Baumann's plan: Bayer's boss wants to rebuild the group

It is already clear that Bayer is preparing a complete reorganization and wants to streamline its organization. The group plans to implement a new austerity program, including large-scale job cuts in the business community. It is intended to cover several areas of the group, but at different levels.

Above all, the crisis sector of over-the-counter drugs (consumer health) is affected. Even in pharmaceutical research and the combined agricultural sector in Monsanto, jobs are likely to disappear. There will be no dismissal at least in Germany.

Added to this is the possible separation of parts of a company in order to recover its financial strength. The board of directors maintains open the option of a sale of veterinary drugs, for which there are already several stakeholders, it was said in the financial community.

The CEO, Baumann, wants to go back on the offensive – and is fighting for the future of Bayer and the billion dollar project, Monsanto. However, investors are constantly irritated and dissatisfied, especially because of the 30% drop in prices after the first glyphosate loss process. Winfried Mathes, from the fund management company Deka, said: "We want an answer because Bayer wants to end the avalanche process."

Bayer's Managing Director, Baumann, is informed daily of Leverkusen's head office. Halfway between the office and the elevator, a small monitor hanging on the wall hangs in the little standing cafe, displaying Bayer's stock price in real time.

It has been going straight for months. The dimension even places the hard Bayer at. 94, 84, 74, 64 – these are the price increases since August. 30 billion euros in stock market value have disappeared. Bayer is still worth a little more than 60 billion euros on the stock market. In a nutshell: Farmers in Leverkusen paid Monsanto seed grower about the same amount in June of this year.

Until now, the purchase was a poison for the stock price. Due to the high legal risk resulting from the loss of the first phytopharmaceutical product, glyphosate, investors fled the Bayer stock. "The loss of price makes us extremely dissatisfied as an investor," says Winfried Mathes, an expert in corporate governance at Deka, a subsidiary of Sparkbaden-Fond.

Quo vadis, Bayer? Not only the owners ask, but also the employees. In the job market, "nervousness and uncertainty are palpable", means in worker circles. Also because of glyphosate – but not alone.

Because it is crumbling in all the divisions of the group. Bayer's flagship pharmaceutical sector is losing momentum and needs a new perspective. The consumer health division offering over-the-counter products, which was expanded in 2014 with a purchase of 10 billion euros, presents itself as a case of reorganization. The third division, the agribusiness, will take a leap forward with the mega takeover of Monsanto. Bayer is now the world leader in seed and crop protection. For the public, however, it is for the moment only damage to the image and legal risks, which has allowed Bayer to win the largest contract in its history.

The pressure on CEO Baumann is great, he has to get Bayer out of the defense. Weak stock prices and long-troubled investors are fertile ground for active funds, which could upset Bayer. Split, change of platter, wholesale sales are their usual threat scenes. Until now, no sound maker such as Elliott in the Bayer business has heard about it yet. Even the hedge funds, the title Bayer is currently too hot because of legal risks, report the financial circles.

But financial market experts warn: Active funds could quickly be put on the table if Bayer does not even solve the problems of its operation. At the latest in two or three years, this could be threatening if the consequences of the glyphosate processes for Bayer were more predictable. At present, it is unclear whether the group will have to bear charges of several billion euros, as fear investors. Or if Bayer takes it to court in higher instances and pulls it slightly again.

New recipe for medicine

On Wednesday next week, Bayer's board wants to seize this opportunity and regain investor confidence. At Investor Day in London, leaders will present the future strategy and realignment. Bayer will appoint fund managers and badysts the new goals they want to achieve in the agri-food sector with Monsanto and in both medical divisions. The future of agriculture and modern pharmaceutical research is on the agenda.

But it is also uncomfortable plans: Bayer wants to streamline the organization and launches a new program to reduce costs, including job cuts, as it is supposed in the business community. The dismantling will take place in several areas, but should give different strengths. The Consumer Health division is primarily affected. We do not know how many places disappear completely. Bayer did not want to comment.

The topic of cost reduction is tricky for CEO Baumann. It must take this step to bring the two medical divisions to the fore, they must ensure their viability in the tough pharmaceutical competition. At first, it has nothing to do with the threat of glyphosate processes. But in public, one might get the impression that Leverkusen opts for austerity because of Monsanto and glyphosate.

The second strategic direction of Bayer is closer to the $ 63 billion acquisition. In order to recover its financial strength, the Group is currently examining the separation of parts of a company. On the one hand, this concerns the trade with veterinary medicine. This is a small group compared to an annual turnover of 1.6 billion euros.

For them, several options are on the table, as we call them in the corporate and financial circles. An IPO of veterinary drugs is also unlikely in the medium term. In a sale, Bayer can expect revenues between five and seven billion euros. But even this step is not easy: the big financially powerful competitors in the health law sector in divorce, for antitrust reasons as a buyer. However, according to financial circles, several companies have already expressed their interest.

Participation in the operator of the Currenta Chemical Park is also on the list. In the financial sector, the diagnostic contrast products sector has long been cited as a sales candidate. With partial sales, Bayer could more quickly reduce its net debt, which will reach 36 billion euros by the end of the year. For example, the group would gain more air, for example, to strengthen their business with prescription drugs.

But first, the divisions should do their duty. Especially in the Consumer Health division with its flagship product Aspirin, the group is the red pen. The plan calls for substantial job cuts and the separation of small brands. Bayer's new division chief and general manager, Heiko Schipper, has developed a concept he wants to present in London.

Cancellations at Consumer Health

The division has consistently made less profit for three years and is presented as a case of renovation. In doing so, he will play a leading role in the global prescription drug market (OTC) – through the acquisition of a billionaire from the OTC division of US pharmaceutical company Merck & Co in 2014.

But the products acquired as Dr. Scholl's foot care and Coppertone sunscreen proved to be neglected. Since then, Bayer has had to invest heavily in innovation and marketing for troubled brands. Because the price pressure in the industry is huge, especially since Americans prefer to buy over the counter remedies for their ailments on Amazon rather than in pharmacies.

Since Consumer Health is headquartered in Basel, Switzerland, Bayer may also have redundancies. German sites are protected against this: here, the site security contract, which Bayer concluded with workers' representatives until the end of 2020, is applicable. In Germany, Bayer relies on staff turnover or voluntary departures.

This also applies to the central pharmaceutical division, which manufactures prescription drugs and accounts for nearly half of the Group's sales. It remains a strong pillar but has lost momentum in the last two years. The pharmaceutical sector has a problem of perspective: it feeds on advanced products such as Xarelto anticoagulant and Eylea eye cream, which are growing rapidly.

The two other medicines that make Bayer one of the "main products of growth", the anti-cancer drugs Xofigo and Stivarga, on the other hand, experienced a decline in sales, as did the vast majority of the essentially non-patented product portfolio. . The current product range promises little potential for the difficult phase that begins in 2023. The patents expire for Xarelto and Eylea. This would threaten a shortfall of more than six billion euros, which will then have to close Bayer.

Bayer now wants to take up this challenge intensively. Baumann brought Stefan Oelrich, former Bayer executive, to Sanofi. Since November 1, he is responsible for the Pharmaceutical Division on the Board of Directors. His first major presentation will focus on the reorganization of Bayer's engine: drug development.

The division has merged all research and development (R & D) departments. Objective: The entire process, from the discovery of the drug to the registered product, should be accelerated. In addition, R & D will be more closely linked to university research and the biotechnology scene. Bayer has recently missed some important trends, such as immunotherapy for the treatment of cancer. Behind the pharmaceutical project bearing the pretty name "Super Bowl" is not just a new cooperation. The reorganization will also lead to cost reductions and job cuts, according to the company.

This also applies to Monsanto's integration into the Crop Science division. 1.2 billion euros of synergies should enable this acquisition to be acquired within three years. Most of these solutions need to be created with new products, which Bayer promises by combining seed and crop protection. The rest is represented by the cost savings. The expectations of investors are great: "Bayer must now integrate Monsanto successfully, introduce a culture change in Monsanto's former business and exploit the promised synergies," said Deka's director, Winfried Mathes.

Bayer's boss, Baumann, must prove himself with his team on three of the group's projects – and show that the group has its future in its current form. Or, as one investment banker puts it: "Bayer must disenchant his own actions with fantasies that an activist investor could develop."