Bayer has posted a dip in earnings for the third quarter this morning, but the Leverkusen-based firm is optimistic about the future especially given the strong performance from its healthcare unit .

Earnings before interest, taxes, depreciation and amortisation (and before special items) were down 4.2% to 1.49 billion euros, hit by the unfavourable effects of currency exchange and soaring energy and raw material costs at its MaterialScience unit. Group turnover edged up 2.0% to 7.79 billion euros.

Sales at Bayer’s healthcare division were up 3.3% to 3.80 billion euros, while pharmaceutical revenues increased 2.6% to 2.64 billion euros.

Growth was driven by Betaferon/Betaseron (interferon beta 1b) for multiple sclerosis (291 million euros; +11.1%) and the Yasmin (ethinyl estradiol/drospirenone) contraceptive franchise which climbed 10.8% to 308 million euros. Mirena, the firm’s levonorgestrel-releasing intrauterine contraceptive system, contributed 105 million euros, up 9.4%. The haemophilia agent Kogenate (recombinant antihaemophilic factor), increased 10.3% to 235 million euros, while the antibiotic Avelox (moxifloxacin) edged up 2% to 101 million euros.

Nexavar (sorafenib), which is now approved for liver as well as advanced kidney cancer, contributed 121 million euros, up 59.2%. Sales of the hypertension treatment Adalat (nifedipine) were down 2.6% to 148 million euros, and the erectile dysfunction drug Levitra (vardenafil) fell 3.5% to 82 million euros. The antibiotic Cipro/Ciprobay (ciprofloxacin) fell 12.5% to 84 million euros as a result of generic competition.

Future growth at healthcare is expected to be boosted by Xarelto (rivaroxaban), the antithrombotic, taken as a single tablet, once-daily, which has been approved by European regulators for prophylaxis of venous thromboembolism following elective hip or knee replacement surgery. Bayer chairman Werner Wenning noted that clinical studies in further indications are already at advanced stages and “we believe this innovative drug has the potential to achieve peak annual sales of more than 2 billion euros in the future”.

Mr Wenning went on to say that “despite the difficult economic conditions expected in the fourth quarter”, the company continues to target over 5% adjusted sales growth for the full year, up to 33 billion euros. He added that Bayer remains on track despite the financial crisis and the weakening economy.

No need for refinancing
The crisis should not have a direct impact on the company’s financial status, Mr Wenning noted, especially as the Schering AG acquisition “was soundly financed right from the start. As a result, we currently have no need for refinancing and debt that matures in the coming years is intended to be paid down out of operating cash flow”.

He acknowledged that the crisis tends is causing anxiety among the workforce, “so it’s precisely at times like these that we must have special consideration for our employees.“ Mr Wenning noted that “for years Bayer has concluded agreements with the works council that rule out dismissals for operational reasons in Germany – currently until the end of 2009,” and pensions are also safe. “Speculative behaviour is not part of the investment strategy of our pension funds,” he added.

Also, some 70% of the business – health care and agriculture – is less dependent on cyclical fluctuations, and this is paying off,” he noted, confirming its goal for 2009 of an underlying EBITDA margin of around 28% for health care. However Bayer intends to narrow its forecast for 2009 and details will be unveiled at its spring financial news conference in March.