Industry Trend Analysis - Pharmaceuticals Division To Remain The Key Growth Driver - APR 2017

BMI View : Bayer ' s Q416 and full-year 2016 performance emphasizes the importance of the company ' s pharmaceuticals division. Driven by bestselling products Xarelto, Eylea and Xofigo, record-high revenue growth from within the pharmaceuticals division continues to offset muted performances from the consumer healthcare and CropScience sectors - detrimentally impacted by competition and challenging market conditions in key markets. The key for Bayer in 2017 will be its ability to successfully reorganise its business structure and strategy going forward without threatening the sustainability of the company's traditional core growth drivers.

Bayer reported Q416 revenues of EUR11.82bn (USD12.56bn), representing a 4.8% y-o-y increase from Q415 revenues of EUR11.28bn (USD11.98bn). Over the same period of time, sales from its Pharmaceuticals division saw a 7.1% increase to reach EUR4.27bn (USD4.54bn), while Consumer Healthcare products saw a 4.4% increase to EUR1.54bn (USD1.63bn). Revenues for FY16 accumulated to EUR46.8bn (USD49.7bn) - up 1.5% from FY15. Despite revenue for both the fourth quarter and full-year exceeding analyst expectations, Bayer missed earnings expectations and experienced a 26.1% fall in net income to EUR453bn (USD481bn) - well below consensus.

Looking ahead, Bayer expects to report mid-single-digit sales growth in 2017. Werner Baumann, Bayer CEO, added that, 'For the group as a whole, we are planning to increase sales to more than EUR49bn (USD52bn) in 2017'. At the same time, Bayer is in the process of refinancing the agreed acquisition of Monsanto Company. The company has successfully implemented both the acquisition financing of EUR54bn (USD57bn) and the first equity measure of EUR4.0bn (USD4.2bn), according to Baumann. Subject to regulatory approval, Bayer expects the acquisition to be complete by the end of 2017. It is worth noting, however, that if the acquisition fails to close due to antitrust law, Bayer will be obliged to make a compensation payment of USD2bn to Monsanto.

Revenue Up, Earnings Down
Bayer: Q416 Financial Snapshot (EURbn)
Source: Bayer , BMI

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