Bayer Q2 shows pharma, consumer divergence in China, emerging markets

Bayer Healthcare and Consumer showed divergence in China and emerging markets in the second quarter as integrating acquisitions in the consumer unit continued as a challenge, while leading therapies Xarelto and Eylea powered ahead.

In the case of Bayer Healthcare, solid market share and sales for age-related macular degeneration treatment Eylea (aflibercept) in Asia Pacific, with Japan a star, Bayer Group CEO Werner Baumann said on the July 27 earning call.

"We have already achieved 70% market share in Japan, and that is driven by continued expansion in the wet AMD market segment, as well as recent launches of new indications," Bauman said on the call, adding that "recent launches continue with expansion in wet AMD give us significant optimism for continued substantial growth going forward."

The same upbeat message on the region came with a discussion on blood clot therapy Xarelto (rivaroxaban)‎.

"In Asia Pacific 35%. In Japan, total market share in sales is over 31%," Bauman said.

Baumann noted special charges of €104 million as part of the reorganization of the acquired consumer care businesses, which would include China. But at the same time he said that sales for top brand Claritin grew 11% in the second quarter.

"This was primarily driven by business in China," Bauman said.

But Florent Cespedes, an analyst with Societe Generale, asked for a bit more detail on consumer overall and on emerging markets, particularly China, which brought out a bit more comment.

Erica Mann, head of Consumer Health, noted the China challenge on consumer before adding that conditions in Russia and Brazil are a worry. She added that Russia has shown some recovery, "but Brazil is currently in a heavy decline."

And then Dieter Weinand, head of Pharmaceuticals, painted a brighter picture in emerging markets outside of Russia, though warned of possible storm clouds in China while hailing Xarelto's performance there.

"With regards to the emerging markets performance overall, we grew in emerging markets 12.5%. We're very pleased with our performance," he said on the call.

"As you know, in particular in China in the pharma market, there have been some related changes implemented in terms of reimbursement, and so forth. So the IMS revised their growth substantially to market growth lower looking forward, in particular in May this year, they lowered their growth projection to roughly 6.8%.

"If you look at a currency adjusted basis, we outgrew the markets in China with roughly 10%, so we're very pleased with our progression in China. We have not yet experienced what we previously anticipated significant price impact, we have actually done very well thus far and China remains a significant growth market for us going forward.

"On a currency-adjusted basis we grew over 22%, driven primarily by Xarelto. So excellent performance from an operational perspective, and long term, we have to monitor the China situation and see how we manage."

by EJ Lane | Jul 29, 2016


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