Bayer To Focus On Life Sciences, Splits Off MaterialScience Business
Bayer announced it plans to devote its full attention to its Life Science businesses, which includes HealthCare and CropScience, and to float its MaterialScience plastics business on the stock market in 2016 as a separate entity.
Splitting off its MaterialScience business will help the company focus on its more profitable Life Sciences unit, which currently accounts for approximately 70 percent of Bayer’s sales. It will also place MaterialScience in a better position to access funding as an independent company. The polymers unit had sales of €11.2 billion last year and is estimated to be worth around nearly €10 billion to €11 billion, including debt. Upon its floatation, Bayer’s MaterialScience is expected to become the fourth-largest chemical company in EU. Reuters reported that, in the past, a potential deal between Bayer and rival Evonik for MaterialScience was discussed but did not materialize due to differences in price expectations.
On the other hand, Bayer’s core health care business brought in €18.9 billion in sales last year. “In recent years, Bayer's center of gravity has greatly shifted toward its Life Science activities with the successful launch of novel pharmaceutical products,” the company stated in its press release. The company says its quintet of drugs – the eye medicine Eylea, the anticoagulant Xarelto, the pulmonary hypertension drug Adempas, and the cancer drugs Stivarga and Xofigo – is expected to bring in a minimum of € 7.5 billion in combined peak annual sales. Bayer also said it will increase its R&D spending on its Life Science units and continue its momentum in commercialization of its latest pharmaceutical products.
The company’s Supervisory Board gave its unanimous approval to the Board of Management's plans. “Our intention is to create two top global corporations: Bayer as a world-class innovation company in the Life Science businesses, and MaterialScience as a leading player in polymers,” Bayer CEO Dr. Marijn Dekkers said. The German firm’s shares shot up to a record high 6.2 percent gain following the announcement.
In May, Bayer announced it was making another strategic move to beef up its Life Sciences unit by buying Merck’s consumer care business, bringing Claritin, Dr. Scholl’s, and Coppertone products into its product portfolio. This particular transaction will make the company one of the biggest providers of over-the-counter healthcare products in the industry.