Bayer AG, the German drug maker that bought U.S. seed company Monsanto Co., on Thursday announced the sale of a number of businesses, job cuts affecting thousands of its staff and €3.3-billion ($4.99-billion) in impairments.
The group is looking into strategic options for product lines including Coppertone sunscreen and Dr. Scholl’s for foot care, among the main brands from Merck & Co.’s consumer health-care division it bought in 2014 for US$14-billion.
Bayer chief executive Werner Baumann is under pressure to boost Bayer’s share price after a drop of more than 35 per cent so far this year, dragged down by concern over more than 9,000 lawsuits it faces over an alleged cancer-causing effect of Monsanto weed killer Roundup.
Bayer will also divest its animal-health division, the No. 5 player in the industry, which analysts have said could fetch between €6-billion and €7-billion ($9.07-billion and $10.6-billion).
The unit, the largest maker of flea- and tick-control products for cats and dogs and a supplier of livestock veterinary drugs, had sales of €1.57-billion ($2.37-billion) in 2017, accounting for about 4.5 per cent of group revenues.
There has already been consolidation in animal health, with Pfizer Inc. and Eli Lilly and Co., successfully floating their veterinary-medicine units on the stock market as independent entities.
Bayer ranks fifth in veterinary medicine, surpassed in size by Zoetis Inc., the former Pfizer unit, Elanco, unlisted Boehringer Ingelheim, which acquired animal-health assets from Sanofi S.A., and drug maker Merck & Co.
Bayer would seek a buyer for its 60-per-cent stake in German chemical-production site-services provider Currenta.
JOB CUTS
Under a cost-cutting program that will also target synergies expected from the US$63-billion acquisition of Monsanto, Bayer will cut around 12,000 of its 118,200 jobs worldwide.
At the consumer health and pharmaceuticals divisions, Bayer will take about €3.3-billion ($4.99-billion) in impairments and writeoffs the fourth quarter.
Consumer health brands acquired with the Merck & Co. and Dihon businesses will account for €2.7-billion ($4.08-billion) of that, while about €600-million ($906.5-million) of those impairments and writeoffs are attributable to a decision not to utilize a hemophilia drug factory in the German city of Wuppertal and to concentrate production in Berkeley, Calif.
The consumer health-care unit, which sells non-prescription treatments, has faced falling revenues as U.S. consumers went from established drugstores to online shops, often switching to cheaper brands.
In the first nine months of 2018, Bayer consumer health-products’ sales declined by 0.4 per cent when excluding currency swings, following a drop of 1.7 per cent in the full year of 2017.
The company said it was targeting core earnings per share of €6.80 ($10.27) in 2019, up from an expected €5.70 to €5.90 ($8.61 to $8.91) this year, with a 2022 target of around €10 ($15.11), when discounting the effect of currency swings and portfolio changes.
The group’s margin of earnings before interest, taxes, depreciation and amortization (EBITDA) and special items over sales should increase to over 30 per cent by 2022, up from 26.5 per cent last year, it added.