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Shareholders have high hopes for Bayer’s new boss

Aafter bill andersonBayer’s new boss will arrive at the company’s headquarters in Leverkusen on April 1, with the German pharmaceuticals and chemicals giant’s outgoing CEO Werner Baumann on standby for two months to ensure a smooth transition. Given Mr Anderson’s inexperience in Bayer’s biggest business, crop science, you might ask what the board’s thinking was in handing him power. The answer is that he has two qualifications that can make up for his shortcomings. He previously ran the pharmaceutical business at the Swiss pharmaceutical giant Roche. He is american. That makes him the right man for a company making a big bet on the pharmaceutical business across the Atlantic.

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Mr Anderson needs to speed up his response to the three biggest challenges facing Bayer. He has to deal with the unfortunate fallout from Mr Bowman’s $63bn purchase of US agrochemical company Monsanto in 2018. Then there’s Bayer’s transatlantic ambitions. By the end of the decade, it hopes to double its drug sales in the U.S., the world’s biggest market, and introduce new treatments to replace blockbuster drugs like Xarelto, a blood thinner whose patent protection is set to expire this year. maturity. Finally, Mr. Anderson will need to deal with calls to break up Bayer’s pharmaceuticals and crop science businesses, or at least sell off the consumer health unit that makes aspirin, Alka Seltzer and other over-the-counter drugs.

Mr Bowman left the top job a year earlier than planned amid growing discontent among investors, whose shares lost a third of their value during his seven-year tenure. Bayer’s market value fell by 26 billion euros ($27 billion) during that period, much of it attributable to the Monsanto takeover. The costly acquisition makes a lot of business sense for Bayer, which already has a crop business. But Mr. Bowman misjudged the potential cost of the American lawsuit: Monsanto makes Roundup, a herbicide that contains glyphosate. Bayer has received 154,000 lawsuits alleging that glyphosate causes cancer. Bayer denies this, backed by many scientists. But to calm the matter, it has paid a $9.5 billion settlement with 109,000 plaintiffs and set aside another $6.4 billion for the rest.

The Monsanto experience did not put Bayer out of the US market. With 30,000 employees at 150 US sites, Bayer is one of the largest life sciences companies in the country, said Patrick Lockwood-Taylor, head of Bayer’s US operations. Its three U.S. subsidiaries (including Monsanto) accounted for 40% of the company’s revenue last year. Bayer plans to increase its marketing and distribution staff from 1,000 to 3,000 by 2030 in pursuit of an ambitious goal of doubling its $5 billion North American pharmaceuticals business. Last year, it opened a $140 million molecular biology research center near Boston. It has high hopes for two recently launched drugs in the US: Nubeqa for prostate cancer and Kerendia for diabetics with kidney disease.

Bayer has no plans to sell its consumer health business, let alone split it in two. That will not quell calls for separation. Earlier this year, two activist investors, Inclusive Capital and Bluebell Capital, bought Bayer. Inclusive boss Jeffrey Ubben, who has a stake worth more than 400 million euros, has called the crops sector a “gem” amid heightened concerns about food security. As a stand-alone company, he believes it could be valued similarly to that of Corteva, the agriculture business spun out of U.S. chemicals giant DowDuPont in 2019. Corteva trades at 20 times earnings, well above Bayer’s P/E ratio of 7.

In the meantime, a standalone pharmaceuticals business might be better off without the legal risks associated with Roundup. Other pharma spin-offs, such as Switzerland’s Novartis divesting its generics division or the US’s Pfizer selling its animal health division, have had good results.

Anderson, 56, has big ambitions: he left Roche last year after failing to land the top job. He’s also a risk taker: At Roche, he’s betting big on three expensive trials of drugs to treat Alzheimer’s disease, breast cancer and lung cancer, despite disappointing results from early clinical studies. The experiment failed. Bayer shareholders hope Mr Anderson can bring to Leverkusen a trait more associated with Ireland – luck.

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