While many companies are seeking high and low at potential acquisitions, Bayer has made it clear that there will be no major deals this year as it looks to reduce its debts and preserve earnings in a difficult economic environment.
This was the main message coming out of the company’s spring press conference in Leverkusen, Germany where chairman Werner Wenning unveiled healthy results for 2008, especially in healthcare and despite the battering that its MaterialScience business has taken during the economic crisis. However, he said that “we are benefiting from the group’s alignment toward the life-science businesses, which are less dependent on global economic development”.
Last year saw a number of deals for the healthcare division, including the purchase of the eastern European over-the-counter business of Sagmel, the acquisitions of Direvo Biotech in Cologne and the haematology development portfolio of Maxygen, as well as Nycomed’s preclinical oncology programme. However these transactions were not really headline-grabbers and Bayer is not likely to do any eye-catching deals in the near future.
Mr Wenning said that “for the time being, we will give priority to our liquidity and to safeguarding earnings”. He added that the group’s external growth strategy “should now be implemented a little more cautiously in view of the considerable uncertainties associated with the economic crisis”.
When asked by PharmaTimes World News what constituted a major deal for Bayer, Mr Wenning said “I’m sure we won’t have any billion euro transactions this year’. All opportunities will be analysed, he said, but Bayer’s main goal is to reduce net debt from around 14.2 billion euros to 10 billion euros.
He also confirmed that “we have no interest in buying a generics business” and said that innovation is still the way ahead for Bayer. Mr Wenning noted that the R&D budget for the group will be 2.9 billion euros in 2009, “the highest R&D budget in our company’s history”, and around two-thirds of that will go on pharma.
He added that “in these turbulent times we could, of course, help to improve earnings in the short term by cutting back on research…but that would be the wrong strategy, it would not be sustainable, and it would be short-sighted. Mr Wenning added that spending on R&D is “how we safeguard growth – and with it jobs and prosperity, even if in most cases it will be many years before we reap the fruits of this investment”.
There will be more from the Bayer meeting in tomorrow’s elert, including the views of Arthur Higgins, head of healthcare. By Kevin Grogan in Leverkusen
