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In a statement released earlier today, Bayer celebrated a net profit increase of 11.5 percent in the first quarter of 2013. But the results fall short of analysts’ estimates as older drugs and plastic unit performances drag down success of innovative health products.

By Louise Kelly on Apr 25, 2013

Earnings before interest, taxes, depreciation, amortization (EBITDA) and special items increased 0.4 percent to €2.45 billion ($3.2 billion), the German chemical and pharmaceutical company revealed this morning (25^thApril). These figures fell below both the Bloomberg €2.55 billion average estimate and the average estimate from Reuters of €2.59 billion.

Highs and lows

The German conglomerate’s profits have benefited from the success of a number of new pharmaceutical products. Oral anticoagulant Xarelto, eye disease drug Eylea and cancer drug Stivarga have generated combined sales of €244m, a healthy jump from €42m for the same period in 2012.  But the health unit did hold some disappointments as older drugs have not performed as well as expected, including the multiple sclerosis treatment Betaseron and the birth-control pill Yasmin – a costly product for the firm as it has been subject to much litigation in the last twelve months.

Adding to Bayer’s woes, its US-based plastics unit has been struggling with rising raw material prices.  Core earnings at MaterialScience, the world's largest maker of transparent plastics used in sports goggles, DVDs and car lights, slumped by more than a quarter – EBITDA before special items dropped a staggering 27 percent in the first quarter.  Germany's largest drugmaker is therefore pinning its hopes on new drug launches to lift earnings in coming years, reporting earlier this year that five new pharmaceutical products will contribute more than €2.5 billion to sales in 2015. In the meantime, Bayer is depending on its health (healthcare revenue increased 2.3 percent to €4.4 billion) and crop chemicals divisions (Bayer’s agricultural unit climbed 5.9 percent to €2.76 billion) for sustained growth.  

Optimistic outlook

Nevertheless, net profit at the international pharma firm has grown to a respectable €1.16 billion in the January to March period, in some part due to the stronger demand in emerging markets which helped overcome weaker business in Europe.  Bayer noted that the 6.8 percent increase in the emerging markets was nearly three times larger than in the industrialized countries, with strong expansion in business in the BRIC countries – Brazil, Russia, India and China. And at statement release, CEO Dekker said Bayer was sticking to its full-year targets.

“Bayer continues to expect group sales for the full year 2013 to increase by 4.0-5.0 percent to approximately €41 billion. As before, Bayer plans to increase EBITDA by a mid-single-digit percentage and core earnings per share by a high-single-digit percentage,” he said.