Bayer AG raised its annual profit outlook after increased demand for some of its newer drugs drove a better-than-expected performance at its pharmaceutical unit. Adjusted earnings before interest, tax, depreciation and amortization are now expected between €9.8 billion ($11 billion) and €10.3 billion this year, the German company said Tuesday, slightly above its previous forecast range. Sales of prostate cancer drug Nubeqa and kidney therapy Kerendia exceeded expectations in the quarter, prompting Chief Executive Officer Bill Anderson to say Bayer has "reached a turning point in pharma's growth trajectory." Third-quarter earnings of €1.62 billion also beat the average estimate of analysts surveyed by Bloomberg.
The boost comes as the German conglomerate focuses on its biggest problem: mass litigation in the US over claims that its Roundup weedkiller causes cancer, which the company denies. Bayer inherited the litigation with its 2018 acquisition of Monsanto and has already paid more than $11 billion to resolve Roundup claims. Bayer's shares are up about 35% this year on optimism the company may finally be getting to grips with the issue. Anderson has pledged to "significantly" contain the legal overhang by the end of this year through a multi-pronged strategy, including a settlement. Bayer already won a favorable US Supreme Court ruling in June and is awaiting a final nod on its $7.25 billion settlement proposal.
In the third quarter, the pharmaceutical division posted sales and profit growth, with Nubeqa hitting about €1 billion in the period. That helped offset generic competition for blood-thinner Xarelto, whose sales slumped by 30%, as well as eye medicine Eylea. The company recently received its first approval for its potential blockbuster stroke drug asundexian in China. Bayer raised its full-year adjusted earnings margin target for the unit to as much as 27%, from a previous peak of 25%.
Meanwhile, earnings at the crop science division fell 41% in the quarter, partly driven by higher costs and weaker crop-protection sales. Earlier this year, Bayer separated its US glyphosate business into an entity called Ruveon, a move seen as an attempt to limit litigation risks. Consumer health, the smallest unit, posted broadly flat sales, continuing to face headwinds from weakness in the US.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing