Bayer has already said it plans to home in on life sciences after it carves out its plastics unit later this year for an IPO or spinoff. So what, exactly, does that mean for its HealthCare division, numbers-wise?
As the German drugmaker said at its investor conference Wednesday, it means increasing sales by an average of about 6% per year through 2017 to hit more than €25 billion ($27 billion). Bayer will also be looking to up its adjusted core profit margin to 29%-31%, up from 2014's 27.5%.
Making all of that possible will be the company's Big 5 new pharma products, a group that consists of new-age anticoagulant Xarelto, hot-launching eye med Eylea, cancer drugs Stivarga and Xofigo, and pulmonary arterial hypertension treatment Adempas. Last month, the company said it predicted those drugs would pull in €4 billion this year--a substantial leap from this year's €2.9 billion tally.
Consumer health sales will also grow by an average of around 4% per year through 2017 to more than €10 billion, Bayer forecast, despite a fourth-quarter OTC showing that analysts deemed not quite up to par. As CEO Marijn Dekkers pointed out after releasing earnings, that was the first quarter after closing a $14.2 billion deal for Merck's ($MRK) consumer unit--"a transition situation," so to speak.
And as Dekkers noted Wednesday, he's willing to accept narrower profit margins if any of the company's up-and-coming new drugs require higher spending on drug development. "The better the pharmaceuticals pipeline develops, the more investment will be required for further clinical trials," he told investors, according to the company's release.
And the way Citi analyst Peter Verdult sees it, that "tempered margin outlook" for pharma is okay. "A stronger outlook for CropScience, as well as a stronger margin outlook for Consumer to reflect the Merck OTC acquisition, offsets a tempered margin outlook for Pharma," he wrote in a note seen by Bloomberg.