Bayer Completes $2.6 Billion Sale of Environmental Science Professional Business to Cinven, Refocusing on Oncology Ambitions

Following the agreement reached in March, on October 8, Bayer announced the official completion of the sale of its Environmental Science Professional business to international private equity firm Cinven for $2.6 billion (€2.6 billion).

Screenshot from Bayer's official website

The former Bayer Environmental Science business, after being divested, will operate as an independent company named 安蔚优 (English name: Envu). The company's headquarters is located in Cary, North Carolina, USA, and approximately 900 employees will transition from Bayer to Envu.

The net proceeds from this transaction will be used to repay the company's debt. As of June 30 this year, Bayer AG’s net financial debt increased to 36.575 billion euros, marking a 5.9% rise compared to March 31 this year.

After the Acquisition, Litigation Continues Unabated

Bayer's debt pressure began with the Monsanto acquisition plan launched in 2016.

In May 2016, Werner Baumann took office as CEO of Bayer and soon launched the acquisition plan for Monsanto, intending to acquire the world's largest seed and pesticide producer for $66 billion. Due to reviews by European and U.S. antitrust regulators, the deal was delayed until June 2018, with the final transaction amounting to $63 billion, making it the largest all-cash acquisition in history.

This acquisition not only cost Bayer a large amount of cash but also entangled the company in multiple lawsuits:

In August 2018, Monsanto's herbicide was ruled to have caused a school groundskeeper in the United States to develop cancer, and Bayer AG was ordered to pay $289 million (approximately RMB 2 billion) in damages.

In May 2019, a jury in California ruled that Monsanto was liable for the lymphoma developed by a local couple due to the lack of warning about the carcinogenic ingredient "glyphosate" contained in its herbicide design, and ordered the company to pay more than $2 billion (approximately RMB 14 billion) in damages.

……

In 2020, Bayer paid a total settlement amount of $10.1 billion to $10.9 billion (€9.1 billion to €9.8 billion) to resolve major litigation related to the former Monsanto. That year, Bayer recorded a net loss of €10.5 billion, setting a historical record.

Since the completion of the acquisition in June 2018, Bayer's stock price has fallen by nearly half. Originally, Monsanto owned genetically modified crop seeds and pesticide businesses, which were complementary to Bayer's Crop Science division—on paper, it appeared to be a perfect deal. However, after the acquisition, it turned into a "hot potato."

Investor dissatisfaction erupted again earlier this year when Temasek Holdings Pte, a long-term shareholder of Bayer, urged CEO Werner Baumann to step down. According to media reports in September, Bayer had begun searching for his successor.

New Strategic Goal: Global Oncology Top 10

On August 4, Bayer announced its 2022 H1 performance, which provided some relief to the market. The total revenue for the first half of the year was 27.458 billion euros, representing a year-on-year increase of 18.4%, with pharmaceutical business revenue reaching 9.442 billion euros, up by 6.6%. Bayer expressed optimism about the performance in the second half of the year and raised its full-year outlook for the entire group.

At the same time, with the patents for Bayer's two blockbuster drugs, Xarelto (rivaroxaban) and Eylea (aflibercept), nearing expiration, the hope for business growth now rests on new drugs.

At the Global Media Day for prescription drugs in March this year, Bayer set an important strategic goal: to make Bayer's oncology business rank among the top 10 globally by 2030. To this end, Bayer is accelerating the adjustment of its product pipeline and personnel allocation. The investment department’s Leap program will invest more than 1.3 billion euros over the next three years, and has recruited two executives from GSK: former Senior Vice President of Global Oncology Business, Christine Roth, and former Senior Vice President and Head of Oncology Drug Development, Tara Frenkl.

Currently, Bayer has launched six products and ten indications in the global oncology market, with the main focus being on the new drug Nubeqa (Nubeqa) for the treatment of prostate cancer. This drug, co-developed by Bayer and Orion, is an androgen receptor antagonist that was successively approved for marketing in the United States, the European Union, and China in July 2019, March 2020, and February 2021, respectively. In the first half of this year, sales of Nubeqa (Nubeqa) doubled compared to the same period last year, reaching 181 million euros.

To further advance the development of oncology drugs, on June 29, 2022, Bayer announced an investment of $140 million in Kendall Square, Boston-Cambridge, Massachusetts, USA, to build a new Precision Molecular Oncology Research Center aimed at developing novel targeted cancer therapies for patients.

References:

[1] Bayer Official Website: "Bayer Completes Sale of Environmental Science Business to Cinven"

[2] Bayer Official Website: "Bayer Establishes New Research and Innovation Center, Focusing on Precision Oncology Treatment"

[3] E Pharm Exec: "After Selling 'Peripheral' Businesses for $26 Billion, What's Worrying About Bayer?"

[4] E Pharm Exec: "Bayer Takes on a 'Hot Potato,' Teva Faces a 'Farmer and the Snake'... The 'Disheartened' World Behind Multinational Pharma's Buying Spree"

[5] E Pharm Exec: "Will Bayer's Global CEO Step Down Early? No Split Despite $10 Billion Litigation Crisis. What Drives Bayer’s Global Top 10 Oncology Ambition?"

[6] Financial Times: "[Update] Bayer Proposes $62 Billion All-Cash Acquisition of Monsanto"

[7] Pharmaceutical Economy News: "Bayer Spends Billions of Dollars to Resolve Over Ten Thousand Lawsuits After Sky-High Mergers and Acquisitions!"

[8] Interface News: "To Settle the Lawsuit over Carcinogenic Herbicides, Bayer Lost Nearly 80 Billion Yuan in Q2"

[9] Proactive: "Bayer CEO May Step Down Early"

[10] PharmaCube Info: "Bayer 2022H1: Total Revenue Grows by 18.4%, Strong Support from Eylea and Xarelto! Full-Year Outlook Raised"

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Editor: Dada Xiwa

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