- Tightening expenses is on the forefront of Bayer's mind as the company gears up for end-of-year commercial and R&D spending, as well as its looming acquisition of Monsanto.
- Those cost-cutting measures are helping reaffirm the German biopharma's earnings projections. In July, Bayer estimated EBITDA, a measure of earnings, would increase by a low teens percentage this year. That estimation would be a slight decline from 2015, when the company reported EBITDA gains of 15.2%, according to its most recent annual financial report.
- While the company didn't say how much of its revenue it expected to pump back into R&D, it reported spending 9.1%, or €4.281 ($4.67 billion), of yearly sales on that in 2015.
Drug sales drove the bulk of revenue gains in the third quarter, the company said during a Wednesday earnings call. They rose 8% to €4.2 billion for the period, and included strong gains from Xarelto, Eylea and Xofigo, among others.
What's more, the company raised annual peak sales expectations for five of its new-to-market drugs to €10 billion from a previously anticipated €7.5 billion. Another six pipeline drugs are expected to drum up €6 billion in annual peak sales.
The company also plans to file for accelerated approval with the Food and Drug Administration for its non-Hodgkin's lymphoma drug copanlisib.
Bayer warned, though, that it would likely see spending increases as the year comes to a close.
"Historically, you will see that we have higher R&D costs towards the end of the year as R&D projects finish and we are initiating new ones," Bayer's head of pharmaceuticals Dieter Weinand said in the October 26 call, adding that investors should expect to see that pattern continue, as well as a series of commercial investments, in the fourth quarter.
The acquisition deal Bayer locked down with the agrichemical and crop juggernaut Monsanto in mid-September also stands to drastically affect business organization and finances.
The company's offer – the third it made over several months of bidding – valued Monsanto at $66 billion, easily claiming the largest transaction seen in 2016. According to the Wednesday call, special charges of €125 million related to the deal negatively impacted third quarter earnings.
Those expenses are not being helped by hemophilia treatment Kogenate, multiple sclerosis medicine Betaferon, and anti-cancer drugs Nexavar and Stivarga, which all saw drops in sales during the latest quarter. Bayer attributed the declines to increased competition, swings in volume order and weaker business models.
Bayer stock held fairly stable on Wednesday, falling a little less than 1% by market close. While share price has rose since the beginning of October, it fell directly after announcing the deal with Monsanto and has decreased 22% this year.