Bayer’s Second-Quarter Earnings Rise as New Drugs Offset Euro

Jul 30, 2014 12:33 pm ET

(Updates with closing share price in fifth paragraph.)

July 30 (Bloomberg) -- Bayer AG’s second-quarter earnings rose on improved sales of new heart, cancer and eye drugs even as a stronger euro and the weaker performance of older products restrained profit.

Earnings before interest, taxes, depreciation, amortization and one-time items climbed 1 percent to 2.22 billion euros ($2.95 billion), the Leverkusen, Germany-based company said in a statement today. That fell short of the 2.3-billion-euro average estimate of 10 analysts surveyed by Bloomberg.

Bayer, one of the last remaining drug and chemical conglomerates, is leaning on its health unit for growth. The company took a step to strengthen the division in May when it agreed to buy Merck & Co.’s over-the-counter products, including the allergy medicine Claritin, for $14.2 billion.

Missing estimates was “partly due to exchange rates,” Fabian Wenner, a Zurich-based analyst for Kepler Cheuvreux, said by phone. “When I look at the pharma bit, which is the most important thing, the quality is OK, because most of the key products performed quite well.” Wenner rates Bayer a hold.

Bayer shares rose 1.5 percent to 101 euros in Frankfurt. The stock has returned 22 percent including reinvested dividends in the past year before today, matching the return for the Bloomberg Europe Pharmaceutical Index.

Russian Sanctions

Over-the-counter drugs, such as the products Bayer will get from Merck, are a “fantastic growth business” in emerging markets, Chief Executive Officer Marijn Dekkers said in an interview with Bloomberg Television. Bayer will continue to invest in Russia amid sanctions announced yesterday by the European Union, he said. The company expects sales to continue to improve in the country, where it had double-digit revenue growth in the second quarter, adjusted for exchange rates.

“Russian citizens use our products every day,” Dekkers said. “I think those businesses that are really focused on the Russian citizen will be less affected by potential sanctions.”

Second-quarter health-care revenue increased 0.9 percent to 4.85 billion euros, in line with total revenue growth. Sales of the Xarelto blood thinner gained 79 percent, while the eye medicine Eylea and cancer treatments Stivarga and Xofigo also climbed.

The negative effect of currency swings means that sales this year will be about 41 billion euros, Bayer said. That’s the bottom of an earlier forecast of 41 billion euros to 42 billion euros. The prediction doesn’t include pending acquisitions. Ebitda before one-time items will rise by a low- to mid-single- digit percentage, the company said, confirming its previous forecast.