Bayer predicts pharma growth

Bayer has forecast 8% annual growth in pharmaceutical revenue through 2016 on demand for new medicines.

Bayer predicted 6% growth for its crop-science business, the company said in a statement today as executives meet with investors and analysts in Leverkusen, Germany, where the 150-year-old company is based. No specific forecast was issued for the material-science unit, which some analysts speculate may be sold or spun off.

“I’m particularly confident about our healthcare business thanks to the encouraging development of the five pharmaceutical products we have recently launched,” chief executive officer Marijn Dekkers said in the statement.

Bayer last month raised its forecast for peak sales of five new drugs to at least €7.5bn from more than €5.5bn. The products are the blood thinner Xarelto, the Eylea eye medicine, the cancer products Stivarga and Xofigo and a treatment called Adempas for pulmonary hypertension.

The stock has returned 27% in the year through yesterday, including reinvested dividends, compared with 22% for the Bloomberg Europe Pharmaceutical Index. It closed at a record in January.

Healthcare sales will increase an average of 6% a year, including the 8% growth in drugs and a 3% increase in consumer health, Bayer said. Crop science aims for a profit margin of 24% to 25%, the company said.

For material science, which produces chemicals for industries including cosmetics and car parts, the company forecast an increase in sales volume that’s greater than global economic growth, gave no prediction for profit growth and said the unit aims for a return on investment that’s greater than its cost of capital.

“Material science is having its challenges from a market point of view,” Dekkers said in his speech to analysts and investors. The company is being disciplined in its management of the unit to improve profitability, he said.

Bayer may get rid of the material science business in the next one to two years and use the proceeds to fund acquisitions in animal or consumer health, Jeffrey Holford, an analyst at Jefferies in London, said last week.

Last year, Bayer’s health-care sales rose 7%, excluding currency swings and changes in the company’s portfolio of products. Within health care, pharmaceutical sales climbed 9% and consumer health increased 3%.