarter. Sales grew by 14 percent year on year to 9.8 billion euros, with all three divisions contributing to this encouraging performance.

Our earnings KPI, clean EBITDA, advanced by 16 percent to 2.1 billion euros, while the clean EBITDA margin came in at 21.4 percent.

Core earnings per share increased by 30 percent, rising from 81 cents to 1.05 euros, driven primarily by the strong earnings performance at Crop Science. Free cash flow advanced nearly 60 percent year on year to just under 2 billion euros.


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This brings me to the figures for the divisions, starting with our agricultural business.

Business in the Crop Science Division expanded significantly in the third quarter, with sales rising by 26 percent to 3.9 billion euros.

Our seed and traits business registered particularly strong gains. In North America, this was mainly due to lower product returns compared with the prior-year quarter as well as higher license revenues. Our seed and traits business in South America benefited from higher prices and volumes, as well as the launch of a new corn trait. Our herbicides business expanded as a result of higher prices, particularly in North America.

Clean EBITDA at Crop Science came in at 471 million euros in the third quarter, compared with minus 34 million euros in the same period of 2020. During this quarter, our good performance was easily able to offset an increase in the cost of goods sold and higher R&D investments.

Regarding the glyphosate litigations in the United States, I would like to briefly point to our five-point plan, which we had provided specific information on this summer. In December, the U.S. Supreme Court could decide whether to accept the Hardeman case for review. A positive outcome in the coming year could then effectively end the litigation. In the event of a negative outcome, we already made an additional provision of $ 4.5 billion before taxes and discounting in the second quarter to cover possible long-term risks as communicated.


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That brings me to our Pharmaceuticals Division. Sales at Pharmaceuticals climbed to around 4.5 billion euros in the third quarter. This substantial growth of 7 percent was driven in particular by Eylea™. Business with the ophthalmology drug expanded significantly in all regions, with sales up by nearly 20 percent overall. We were able to capture market share in a growing market thanks in part to the continuing commercialization of Eylea™ prefilled syringes. In addition, business continued to recover from the COVID-19 restrictions, especially in Europe.

Sales of our anticoagulant Xarelto™ advanced by 4 percent, largely thanks to expanded volumes in Russia and Germany. However, sales of Xarelto™ were down in China due to falling prices.

Encouraging progress was also made with the market launches of Nubeqa™ and Verquvo™, as Werner already mentioned. Our new product Kerendia™, which was approved in the United States in July, registered sales for the first time in the third quarter.

Clean EBITDA at Pharmaceuticals came in at 1.4 billion euros in the third quarter, which was about 10 percent lower than in the prior-year period. This was due to increased R&D investment, including in the area of cell and gene therapy. The market launch of new products also led to an increase in expenditures.


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We were able to maintain the strong pace of growth in our business with self-care products. Even against a very strong prior-year period, business expanded across all regions and product categories. Overall, sales at Consumer Health rose by 11 percent to 1.3 billion euros.

Nutritionals remained the key driver, with sales in that category increasing by 20 percent. The Pain & Cardio category also achieved substantial growth of 17 percent that was partly attributable to a product line extension for Aleve™.

Sales increased by 7 percent in the Cold & Allergy category, which had seen a decline in business in the previous year due to the COVID-19 measures.

Clean EBITDA at Consumer Health rose by 2 percent to 308 million euros, with earnings held back by higher investments in innovation and product launches.


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Now let’s move on to our outlook for full-year 2021, which we had upgraded in August after the second quarter. In view of the continued strong performance in the third quarter, we are today able to update our guidance again.

We are now anticipating stronger growth at our Crop Science and Consumer Health divisions, while our Pharmaceuticals guidance remains the same. As a result, we are now expecting Group sales growth of around 7 percent after adjusting for currency and portfolio effects compared to previously approximately 6 percent.

On the slide you can see the outlook for our financial KPIs, with different assumptions regarding currency effects. You’ll notice that we’ve also slightly raised our forecast for core earnings per share. We’ve also raised our free cash flow guidance as a portion of the settlement payments for the glyphosate litigations are now set to be made in 2022 instead of 2021.

In the agricultural business, we've had a successful start to the season in Latin America and are now preparing for the 2022 season in North America. Our U.S. production facility in Luling, Louisiana, was out of commission for around five weeks due to Hurricane Ida. The plant is now back up and running and is operating at full capacity. We expect the negative impact of the production stoppages to be largely offset by the positive growth momentum that Crop Science will continue to see in the fourth quarter.

We also expect to meet our forecast in the Pharmaceuticals Division. Despite the pressure on prices in China, we continue to anticipate stable growth for Xarelto™. And for Eylea™, we're expecting 2021 sales growth in the mid to high teens in percentage terms. At Consumer Health, we are also fully on track to deliver on our strategy and aim to grow in all categories and regions at Consumer Health. However, the situation remains somewhat volatile in our Cough & Cold business which we monitor closely. And now it’s time for me to hand back to Werner.


Werner Baumann:

Thank you, Wolfgang.

As you can see, our third-quarter performance shows that we’re very much on the right track – both in terms of operational development and the market launch of new products. This ability to invest in scientific research and develop innovations has always been Bayer’s lifeblood – and that’s still the case today.

We have aligned our corporate strategy and our innovation potential toward health and nutrition, which are areas of systemic importance. In doing so, we are looking to help solve a question of fundamental importance: How do we feed and satisfy the health needs of a growing population in the face of climate change?

This question is as relevant as it is topical. It is one of the issues that is being discussed at the moment at the world climate summit in Glasgow, where we're seeing a growing number of countries making firm commitments to become carbon neutral in the coming decades.

It's a development that our company welcomes. We cannot be sure what outcome the negotiations in Glasgow will bring over the coming days, but I do hope this opportunity is seized upon and a large group of countries join together as a "climate club" of sorts that will define clear objectives and necessary action.

In view of all the specific steps to take on the journey toward carbon neutrality, it's clear that new technologies will be vitally important. Simply put, we need to see more progress and more openness toward innovation. I believe the time for that has come. Firstly, because we are currently seeing enormous advances in science. Secondly, because we have to act – and fast. And thirdly, because with the COVID-19 vaccines, we are currently all experiencing in a very tangible way just how valuable research is for society. Particularly here in Europe, this is something that should also carry over to other technologies.

Together with our partners, we are working on numerous projects involving technologies that can really make a difference for society.

Take fertilizers, for example. Today, nitrogen fertilizers are used to grow around 40 percent of the world’s food but they also account for roughly 4 percent of all greenhouse gas emissions worldwide. We therefore need alternatives. Via our Leaps unit, we have invested in a number of biotech start-ups that are harnessing various technologies in their research on microbial engineering. If these approaches prove successful, this could potentially pave the way for more crops to effectively “fertilize themselves” from the middle of this decade. That really would be great news for the climate.

Or take Parkinson’s disease, for example. Two different approaches to treat the nervous system disorder are currently being investigated in Phase I trials. Both involve completely novel therapies: a cell therapy and a gene therapy. There is currently no cure for Parkinson’s disease, and no real progress has been made in decades. A breakthrough here would represent a groundbreaking innovation for millions of patients.

Those are just two of the long-term innovations we are researching. We are investing in the future: With over 13,000 researchers who, day in, day out, go about their work with great dedication; with the more than 5 billion euros that we invest in research and development each year; and with the countless partnerships we engage in around the globe.

Many of our actual projects are centered around what experts refer to as the bio-revolution. By that they mean the significant progress in the world of cells and genes that is being accelerated exponentially by artificial intelligence and the digital transformation. Bayer is better positioned than any other company to harness the innovation potential of the bio-revolution in the fields of health and nutrition. And we will continue to work tirelessly to make that happen.

Ladies and gentlemen,
As you’ll have seen, our press release on the third quarter wasn’t the only one we released this morning, as we also had some personnel news to announce.

After more than 30 years with Bayer, Liam Condon has decided to pursue a new career challenge, and I’d like to wish him all the best and every success in that endeavor. I’d like to sincerely thank Liam for the many years of trustful collaboration we have shared. He has been of great service to Bayer, and we’ll give him an appropriate send-off at the end of the year.

He will be succeeded by Rodrigo Santos, a renowned expert with over 25 years of industry experience. Effective January 1, 2022, he’ll take over from Liam Condon as head of our Crop Science Division and a member of the Board of Management. I’m very much looking forward to working with him in the future.

Thank you for your attention. We now look forward to taking your questions.

Forward-Looking Information
This release may contain forward-looking statements based on current assumptions and forecasts made by Bayer management. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. These factors include those discussed in Bayer’s public reports which are available on the Bayer website at www.bayer.com. The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.

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