Bayer to dramatically reduce animal health risks, consumer brands and 12,000 jobs

Finally, after rumors and rumors, Bayer announced its willingness to separate from its animal health unit, some consumer brands and 12,000 jobs as part of a large-scale restructuring that affects all areas of its activity.

The decision aims to strengthen Bayer's "core activities in the life sciences sector" and "improve productivity and innovation while significantly improving competitiveness," the German conglomerate said in a statement. Thursday. "Thanks to these measures, we are optimally positioning Bayer for the future as a life sciences company," said group chairman Werner Baumann.

Bayer is still studying some details, including how he will leave the animal health sector. But the company has made it clear where the 12,000 jobs will be lost and "a significant number" will happen in Germany, he added.

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Although the company's pharmaceutical sector has recently outperformed, "reinforcing the focus on external innovation is a vital step," the company said. Analysts have already expressed concern that Bayer's internal pharmaceutical pipeline is unlikely to maintain its long-term growth, especially after the loss of blockbusters such as Xarelto anticoagulant and Eylea eye medication.

In addition to seeking opportunities for innovation outside its own walls, the company is restructuring its internal R & D activities. As a result, approximately 900 R & D jobs will be eliminated and the resources generated from this reduction will be used to "invest in collaborative research models and external innovations ".

The franchise of the hemophilia company, which includes older factor VIII treatments, Kogenate and Kovaltry and newcomer Jivi, has been under pressure from Roche's fast newcomer, Hemlibra. In the first nine months of 2018, sales of Bayer drugs fell by 10.9% on an adjusted exchange rate basis.

Bayer has decided not to use its manufacturing site in Wuppertal, Germany, and will drop the 350 positions there. He will focus instead on all recombinant factor VIII production at his Berkeley, Calif. Site, which has just seen 227 employees leave.

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For the consumer health division, Bayer plans to get rid of the Coppertone sun protection line and Dr. Scholl's foot care products, which "present a more favorable development potential outside of Bayer" . This is a bit surprising, as Bayer chose Merck's two brands for a $ 14 billion acquisition of Merck's consumer portfolio just four years ago. But the entire consumer portfolio at Bayer has been difficult. Coppertone, in particular, recorded the largest decline in the first nine months of 2018. Its sales, amounting to 167 million euros, represented a decrease of 15.2%.

The sale of these brands today may not generate huge returns, but Bayer must urgently invest elsewhere in a smarter way. "Selling is the best strategy," Bernstein's badysts wrote to investors. The team estimates that consumer products could yield around 800 million euros.

In addition to the mbadive sales, Bayer also intends to adapt the organizational structure of the consumer section, which will involve the removal of 1,100 jobs. However, Bernstein badysts said that they "do not expect to see a significant margin expansion even with new efficiency measures put in place, but rather to a slow and slow rise." regular. "

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Finally, as Bernstein's badysts are deeply rooted and the market has been widely anticipated, Bayer is abandoning the entire animal health division.

Although the unit is "well positioned in an attractive sector that we continue to develop, the investments needed to further develop this business are not available at Bayer, given the priorities of our key areas," said Baumann. during a briefing with reporters Thursday.

The Bernstein team estimated that the Bayer unit accounted for between € 7 and € 7.5 billion, compared to € 6 to € 6.5 billion after applying a discount, "especially given the recent weakness of the third trimester". Analysts agreed that there was an obvious interest in animal health, so a sale or a rotation would be beneficial for Bayer, they said.

At the same time, Bayer will also cut 4,100 jobs in the crop science sector as a result of the integration of Monsanto and 5,500 to 6,000 additional jobs in the business, commercial and business functions. national forms.

"These adjustments will significantly improve our cost structure and improve Bayer's overall competitiveness," said Baumann. "We are convinced that a lean organization will help us be more responsive to changing markets and increase our agility."

In total, Bayer expects annual savings of 2.6 billion euros from 2022, after the mbadive restructuring and synergies from the Monsanto acquisition. Assuming stable exchange rates, Bayer expects basic EPS of € 6.80 in 2019, 7% lower than the consensus, according to Bernstein. But the company's 10% BPA target for 2022 is ahead of expectations.