Activist Investor Joins Bayer Board Amid Strategic Overhaul and China Sales Slump

Mar 04, 2024 19:09 CST Updated 19:09

Bayer

Pharmaceutical Product R&D Developer

Recently, Bayer AG, the German pharmaceutical and pesticide chemical giantBayerOfficially announced a new round of personnel adjustments ——Plan to add new professionals to the board, including a prominent activist investor.

The Supervisory Board proposed three new independent candidates, namelyBiotech expert Nancy Simonian (63), legal expert Lori Schecter (62), activist investor Jeffrey Ubben (62)。

These nominations will be inApril 26At the annual general meeting of shareholders for a vote.

In addition, the Board of Directors also promoted Julio Triana, Head of International Commercial Operations at Bayer Pharmaceuticals Division, toCEO of Bayer's Consumer Health Division, effective from May 1st.

Bayer stated in a press release that the President of the Consumer Health Division, who has served for six years,Heiko Schipper Resigns from the Board of Directors,"Seeking career development opportunities outside of Bayer." His successor, Julio Triana, has been working for the company since 2002.

The key question is, what impact will the entry of activist investors into the board bring to Bayer, which is already in a state of intense turmoil and planning a restructuring? Will the redesigned Bayer emerge from the mire, or continue its darkest hour?

China's Performance Indirectly Affected by Medical Anti-Corruption Campaign

Bayer's Q3 2023 financial report shows that in the first nine months of 2023, Bayer achieved sales of 10.342 billion euros; EBITDA before special items was 1.685 billion euros, a significant year-on-year decrease of 31.3%, mainly due to the decline in earnings from the Crop Science division; net profit was -4.569 billion euros, compared to 546 million euros in the same period last year.

A multinational corporation (MNC) with revenue ranking among the top ten globally has contracted the "loss-making disease" commonly seen in biotech companies.

At the same time, in Q3 2023, the sales of Bayer AG's pharmaceuticals business remained flat compared to the same period in 2022, at 4.538 billion euros.

But in contrast, sales in China plummeted,Partly due to the tendering process for Adalat, and partly because China's healthcare anti-corruption campaign has indirectly negatively impacted demand.

Oral anticoagulant Xarelto,Kogenate/Kovaltry/Jivi Hemostatic Drugs,Aspirin Cardio, used for secondary treatment of heart attacks, has also significantly declined in the Chinese market.

UnderperformingHow will the China market be affected by the global "redesign" strategy? This still needs time to verify.

Splitting Three Major Businesses at the Same Time? "Infeasible"

For years, rumors about Bayer's potential split have been circulating, intensifying after the new CEO of Bayer took office in June 2023.

However,Reuters reported in January, citing two informed sources, that the company might shelve any potential spin-off plans and focus on restructuring.Splitting Bayer's pharmaceuticals, consumer health, and crop science divisions simultaneously is "not feasible".

On one hand, divesting the crop science business could be tricky, as there are ongoing lawsuits related to herbicides valued at up to $1.56 billion. This asset was acquired by the company's former CEO Werner Baumann through the $66 billion acquisition of Monsanto early in his tenure.Now, thousands of lawsuits "may limit the company's room for maneuver in divesting its Crop Science division."

On the other hand, Bayer's pharmaceuticals division suffered a major blow in November 2023. BayerThe highly anticipated anticoagulant drug asundexian was proven less effective than apixaban (Eliquis), an anticoagulant developed by Bristol-Myers Squibb (BMS) and Pfizer, in a Phase III large-scale clinical trial aimed at preventing strokes in high-risk patients. This clinical trial has been halted. Subsequently, Bayer's stock price plummeted by nearly 20%.Hit a 12-year low.

Despite setbacks, new CEO Bill Anderson stated that these events would not impact Bayer's "strategic options." On the contrary, he noted in a November conference call with investors that these events might simply mean "some of those terms may be a little bit tougher than they otherwise would have been."

Bayer AG will be scheduled forMarch 5Revealed more information about its strategic plans at the investor event.

New CEO Aims to Cut "Middle Management Positions"

At the earnings conference in November 2023,BayerNew CEO Bill AndersonAlsoHe said that between him and the client,12th FloorManagement "is really too much", andPlanCut multiple middle-level managers before the end of 2024. At the same time,He makes no secret of his plan to "redesign Bayer," which means "focusing only on core businesses and getting rid of everything else."

In fact, Bayer's layoffs have already begun quietly. In August 2023, BlueRock Therapeutics, a cell therapy company under Bayer, announced that it had laid off about 50 employees. Even earlier, in February, Bayer launched a "Voluntary Separation Program" in California, USA, targeting employees aged 55 and above with at least 10 years of service, resulting in the layoff of 55 people.

However, in January 2024, Reuters reported that due to concerns that it might lead to unemployment among Germans, Germany's labor unions areUrge this large enterprise group to maintain unity,Oppose the rumored possible split of Bayer into three divisions;Bayer AG also holds a cautious attitude towards Bill Anderson's plan to cut multiple layers of middle management.

Activist Investors Set to "Invade" Bayer Board

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Jeffrey Ubben, the activist investor nominated by Bayer's Supervisory Board this time, also enjoys a formidable reputation among Bayer's shareholders.

Jeffrey Ubben is the founder, portfolio manager, and managing partner of the investment firm Inclusive Capital Partners. Previously, he was also the founder, chief investment officer, and portfolio manager of ValueAct Capital.Jeffrey UbbenWith over 35 years of investment experience, he has served on the boards of more than 20 public companies. Additionally, he serves as a board member for Duke University, the E.O. Wilson Biodiversity Foundation, and the World Wildlife Fund, and was the Chairman of the Poseidon Foundation's National Board for 9 years.

Jeffrey UbbenThe pressure came from his company, Inclusive Capital Partners, acquiring a 0.83% stake in Bayer AG.

Early January 2023,Jeffrey UbbenWhen interviewed by the Financial Times, he expressed that he "prefers to hire externally" to replace Bayer.The position of former CEO Werner Baumann,This strategy represents "a complete break from the past practice of internal recruitment."Werner Baumann served Bayer for 35 years.

In February 2023, Jeffrey Ubben led shareholders in pressuring the company to quickly replace Bayer AG's then-CEO, Werner Baumann.

February 8, 2023Bill Anderson, former CEO of Roche Pharmaceuticals, has been appointed as the new CEO of Bayer.Effective from June 1, 2023。

In the same month,Jeffrey Ubben beginsMember of Bayer's Independent External Sustainability Council.If he is successfully elected as a member of the Supervisory Board in the vote at the end of April, he will resign from his position on the Sustainability Committee.

Prof. Norbert Winkeljohann, Chairman of the Supervisory Board of Bayer AG"Jeffrey Ubben will further enhance the profile of our Supervisory Board. As an internationally renowned investor, Jeffrey Ubben’s extensive experience in finance and capital markets will greatly enrich the work of our Supervisory Board."

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