Earnings call transcript: Bayer’s Q1 2025 performance highlights innovation amid challenges

Bayer AG reported its financial results for the first quarter of 2025, showcasing a stable sales performance and strategic innovations in pharmaceuticals and crop science. The company’s core earnings per share (EPS) were 2.49 euros, aligning with its annual guidance. Despite a 7% decline in EBITDA before special items, Bayer improved its free cash flow by 1 billion euros compared to the previous year. With a current market capitalization of €29.03 billion and trading at just 0.74 times book value, InvestingPro analysis suggests the stock is currently undervalued, presenting a potential opportunity for value investors. The stock remained unchanged at 112.36 euros, reflecting a balanced investor sentiment amid ongoing restructuring efforts and market pressures.

Key Takeaways

• Bayer’s Q1 2025 group sales remained flat year-over-year.
• Core EPS reached 2.49 euros, on track for full-year guidance.
• Free cash flow improved by 1 billion euros, despite remaining negative.
• The company is focusing on innovative pharmaceutical launches and crop science technologies.
• Ongoing restructuring includes significant workforce reductions.

Company Performance

Bayer’s performance in Q1 2025 was marked by stable sales and strategic innovations, particularly in its pharmaceutical division. The company launched BIANTRA in Germany and is preparing for the elenzanatant launch in the second half of 2025. Nubeqa and Corendia showed significant growth, with an 80% year-over-year increase, highlighting the company’s focus on high-growth areas.

Financial Highlights

• Revenue: Flat year-over-year
• Earnings per share: 2.49 euros, on track for annual guidance
• Free cash flow: -1.5 billion euros, improved by 1 billion euros year-over-year
• EBITDA before special items: 4.1 billion euros, a 7% decline
• Net financial debt: 34.3 billion euros, reduced by 3 billion euros year-over-year

Outlook & Guidance

Bayer maintains its full-year 2025 guidance at constant currencies, with expectations for its pharmaceutical segment to deliver at the upper end of sales and profitability guidance. The company is monitoring potential tariff impacts and anticipates a foreign exchange headwind of 900 million euros in net sales.

Executive Commentary

• "We’re keeping a close eye on the macro environment, and we will adapt as required." - Bill, Executive
• "Our mission is to provide health and nutrition solutions, whatever comes." - Bill, Executive
• "We’re forced to focus our work only on the highly innovative technologies and products that differentiate us from generics companies." - Bill, Executive

Risks and Challenges

• The decline in EBITDA and ongoing restructuring efforts pose financial and operational challenges.
• The crop protection market faces significant overcapacity and price declines due to competition from Asian manufacturers.
• Generic pressure in the pharmaceutical market continues, particularly affecting Xarelto.
• Bayer is committed to reducing net financial debt and returning to an A-rating category, which may impact its financial flexibility.
• Potential foreign exchange headwinds could affect net sales.

Q&A

During the earnings call, analysts focused on Bayer’s litigation status, with 181,000 total glyphosate lawsuits reported and 114,000 resolved. Questions also addressed the company’s balanced production strategy between the US and EU and its commitment to debt reduction.

Full transcript - Bayer AG (BAYN) Q1 2025:

Michael, Moderator/Host, Bayer: Morning, everybody, and welcome to our media update for the first quarter of twenty twenty five. To kick things off, Bill will share his perspective on Bayer’s business performance and the progress we’ve made on our strategic priorities. Wolfgang will then provide further insights into the Q1 financials, the current geopolitical environment and our outlook for the remainder of the year. After the presentations, we will have time for your questions. And one additional remark, we also invite you to listen to the Crop Science webinar for investors later today at four p.

M. Central European Time, where we will delve further into the division strategy and outlook. You’ll find the link on our Investors page and in the news release. Now before starting, I would like to briefly draw your attention to the cautionary language included in our safe harbor statement. And with that, over to you, Bill.

Bill, Executive (likely CEO), Bayer: Thanks, Michael. Yes, and hi, everyone. Thanks for joining our call today. We’re really looking forward to going through our Q1 business results and our strategic priorities with you. And we’re also aware that the present geopolitical and economic uncertainty is top of mind.

So Wolfgang and I will try to give you a sense of how we’re approaching that as well. So let’s start with our first quarter performance. First, a reminder that we speak about our sales growth in currency and portfolio adjusted terms. As a group, our sales are flat year over year and that positions us well within the minus 3% to 1% plus 1% corridor that we guided in 2025. Our core EPS came in at 2.49 and that means we’re on track to reach our outlook of 4.5 euros to €5 at constant currencies.

Free cash flow is at minus €1,500,000,000 And as we’ve explained before, the negative figure is due to seasonality of the crop business. It’s also EUR 1,000,000,000 ahead of where we were last year at this time. So we’re pacing well to land within our 2025 guidance. So I’ll now go through our businesses one by one. In March, we said we expected mid single digit sales declines in Crop Science in Q1 and sales declined 3%.

As expected, regulatory impact cut into some of our higher margin sales, which is why our EBITDA margin is behind last year’s Q1 number. Overall, we expect growth in Q2 and we’re on track to deliver our outlook for the year. In Pharmaceuticals, we posted a strong first quarter with 4% growth. Ubeka and Corendia continued their exceptional momentum. Together, they grew 80% year over year.

These gains more than offset the declines that we’re seeing on Xarelto. I also want to call out our cost management at pharma. We have launch activities underway across the business. So 12% earnings growth is a remarkable feat, and it’s an encouraging sign that our model is helping teams do more with less. We know the Xarelto declines will weigh heavily on our top and bottom line over the remainder of the year, but we’re equally confident in the momentum of our launches and the fundamentals of our business.

In fact, in a more certain environment, we likely would have adjusted our guidance for pharmaceuticals upward, but given the uncertainty around tariffs, we feel it’s prudent to reaffirm what we said in March and then closely monitor developments. Overall, we expect our pharma business to come in at the upper end of our 2025 outlook in both the top and the bottom line. In consumer health, we grew 2.5% with contributions from across the business, while experiencing soft conditions in key markets. Most importantly, we saw 2% volume growth in Q1. On margins, we were slightly behind prior year, but our guidance of 23% to 24% is well within reach.

Overall, these results put us in a good position to deliver the year. So now on to our strategic priorities. You see them captured on the slide, and I’ll touch on select highlights here before handing over to Wolfgang. On the pharmaceuticals pipeline, the ENTRE launch is underway now in The EU, and we’re prepping to launch elenzanatant in the second half of the year. On litigation, we received an adverse decision by the Superior Court of Pennsylvania last week.

That led to a technical revision of the litigation provision, while we will continue to appeal. This also underscores the need of the U. S. Supreme Court to provide clarity on federal preemption. Our multipronged strategy to significantly contain litigation proceeds apace.

We filed for U. S. Supreme Court review in the Durnell case, and we’ve received notable amicus briefs in support of the argument from legal scholars, commodity groups, and other experts in support of the merits of our petition. We also filed two hold petitions with SCOTUS for the Johnson and Salas cases, as the issue of federal preemption exists for both as in Durnell, and we seek court, we we seek the courts to hold these cases pending final resolution of that case. In the legislative realm, we welcome the progress we’ve seen in several states, including passage in North Dakota and Georgia, where the governor just signed this important bill last Friday.

We await developments in additional key states as legislative sessions conclude in the coming weeks and months. And on crop science profitability, yesterday we announced that we’re reorganizing crop production and R and D activities in Germany, discontinuing some activities by the end of twenty twenty eight, and relocating other activities to other German sites. This is a difficult step, but it’s necessary to guarantee the division’s competitiveness. Let me spend some time on it as it merits explanation. In recent years, Asian manufacturers of generic crop protection products have built significant overcapacities, driving the prices of crop protection products down with lasting effects.

In fact, the market prices of some crop protection products are significantly lower than the cost of manufacturing them in Europe. On top of that, increasing regulatory hurdles make it harder to operate in the status quo. In this environment, we’re forced to focus our work only on the highly innovative technologies and products that differentiate us from generics companies, and we have to consolidate or stop some activities. We won’t continue our research and production activities in Frankfurt beyond the end of twenty twenty eight. We aim to sell parts of the activities and others will be relocated to other German sites.

Production at our Dormagen site will be streamlined and optimized for future growth. These are difficult decisions. We don’t make them lightly. We’re in close contact with employee representatives, and we will work with them to find viable solutions for our colleagues. We know that we’re in dynamic industries, and that calls for decision making that safeguards the future of Bayer’s organization, our business and the future success of our customers.

Finally, on our new system, the people of Bayer forge ahead in our journey to make Bayer leaner, faster and more productive. We reduced around 2,000 roles in the first quarter of twenty twenty five, amounting to a reduction of roughly 11,000 roles since beginning the system in July of twenty twenty three. We’re currently focused on two big enablers. First, freeing up resources so our teams can flow them to the highest impact work. Second, installing people enablement tools that are fit for our new system, and that we continue to attract and retain top talent.

Let me close with three points. First, despite headwinds from patent expiries and regulatory impact, our first quarter puts us in a good spot to deliver in a challenging and important year for the company. Second, we have a plan to address the company’s biggest priorities. You have a chance to get some more color on one of them, crop science profitability, later today. Finally, it’s our mission to provide health and nutrition solutions, whatever comes.

So we’re keeping a close eye on the macro environment, and we will adapt as required. Over to you, Wolfgang.

Wolfgang, CFO, Bayer: Thank you, Bill, and hello also from my side. I would like to start with some more color on the drivers of our first quarter results. For the group, Q1 net sales were flat versus the prior year, both in currency and portfolio adjusted terms and as reported. A decline in Crop Science was offset by growth in Pharmaceuticals and Consumer Health. EBITDA before special items came in at €4,100,000,000 which is 7% or about €300,000,000 below the prior year’s quarter.

The decline is largely related to the lower Crop Science earnings and a lower reconciliation result. The latter was driven by higher long term incentive provisions and balance sheet related hyperinflation postings. For Q1, the FX headwind on EBITDA before special items was €165,000,000 largely driven by the aforementioned hyperinflation impacts. Core earnings per share of €2.49 were €0.33 or 12% below the prior year quarter, mainly impacted by the lower EBITDA before special item I just mentioned. In Q1, we recorded EBITDA relevant special items of €587,000,000 including the glyphosate litigation related provision update that Bill just referred to.

Consequently, we now expect to come in rather towards the minus €1,500,000,000 of our full year modeling range provided. Driven by the crop business seasonality, we saw a negative free cash flow of €1,500,000,000 in the first quarter. This reflects an improvement of about €1,000,000,000 compared to last year, primarily due effects relating to advanced payments from our Crop Science customers and including the change in factoring. In line with the seasonality of our cash flow profile, net financial debt increased by €1,700,000,000 to €34,300,000,000 since year end 2024. Year on year, however, net financial debt was down by about €3,000,000,000 Let’s now take a closer look at the divisional performance.

When I talk about sales growth, I always refer to currency and portfolio adjusted figures. For Crop Science, net sales came in at €7,600,000,000 in the first quarter, down three percent versus the prior year. As a reminder, we had projected mid single digit declines for the first quarter, so we are largely in line with our internal assumptions. The core business declined by 3% with seeds and traits down 5%, impacted by lower soybean and cotton sales due to The U. S.

Dicamba label vacatur and also corn volume phasing to the second quarter following a strategic adjustment of our distribution network. The core crop protection business was up 2%, driven by higher non glyphosate herbicide volumes, partially offset by lower insecticide volumes in The EU due to the expiration of the Momento registration. The regulatory impact related to dicamba and Memento in Q1 is in line with the previously communicated 200 to 300 basis point margin impact for the full year. We expect the majority of that effect in the first half of the year. Glyphosate sales declined by 10%, driven by phasing into subsequent quarters to support just in time purchases in the Southern Hemisphere.

On profitability, EBITDA before special items came in 10% lower at €2,600,000,000 resulting in a margin of 33.7. As expected, the lower margin is primarily an effect of high margin sales losses due to the regulatory impact and the corn phasing to Q2. We were able to partially compensate these effects by cost savings. Let me now move on to our Pharma business. Net sales of 4,500,000,000 were up 4% in the first quarter, with growth across the portfolio more than offsetting the expected Xarelto decline.

Our launch assets Nubeqa and Carenta continue to perform particularly well, growing 80% year on year and reaching combined sales of €680,000,000 This was largely driven by strong contributions from The U. S. EYLEA grew by a solid 5%, supported by the ongoing rollout of eight milligram, and sales were in particular strong in Europe and also in Japan. Our base business grew by 6%, driven by strong contributions from our Radiology and Women’s Health portfolio in addition to high demand for cardio aspirin and also Adalat in China. As expected, Xarelto declined in the first quarter, coming in 31% below the prior year.

This was mainly driven by continued generic pressure in Europe and Japan. On the bottom line, EBITDA before special items increased by 12% to €1,300,000,000 in the first quarter, resulting in a margin of 29.5%. Both higher sales as well as continued efficiency gains more than offset slightly higher R and D investments and an FX headwind of about one percentage point. Let me turn to Consumer Health. Sales grew by nearly 3% with balanced category and regional growth.

Volumes were up by 2%, while price increases contributed 1%. All regions performed well with growth in North America, APAC and EMEA. LatAm remained flat due to muted consumer sentiment influenced by The U. S.-Mexico trade relations. The Digestive Health category increased by 13%, driven by product launches as well as supply improvements in products like Iberogast.

For Pain and Cardio, we recorded growth of 7%, fueled by product launches and good consumption of Saridone in Asia Pacific. Additionally, aspirin also performed well across all the regions. Dermatology was up 2% for the quarter, thanks to PePantene and Canestein, along with innovations within our product range, Kengwang in China. The allergy and cold category grew by 2% with strong growth for cold products in North America, partially offset by a slow start to the allergy season. In Nutritionals, we saw a decline of 5% year over year due to weak demand for our prenatal nutrition supplements in China and the discontinuation of the Careof business in The United States in June of twenty twenty four.

Our EBITDA before special items increased to €342,000,000 resulting in a margin of 22.8%, slightly below the prior year but within reach of our guidance range. The improvement in EBITDA before special items was primarily driven by increased sales. Additionally, our ongoing cost management efforts positively impacted profitability, including a reduction in the cost of goods sold. This was partially offset by lower divestment income and increased investments in marketing our innovative products. Let’s now look at the outlook.

As we see high volatility in the geopolitical environment, I will also share our thinking about the potential direct and indirect impacts around tariffs and FX. We are continuously monitoring the various tariff announcements. Our experts are analyzing potential impacts and working on possible solutions to secure supply to our customers. We are focused on maintaining the stability of our supply chains and on minimizing any potential impact. Based on the current status and tariff announcements and our mitigation measures, we expect to manage the impact, and we confirm our outlook at constant currencies for the full year 2025.

For Crop Science, we expect the direct tariff effects to be limited overall, mainly impacting the crop protection portfolio as seeds and traits are mostly produced in the regions where they’re also sold. As of now, most of our Crop Protection active ingredients as well as glyphosate are exempt from the latest tariffs. We’re also evaluating indirect business implications. These could include, amongst others, the magnitude of acreage shifts from soy to corn in The U. S, potential soy shifts to LatAm as well as several pricing and volume scenarios for glyphosate and the broader crop protection portfolio.

For the full year for Crop Science, we are taking decisive measures to maintain stable sales and margin in spite of notable regulatory headwinds. As the anticipated regulatory impact materializes, recovery in Latin America and crop protection, alongside strong efficiency gains, will help to compensate to achieve our full year guidance. Moving on to Pharmaceuticals. On tariffs, we expect to see certain direct effects on parts of our portfolio, mainly product flows between The U. S.

And China. With our production footprint in The EU, there is an additional risk of potential tariffs on pharmaceutical imports from The EU into The U. S. As you know, these are currently exempt under exempt but under a Section two thirty two investigation. The business performance in the first quarter, particular for our launch assets, provides confidence in our ability to sustainably compensate the Xarelto generalization.

Considering this, together with what we currently know about tariffs, we expect Pharma to deliver at the upper end of our sales and profitability guidance range. For Consumer Health, our expectation for the phasing throughout the year are in line with the full guidance. Based on the current tariff announcements, we expect to be able to manage the direct impacts within the guidance range. We are monitoring additional indirect risks mainly related to potential demand impacts stemming from lower consumer confidence. Let me close with some comments on foreign exchange rates.

In the past weeks, we have seen a material depreciation of the U. S. Dollar and other currencies against the euro, which negatively impacts our top line and, to a lesser extent, our bottom line. In line with our long standing practice and legal requirements, we are updating the FX estimate based on March month’s end spot rates. Compared to constant currencies, this leads to the number shown in the last column of the table on Page 11 of our investor deck.

However, as we all know, currency have materially changed since the announcements from the U. S. Administration in early April. To illustrate the potential impact, we performed further analysis based on the spot rates of April 24. In that scenario, there is an incremental FX headwind of about €900,000,000 in net sales and approximately €0.10 in core EPS.

On the other hand, this would reduce net financial debt by another €500,000,000 compared to the figures shown on this slide for March. We will monitor further developments and update you on the impact with our next reporting. And with that, I close my remarks and hand over to you, Michael, to lead us through the Q and A.

Michael, Moderator/Host, Bayer: Thank you very much, Wolfgang and Bill, for your presentations. And with that, we’ll now start with the Q and A session. So if you would like to ask a question, please do the following. Make sure that Zoom is the only active chat program open on your computer because otherwise there might be interference with your ability to engage. Second, make sure your microphone is activated in Zoom.

And third, use the raise hand function. We will then register your interest in asking a question. And when it’s your turn, I will call your name and a pop up window will open on your screen. And when you see this pop up window, please unmute yourself and ask your question. Your camera will remain off for the entire time.

So that’s the logistics. Let’s see where we have the first questions from. First question comes from Antje Erning from Reinacher Post. Antje, over to you.

Antje Erning, Analyst, Reinacher Post: Thank you very much. Greetings to Leverkusen. I have three questions. Can you give us an update to the lawsuits? How many lawsuits have been filed so far?

And how many have you to be settled? And then the trade union is criticizing the closure of the Frankfurt site. Are further site closures planned? Or can you give a guarantee for the German sites? And another question to BSO.

How many jobs will you cut in the end, if you can estimate it now? And how many money have you just spent on several payments up in the moment? Thank you.

Bill, Executive (likely CEO), Bayer: Do you want to take the first one?

Wolfgang, CFO, Bayer: Yes, I can take the first and the last So, Antti, good morning. I’ll take the first and the last one, and Bill will obviously take the second one then. On the lawsuits, and this is related to glyphosate, we have registered 181,000 as of somewhere at April, ’1 hundred and ’14 thousand have been resolved. So consequently, there are 67,000 open. On your headcount questions, we are not really predicting headcount.

You probably have seen that in the first quarter, we reduced another 2,000 on top of the 7,000 last year. And since inception of the program, it’s actually 11,000. We have in total reserved €1,400,000,000 since inception of the program was about €125,000,000 in Q1. And as you know, this is the reserve that we take in the P and L. The actual cash outs will then come at a later point in time.

I hope that answers your question. Bill, over to you.

Bill, Executive (likely CEO), Bayer: Yes. Anja, regarding further site closures, what I can say is that we don’t have any plans for further site closures at this point. We have this sort of economic reality of, you know, we’re producing generic crop protection products today in Germany, and unfortunately, because of the buildup of capacity, and in fact, quite a lot of overcapacity in Asia now, The prices of these generic products have really crashed in the world markets over the last few years, and it just means that with our costs in Germany, things like electricity and gas, which are two to three times higher than our Asian competitors, We’re just not competitive in the generic products. So what we’re doing is we’re actually focusing our efforts on our innovative products, both from production and R and D standpoint, and we hope that can strengthen our German presence so that we’re much better set up for the future. So that’s our outlook.

Speaker 4: Thank you.

Michael, Moderator/Host, Bayer: So the next question comes from Eichar Scharma from Endpoint News, followed then by Ludwig Boga from Reuters. But first over, Ayesha, over to you.

Ayesha, Analyst: Just two for me. So firstly, with the Trump administration announcing plans for most favored nation pricing, I was wondering how you expect that to impact your pharma business? And secondly, I know that you mentioned that you cut, I believe, 2,000 jobs in the first quarter of twenty twenty five. Would you be able to clarify how many of those jobs are in each of the business units? Thank you.

Bill, Executive (likely CEO), Bayer: Yes. Thanks, Ayesha. Yes. Regarding the announcement from the U. S.

Administration, I think it’s really too soon to say. I think there’s a lot of discussion that needs to happen about this. As you know, The US has been a world leader in innovation and biotechnology, And I think that’s been from this sort of unique combination of generally providing for patient access at prices that are, yeah, so that patients that are of means or patients without means are able to access therapies. And then at the same time, having prices that provide for sustaining that innovation, for funding that innovation. And so we definitely encourage policymakers around the world keep an eye on those two things.

And in fact, think there’s an opportunity for European policymakers to look hard at their approach and make sure that each European country is also funding its fair share for innovation, because that bill should not be following, or should not be falling heavily on on one country at the exclusion of others. And and so I I I think it’s really too soon to speculate on on where this goes next and what the next turn is, but I think what’s important is that policymakers from, yeah, all the major countries having dialogue about this, and how do we make sure that we continue to fund advances in cancer, in chronic diseases, so that we don’t lose the benefits for the next generation. In terms of the do you have

Wolfgang, CFO, Bayer: the Yeah, Aiga, we don’t really disclose reductions by country or division, but you should just walk under the assumption that we are doing this change in our operating model across the company, so in all three divisions and also the enabling functions. I can probably tell you that there is a very keen focus more on the level of positions that are being reduced and mostly management positions. And probably one interesting effect is that represents itself in a much higher spend of coaching. Since the inception of the program, that was somewhere in the 5% to six range, and now we are approaching 14%. So we see very substantial progress on that front.

Ayesha, Analyst: Thank you.

Michael, Moderator/Host, Bayer: Okay. The next question comes from Ludwig Berge from Reuters. And afterwards, Tim Low from Bloomberg. But first of all, Ludwig Berge, over to you.

Ludwig Berge, Analyst, Reuters: Thank you very much. Good morning. My question is on the approval from the shareholders at the AGM on a potential capital increase. Just given recent developments in Pennsylvania appellate court or whatever else is going on, is the likelihood of a capital increase, is it now higher? Or can you say anything about the likely size of such a move?

Thank you.

Bill, Executive (likely CEO), Bayer: Thanks Ludwig. So as we mentioned before, we requested the capital authorization. We have no immediate plans to use such authorization, and that’s still the case. We think in most scenarios we look at, we don’t need to raise capital, but we wanted to make sure, because the way the German law works, management boards don’t have authorization to issue capital unless that’s been explicitly approved by an annual shareholders meeting or a special shareholders meeting. And so we wanted to make sure that we have that provision in place as do I think more than 80% of DAX companies.

So I think, yeah, there’s really no news on that.

Michael, Moderator/Host, Bayer: Okay. So the next question comes from, Tim Low from Bloomberg and then followed by Jens Thunnasman from Dietz Seid. Tim, over to you.

Tim Low, Analyst, Bloomberg: Great. Thanks. Two quick questions on, like, the roundup front. On in concerning the Asian generics production of pesticides, I just wanna know if you could explain a little bit more what’s behind that because I’ve I’m hearing more and more about this. Did did producers in in China significantly expand their capacity in the last couple of years?

Because I was just looking at, like, glyphosate commodity prices, and it seems to me, like, aside from the you know, there was the 2021 to 2023 spike in prices. But aside from that, it looks like they’ve returned to the levels that they were mostly at between, like, 2034 and 2020, which is when, you know, Bayer acquired Monsanto. So I’m just trying to understand what’s the new phenomenon happening right now that’s causing you to consider, you know, phasing out production of glyphosate and other, pesticides.

Bill, Executive (likely CEO), Bayer: Yeah. Thanks, Tim. I I think there may be two issues that are sort of getting conflated here. So the question of glyphosate production is something that has been, I think a factor for probably close to fifteen years that it’s been quite highly genericized. And on glyphosate, we actually have a relatively competitive cost structure, with our, with our phosphorus mine in Idaho and our production facilities in Louisiana and Iowa.

So there is a pretty different discussion. And I think the situation there is that, yeah, the prices have been low and they’ve sort of stayed low. And so that’s a pressure on glyphosate, the cost structure. And for us, the question about continuing to produce glyphosate is a combination of that situation, plus the fact that in The U. S.

There’s no broad protection for producers of pesticides because of this current lack of clarity around pesticide labeling, that we can comply with the EPA labeling requirements and still get sued for failing to warn, that that’s frankly just a policy issue, and that has to do with glyphosate. Now the the thing we’re talking about about, realigning crop protection production in Germany has nothing to do with glyphosate. It has to do with other crop protection products that are produced in Germany, and those are products that have had increasing generics penetration. And then also, you asked about new capacity. So in Asia, there have been a number of new facilities have come online.

In fact, some of those facilities were delayed during COVID, and so it resulted in sort of an avalanche of new facilities being approved. And so that’s led to really more intense competition from generics for the broader portfolio of crop protection products. So hopefully that clarifies it, Tim.

Tim Low, Analyst, Bloomberg: Sure, That’s helpful. Can I just ask a quick add on to that? When it comes to like, should Bayer decide to stop producing glyphosate in The US? I assume that, at least for now, Roundup would still include glyphosate that you would source from overseas. And does that help at all in terms of the future litigation risk if there’s still glyphosate in the product, even if you’re not producing it?

Bill, Executive (likely CEO), Bayer: Yes. I wouldn’t even speculate about that, Tim. I think you’re making some assumptions about the business would look like, and I really couldn’t say. I think we have to evaluate that very thoroughly.

Wolfgang, CFO, Bayer: Got you. Thanks.

Michael, Moderator/Host, Bayer: Thank you. Next question comes from Jens Thunnas, And afterwards, we have Kevin Grogan from Scrip. But first, over to Jens.

Jens Thunnas, Analyst: Well, good morning. Thank you very much. I hope you can hear me. I’ve got an additional question concerning your decision to close the Frankfurt site. Missus speaking for the said yesterday that the and the union will fight for the rights of the employees and that they are strongly against abandoning the Frankfurt site, which they call modern and future proof, and that the move actually violates key social partnership agreements from the jointly adopted future concept.

I would like to know, is she right? Are you ignoring early agreements with the and furthermore, can Bayer afford a labor dispute in this tense situation and the intense transformation the company is currently going through?

Bill, Executive (likely CEO), Bayer: Yeah. Thank thanks, Jens. Obviously, it’s a it’s a very difficult situation for for everyone involved and particularly for the workers involved. And I deeply regret that. You know, we, I would say everyone at Bayer has a deep commitment to, yeah, to our employees, to our future, and to the people in Germany.

And I think that’s that doesn’t change because of decisions like this. This decision really reflects just the economic reality that we’re trying to produce products that are subject to generic competition, but with a with a very high cost base. And by the way, that cost base is not the fault of the employees. It’s not the fault of management. There’s no one in management, there’s none of the workers who decided that gas and electricity prices, which are the major input costs for these products, would be two to three times in Germany, what they are in the countries where our competitors are producing.

And so as much as our, yeah, our hearts are with continuing here, We just can’t, we can’t afford to ignore that economic reality. And so this is a time where we have an opportunity to make changes that can strengthen our German footprint, that Germany can be a stronger producer of the most innovative crop protection products in the world, that our r and d efforts in Germany are, again, focused and concentrated on the most innovative products that the world is going to need in 02/1930, in 02/1940, in 02/1950. But that doesn’t make it easier. And and so we have to work through that.

Jens Thunnas, Analyst: Well, thank you very much, Bill, but I would like to come back to the question. Is she right? Are you ignoring early agreements? I mean, this is what what they are saying and what they announced in their press statement. So is she right in in saying that you’re ignoring this earlier agreement you have made with the Beatriz Hart?

Bill, Executive (likely CEO), Bayer: Look. Since I arrived at Bayer two years ago, I’ve had a very close partnership with the unions and with all our employees, and that that that means a lot to me. And I yeah. I would say that there’s no agreement that I’ve made that I’ve not honored, and I will continue to keep all my agreements and all my commitments to the workers. And I’m happy to, yes, to talk about that in any public forum.

Kevin Grogan, Analyst, Scrip: Thank you.

Michael, Moderator/Host, Bayer: Thanks. Next question comes from Kevin Grogan from Scripps. And afterwards, we have Isabella Boufaki from Ildsolar. So first of all, Kevin, over to you.

Kevin Grogan, Analyst, Scrip: Good morning, everybody.

Bill, Executive (likely CEO), Bayer0: I’ve just got a quick question, first of all, on manufacturing. Could you give a bit more color on the manufacturing situation? Given that the product flow between The US and China and with your production footprint in The EU, do you need to do more manufacturing in The US like many of your peers? What’s this called manufacturing? And a second quick question on, Beontra, the launch.

Obviously, it’s very early days, but any early thoughts on how you think it will go this year? You know, like, the Bridge Bio launch is shattering every sort of consensus forecast. It’s flying off the shelves. How do you think it will go in Europe? Thank you.

Sorry for the echo.

Bill, Executive (likely CEO), Bayer: Thanks, Kevin. Yeah. If it makes you feel better, we didn’t have any echo on our end, so all good. Yeah. In terms of the manufacturing balance, and this is generally true across Bayer, across the three divisions, but maybe you’re asking about pharma.

We have considerable manufacturing in both The US and in Europe, and we have sort of a rough balance. If you look across the divisions, across the products, that’s one reason why for us continued free trade is very important because we have an optimized production network that really benefits from being able to focus production, say of one product in Germany and another product in The U. S. And then we can ship back and forth. That’s a real benefit for the company.

That’s a benefit for consumers because it allows us to keep our prices lower. And so we have no immediate plans to revisit our manufacturing footprint, because as I said, we’re roughly balanced around the globe. In terms of BIANTRA launch, yeah, we’ve now got it in the market in Germany. The initial impression from doctors has been really positive. We’re very excited about it, but we’re literally weeks in, so we don’t really have any quantitative update, but we’re very pleased with what we see and we see a really great future for BIANTRA across Europe.

Michael, Moderator/Host, Bayer: Okay. And the next question comes from Isabella Boufaki from Iltsolar. And afterwards, we have Andrew Noel from Chemical ESG. But Isabella, you’re first.

Bill, Executive (likely CEO), Bayer1: Good morning, and thank you very much for taking my questions. The first is on debt. If you can give an idea if already you could have see an impact of the shareholders’ authorization to increase capital or impact on bonds and also on ratings. I mean, you do have a rating, which is getting closer and closer to speculative grade. You have a negative on Moody’s, and I thought this message you gave that we’re not going to increase debt to pay the litigation bills if they blow up could have an impact.

But also, I saw that your debt year over year is going down. So so what is the importance of this reduction? And the second question, if I may, you don’t comment on plans on country by country on the the reductions of I can do that. Jobs. But Italy, of course, Italy is as Germany has a problem of very high electricity costs and gas and is worried not to be so competitive.

So how at least do you look at your performance in Italy? Thank you.

Wolfgang, CFO, Bayer: Well, Isabella, good morning. I’ll take the first one and Bill will take the second one on Italy. In regards to debt, first of all, I think it’s important to point out that it’s one of our five priorities to reduce debt and in the midterm to get back more into an A category as opposed to the BBB that we have right now. It’s good for us to have all the tools in the draw, as Bill said earlier, on resolving the litigation. And in general, you can say that in the discussions with debt holders and rating agencies, having that flexibility and not under any circumstances relying on the debt market is an encouraging signal for them and we saw that to a certain degree in the reduction in the spreads.

We’re in constant exchange with all rating agencies and bondholders. And like I said, we’re committed to reduce the debt and you’ll see a step towards that already this year.

Bill, Executive (likely CEO), Bayer: Yes. And hi, Isabella. I’m happy to answer the questions about the position of Italy. In fact, I was in Italy in, gosh, I think it was either late November or December to visit our teams there, one of the plants. We have a very strong position in Italy, both commercially, but also with seed production, a lot of specialized medical manufacturing where we have really some world leading capabilities and in some, I guess I would say some, yeah, very, very specialized manufacturing.

So it’s not particularly sensitive to energy prices. It’s not, it’s not particularly, raw material or energy intensive. So yeah, we feel really good about our position in Italy. Also the Italian commercial affiliates have been early adopters of dynamic shared ownership, and they’re really doing amazing things. Regular updates from the team there.

So I think, yeah, we feel really good about our position in Italy.

Bill, Executive (likely CEO), Bayer1: Thank you very much. Thank you.

Michael, Moderator/Host, Bayer: Thank you. Next question comes from Andrew Noel from Chemical ESG. Andrew, over to you.

Bill, Executive (likely CEO), Bayer2: Hello there. Thanks for taking my question. I just have one. When I looked when I listened to Cortiva and their 1Q results, you know, that licensing was such a big theme, out licensing and how they’re accelerating, they’re broadening it. And yet it doesn’t seem to be such a I I know Bayer does do some licensing, but it doesn’t seem to be such a a major transition strategy.

I wondered if you could talk about, you know, given you’re trying to deal with all these commodity markets and and so on, is that something that you’d be looking to accelerate?

Bill, Executive (likely CEO), Bayer: Actually, Andrew, I think probably historically, I would say we we’ve been the world leader in licensing and we still are the world leader in licensing. So I think, yeah, maybe, maybe we’re taking it for granted, in terms of not talking about it, but I can assure you from a business standpoint, we don’t take it for granted. That’s why we’re also the largest investor in seed R and D, which is where most of the licensing is. And, we’ve got a whole new wave of breakthrough innovations coming. If you look in the next ten years, things like direct seeded rice, short stature corn is a big one.

We’ve got HT4 and HT5, which are new soy platforms. And so for example, HT4 confers resistance to five different pesticides. HT5 is six different pesticide resistance. And so these are all new licensing opportunities for Bayer. You don’t hear us talking about it so much explicitly, it’s certainly, yeah, a key part of our business model.

Wolfgang, CFO, Bayer: Yeah, and Andrew, probably just to add color on, we have gone public to a certain degree that revenue for us is in excess of €2,000,000,000 per year. So it’s a very substantial part of the business. And as Bill said, a reflection of our innovation power, in particular, in the seats and trades area. The only additional info I can give you that the very small single digit percentage comes from our multinational competitors. The rest comes from a wide array of license takers around the world.

Bill, Executive (likely CEO), Bayer2: Thank you.

Michael, Moderator/Host, Bayer: Okay. Next question comes from Michael Holsten, West Deutsche Bank. Over to you.

Kevin Grogan, Analyst, Scrip: Yes. Good morning, Bill. We read recently that you spent a lot of time in The U. S. And Washington to meet a representative of the new government there.

Can you give us some some words on the on the result? Is there any any progress the new administration in Washington that could profit from?

Bill, Executive (likely CEO), Bayer: Yeah. Thanks for the question, Michael. Yeah. So I I spent quite a bit of time in The US, both in Washington as well as in a number of state capitals, and so, I think the starting point is when you have a new administration, and don’t forget, we also have a new Congress with many newly elected representatives, a lot of the, for example, committee chairs changing. It’s important to have conversations with people and make sure they understand the value that our company brings.

And whether that’s on the pharmaceutical side, with breakthrough therapies and experimental therapies and diseases like Parkinson’s disease, various cancers, or whether it’s on the crop science part. So I had yeah, quite a lot of good conversations. It’s important that people are informed because there’s a lot of, how would I say, there’s a lot of misinformation about things like pesticides, and so we have to make sure that that members of industry and also farming groups are are making clear the realities of what it takes to put food on the table in an affordable way for people in America, people in Europe, people around the world. And I think you can see some results of that. And those aren’t really results of my efforts.

These are results of really the agriculture community communicating and stepping up. And so you can see that legislation that was passed in North Dakota, in Georgia, these are states that are saying, Hey, you know, our farmers need these tools to be able to grow safe, affordable crops. And having clarity around that is important, not just for today’s manufacturers or today’s products, but it’s also important for the future that manufacturers would have the confidence to invest in new solutions. Because you can hardly invest, you know, ten years and 300 or $400,000,000 in a new crop protection product if the reward at the end of that is endless lawsuits. So I think we see progress.

I I would definitely say policymakers are increasingly aware of the stakes and what it means in particular for food security, food safety, and affordable food in America.

Michael, Moderator/Host, Bayer: K. And the next question comes from Daria Sukaczuk from APM News. Daria, over to you.

Speaker 4: Yes. Hello. Thank you for taking my question. I have a short one. How does Bayer see the situation around one of your bestsellers, EYLEA, which is facing generic sorry, biosimilar competition right now, especially in Europe.

And I see Bayer’s launching the high dose product. So do you see that you’re compensating for generic competition? Thank you.

Bill, Executive (likely CEO), Bayer: Yeah, Davi. That’s basically our goal, and that’s what we believe is a reasonable sort of reasonable target for us, is that with the introduction of the eight milligram EYLEA, which has some real dosing advantages for patients in terms of extending the interval between intraocular injections that we think we can basically make up what’s lost on two mg to biosimilar, we can make up with eight mg over the next few years, that’s our goal.

Michael, Moderator/Host, Bayer: Okay. So that seems to be the last question that we actually had in the system. And with that, I’d like to say thank you very much for your questions. Thank you very much for your interest. That concludes actually our call for today.

We also hope that you actually got to dial into our Crop Science investor update. This afternoon our time would be great that you could also spend some time and learn more about that business. And with that, we wish you all a great day. Thank you very much and bye bye.

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