Management Report & Annexes | Fundamental Information About the Group

5. Research, Development, Innovation

Innovation and the skills of our employees form the basis for our success as a company. We drive innovation by continuously developing new molecules, technologies and business models in our research centers, investing in research and development projects, supporting the development of our employees and expanding our activities through acquisitions or collaborations with external partners. Strengthening our innovative capability enables us to address the challenges of our time and achieve profitable corporate growth.

In 2014 we raised our research and development spend by 5.3% (Fx adj.) to €3,574 million. Adjusted for special items of €2 million (2013: €212 million), this represented a 12.2% increase (Fx adj.). The ratio of research and development expenses to sales before special items was 8.5%. Approximately 14,000 employees worldwide work in this field.

Research and Development Expenses Full Year 2014 [Table 3.5.1]
  Research and
development expenses
Research and development
expenses before
special items
Share of R&D
expenses
R&D expenses
before special
items/sales
  2013 2014 2013 2014 2013 2014 2013 2014
  € million € million € million € million % % % %
HealthCare 2,229 2,301 2,039 2,297 65.4 64.4 10.8 11.5
Pharmaceuticals 1,771 1,878 1,653 1,876 52.0 52.6 14.8 15.6
Consumer Health 458 423 386 421 13.4 11.8 5.0 5.3
CropScience 861 974 858 974 25.3 27.3 9.7 10.3
MaterialScience 231 210 211 213 6.8 5.9 1.9 1.8
Reconciliation 85 89 86 88 2.5 2.5 7.3 7.9
Group 3,406 3,574 3,194 3,572 . . 8.0 8.5
2013 figures restated
1 For definition see Chapter 16.2 “Calculation of EBIT(DA) Before Special Items.”

As well as investing in research and development, Bayer promotes an innovation culture based on openness to new approaches and internal interdisciplinary cooperation. We are building a national and international network of outstanding scientists to further increase our expertise and extending this network through collaborations with external partners.

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We offer our leading r&d experts special opportunities for professional advancement through the Expert Career initiative. In addition, the approximately 120-member Expert Club – headed by the member of the Board of Management responsible for Innovation – promotes dialogue between scientific experts from different subgroups.

We also ensure that special contributions by individuals or employee groups are announced and honored. For example, we bestow research awards such as the Otto Bayer Medals, which are presented every two years to teams of scientists for outstanding achievements.

Scientists from our company are involved in constant dialogue with renowned research institutes, support partnership projects in the public and private sectors (e.g. in rice growing with the International Rice Research Institute), hold professorships at universities worldwide (e.g. in Germany and China) and regularly invite scientists, university students and schoolchildren to attend various events such as symposiums on health topics or research days for school students. We also view this commitment as an investment in the future, because as a research-based company, we rely heavily on the availability of talented and highly trained people and on society’s acceptance of technology.

Our global internet platform WeSolve promotes joint problem-solving by employees from all subgroups and service companies. Topical issues in research and development, marketing or production are announced via the WeSolve platform and jointly discussed to identify the best solution approaches. Employees use the Bayer Group’s suggestion system, known as the Bayer Ideas Pool, mainly to propose improvements to methods or processes. In 2014 the employees once again displayed their commitment to the company by submitting some 4,850 valuable suggestions to the Bayer Ideas Pool. Of the suggestions for which processing was completed in 2014, 49% were put into practice, resulting in calculable savings of more than €5.1 million in the first year of their implementation. In 2014 we paid out a total of over €1 million in special employee bonuses for the suggestions implemented.

Our collaborations and alliances with leading universities, public research institutes and partner companies are supplemented by incubators, crowdsourcing and science hubs in Asia and the United States to tap into external innovative potential using the open innovation approach. Some of our collaborations are supported by public funding.

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In Germany alone, Bayer participated in more than 80 publicly funded projects in 2014, receiving a total of about €8 million in grants. This is equivalent to roughly 0.3% of our annual r&d expenses.

Reliable, global protection of intellectual property rights is essential for an innovation company like Bayer. The Bayer Group endeavors to obtain patent protection for its products and technologies in the major markets. The degree of protection a patent provides varies from one country to another and depends on the type and scope of the patent claim and the options available for enforcing our rights. At the end of 2014, we owned approximately 68,200 valid patent applications and patents worldwide relating to some 8,300 protected inventions.

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Patent terms vary according to the laws of the country granting the patent. In view of the high investment required for product research and development, the European Union countries, the United States, Japan and some other countries extend patent terms or issue supplementary protection certificates to compensate for the shortening of the effective patent protection period due to regulatory approval processes for new drugs. We endeavor to obtain such extensions wherever possible.

The term of a patent is normally 20 years. Since it takes an average of 12 years to develop a new medicine, for example, only eight years of patent protection generally remain following the product’s approval. In most cases it would be impossible to cover the substantial costs incurred in the research and development of innovative medicines or of new indications or dosage forms for existing drugs without patent protection. We are therefore committed to protecting both the international patent system and our own intellectual property worldwide. Further details are given in the political positions posted on our website.

Strengthening research in the Life Sciences

Bayer is the only global company simultaneously researching improvements in human, animal and plant health. Systematic and intensive collaboration among researchers from both Life Science subgroups is providing new impetus. Researchers from HealthCare and CropScience are collaborating on projects involving central biological processes such as gene regulation or energy metabolism. Such projects are aimed at developing a better understanding of diseases, deciphering mechanisms of action, personalizing therapies or explaining resistance mechanisms. The joint use of technology platforms is being expanded. These projects have been supported since 2012 by Bayer’s internal Life Sciences Fund and are mostly implemented in collaboration with external partners.

HealthCare

Research and development expenses at HealthCare rose by 3.6% (Fx adj.) in 2014 to €2,301 million. Adjusted for special items of €4 million (2013: €190 million), this represented a 13.0% increase (Fx adj.) and was equivalent to 11.5% of HealthCare sales. At the end of the reporting period there were 8,100 employees working in research and development at HealthCare.

Pharmaceuticals

Research areas and sites

Drug discovery in the Pharmaceuticals segment focuses on the areas of cardiology, oncology, ophthalmology, hematology and gynecology. We conduct research activities at six centers. Work in Berlin and Wuppertal, Germany, focuses on the discovery, optimization and development of new active substances. Research is also carried out at these sites in the fields of drug metabolism, pharmacokinetics, toxicology and clinical pharmacology. On the other hand, our u.s. research and development activities in the Mission Bay district of San Francisco and in Berkeley, California, are focused on hematology. In Turku, Finland, polymer-based release systems are being developed for fertility control. At our site in Oslo, Norway, we are carrying out research on Thorium Conjugate for use in cancer. We also operate innovation centers in Beijing, China; Singapore; and Osaka, Japan, which focus on coordinating our research partnerships in Asia.

Research activities in 2014

We conducted clinical trials with several drug candidates from our research and development pipeline during 2014 to drive the development of new substances for treating diseases with a high unmet medical need. At the focus of our clinical development are five active substance candidates currently in Phase II trials. These are finerenone, vericiguat and molidustat in the cardiology and cardiorenal syndrome areas, copanlisib in oncology and vilaprisan in gynecology. We strengthen our already approved products, such as the anticoagulant XareltoTM (rivaroxaban), the cancer drugs StivargaTM (regorafenib) and XofigoTM (radium-223 dichloride), the eye medicine EyleaTM (aflibercept) and AdempasTM (riociguat) for treatment of pulmonary hypertension, through life cycle management activities in order to further enhance their use and/or expand their spectrum of indications.

Some of our development candidates are being investigated for the treatment of illnesses that are serious but at the same time very rare – also known as orphan diseases. For example, ciprofloxacin dpi (dry powder for inhalation) for therapy of non-cystic-fibrosis bronchiectasis (ncfb) was classified by the regulatory authorities as an orphan drug.

Clinical trials account for a major portion of the development process for medicines. They are an essential tool for determining the safety and efficacy of new developmental products before they can be used to treat diseases. The benefits and potential risks of new medicines must always be scientifically proven and well documented. All studies at Bayer satisfy strict international guidelines and quality standards, as well as applicable national laws and standards.

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Bayer implements the internal processes for the planning and implementation of clinical trials using a globally uniform procedure. The company sets high standards in clinical trial design and ensures a high level of transparency.

Consistent with these objectives, HealthCare’s “Trial Finder” database contains publicly accessible information on clinical trials sponsored by Bayer. This information is made available to patients, health care professionals and the general public in order to increase the transparency of our clinical research.

In May 2014, Bayer joined the portal www.clinicalstudydatarequest.com. Upon request, Bayer now grants researchers access to anonymized data at the patient level for clinical trials sponsored by Bayer. In this way we are assisting the progress of medical science and helping to improve patient care.

Further information on our globally uniform standards, the monitoring of studies and the role of the ethics committee can be found on the internet.

Following the completion of the required studies with several of the drug candidates, we submitted applications to one or multiple regulatory agencies for approvals or approval expansions.

The most important drug candidates in the approval process are:

Products Submitted for Approval1[Table 3.5.2]
  Indication
Aflibercept E.U., Japan; treatment of macular edema secondary to branch retinal vein occlusion
Bay 81-8973 E.U., U.S.A.; treatment of hemophilia A
Riociguat Japan; treatment of pulmonary arterial hypertension
Rivaroxaban2 U.S.A.; secondary prophylaxis of acute coronary syndrome
Rivaroxaban Japan; treatment of deep vein thrombosis and pulmonary embolism, prevention of recurrent venous thromboembolism

1 as of February 3, 2015
2 submitted by Janssen Research & Development, LLC

The following table shows our most important drug candidates currently in Phase ii or iii of clinical testing:

Research and Development Projects (Phases II and III)1 [Table 3.5.3]
  Indication Status
Amikacin inhale Treatment of pulmonary infection Phase III
Damoctocog alfa pegol (BAY 94-9027, long-acting rFVIII) Treatment of hemophilia A Phase III
Ciprofloxacin DPI Treatment of pulmonary infection Phase III
LCS-16 (ULD LNG Contraceptive System) Intrauterine contraception, duration of use: up to 5 years Phase III
ODM-201 (AR antagonist) Treatment of prostate cancer Phase III
Radium-223 dichloride Combination treatment of castration-resistant prostate cancer Phase III
Regorafenib Treatment of refractory liver cancer Phase III
Regorafenib Treatment of colorectal cancer following surgical removal of liver metastases Phase III
Riociguat Pulmonary arterial hypertension (PAH) in patients who do not sufficiently respond to PDE-5i/ERA Phase III
Rivaroxaban Prevention of major adverse cardiac events (MACE) Phase III
Rivaroxaban Anti-coagulation in patients with chronic heart failure2 Phase III
Rivaroxaban Long-term prevention of venous thromboembolism Phase III
Rivaroxaban Prevention of venous thromboembolism in high-risk patients after discharge from hospital2 Phase III
Rivaroxaban Embolic stroke of undetermined source (ESUS) Phase III
Rivaroxaban Peripheral artery disease (PAD) Phase III
Sorafenib Treatment of kidney cancer, adjuvant therapy Phase III
Tedizolid Treatment of complicated skin infections and pneumonia Phase III
BAY 1067197 (partial adenosine A1 agonist) Heart failure Phase II
Copanlisib (PI3k inhibitor) Treatment of recurrent/resistant non-Hodgkin's lymphoma Phase II
Finerenone (MR antagonist) Chronic heart failure Phase II
Finerenone (MR antagonist) Diabetic nephropathy Phase II
Molidustat (HIF-PH inhibitor) Anemia Phase II
Radium-223 dichloride Treatment of bone metastases in cancer Phase II
Refametinib (MEK inhibitor) Cancer therapy Phase II
Regorafenib Cancer therapy Phase II
Regorafenib (ophthalmology) Treatment of wet age-related macular degeneration (AMD) Phase II
Riociguat Pulmonary hypertension (IIP) Phase II
Riociguat Raynaud’s phenomenon Phase II
Riociguat Diffuse systemic sclerosis Phase II
Riociguat Cystic fibrosis Phase II
Rivaroxaban Secondary prevention of acute coronary syndrome (ACS)2 Phase II
Roniciclib (CDK inhibitor) Treatment of small-cell lung cancer (SCLC) Phase II
Sorafenib Cancer therapy Phase II
Vericiguat (BAY 1021189, sGC stimulator) Chronic heart failure Phase II
Vilaprisan (S-PRM) Treatment of uterine fibroids Phase II

1 as of February 3, 2015
2 sponsored by Janssen Research & Development, LLC
The nature of drug discovery and development is such that not all compounds can be expected to meet the pre-defined project goals. It is possible that any or all of the projects listed above may have to be discontinued due to scientific and/or commercial reasons and will not result in commercialized products. It is also possible that the requisite Food and Drug Administration (FDA), European Medicines Agency (EMA) or other regulatory approvals will not be granted for these compounds.

We regularly evaluate our research and development pipeline in order to prioritize the most promising pharmaceutical projects.

Cardiology

XareltoTM (active ingredient: rivaroxaban) has been approved for more indications in the area of venous and arterial thromboembolism than any of the other new oral anticoagulants. XareltoTM is approved in more than 125 countries worldwide across all indications, its approval status varying from country to country.

In February 2014, the fda issued complete response letters in connection with the u.s. approval process in the prevention of atherothrombotic events secondary to acute coronary syndrome (acs). A new Phase ii study will now investigate rivaroxaban in combination with a single platelet aggregation inhibitor for long-term prevention in patients with acs. XareltoTM is marketed in the United States by Janssen Pharmaceuticals, Inc., a subsidiary of Johnson & Johnson.

In May 2014, we submitted rivaroxaban to the Japanese Ministry of Health, Labor and Welfare (mhlw) for marketing authorization to treat patients with deep vein thrombosis and pulmonary embolism and for the prevention of recurrent venous thromboembolism.

Beyond the already approved indications, rivaroxaban is also being investigated in other cardiovascular disorders. Ongoing Phase iii clinical trials include compass and commander-hf. The aim of the compass study is to investigate the potential of rivaroxaban in the prevention of major adverse cardiac events. The commander-hf study is evaluating the potential additional benefit of rivaroxaban in combination with standard therapy in the prevention of cardiovascular events in patients with chronic heart failure and significant coronary heart disease.

In 2014, the study program for rivaroxaban was expanded to include new trials: the einstein choice trial is evaluating two different doses of rivaroxaban for the long-term, secondary prevention of deep vein thrombosis and pulmonary embolism. The mariner trial is evaluating the efficacy and safety of rivaroxaban to reduce the risk of post-hospital-discharge symptomatic venous thromboembolism (vte) in patients who were hospitalized for acute medical illness. The esus navigate study is investigating the efficacy and safety of rivaroxaban in patients following embolic stroke of undetermined source. A further Phase iii study (voyager pad) to investigate the efficacy and safety of rivaroxaban in patients with peripheral artery disease (pad) following surgery is in preparation.

Rivaroxaban was invented by HealthCare and is being jointly developed with Janssen Research & Development, llc, a subsidiary of Johnson & Johnson.

AdempasTM (active ingredient: riociguat) is the first member of a new class of vasodilating agents known as soluble guanylate cyclase (sGC) modulators. Administered in tablet form, riociguat is currently being investigated as a new, specific approach for the treatment of various forms of pulmonary hypertension.

AdempasTM was approved in the United States in 2013 for the treatment of inoperable chronic thromboembolic pulmonary hypertension (cteph) and pulmonary arterial hypertension (pah). In March 2014, AdempasTM was also approved by the European Commission in both indications. In Japan, the drug was approved for cteph in January 2014 and was submitted for approval to treat pah in April 2014.

In 2014 the study program for riociguat was expanded to include new trials: a Phase iiib pilot study was launched in March 2014 to evaluate the effect of riociguat in patients with pah who demonstrated an insufficient response to treatment with phosphodiesterase-5 inhibitors (pde-5i) either as a monotherapy or in combination with an endothelin receptor antagonist (era). In June 2014, we commenced the Phase iib study rise-iip to investigate the safety and efficacy of riociguat in patients with symptomatic pulmonary hypertension associated with idiopathic interstitial pneumonia (iip). Outside of the pulmonary hypertension indication, riociguat is also in Phase ii testing for the treatment of patients with diffuse systemic sclerosis.

Another representative of the sGC modulator class is vericiguat, currently in Phase iib clinical testing to treat chronic heart failure.

Since October 2014, we have been collaborating with Merck & Co., Inc., on the development and commercialization of sGC modulators.

Finerenone is a next-generation oral non-steroidal mineralcorticoid receptor antagonist that is currently in Phase IIb clinical development for the treatment of worsening chronic heart failure and diabetic nephropathy.

In the cardiorenal syndrome area, molidustat is being investigated for the treatment of patients with anemia accompanied by chronic kidney disease and/or terminal kidney failure.

Oncology

StivargaTM (active ingredient: regorafenib) is an oral multikinase inhibitor. It inhibits various signal pathways that are responsible for tumor growth.

StivargaTM is approved in the United States, Europe, Japan and several other countries for the treatment of patients with metastatic colorectal cancer (mCRC). In 2013, StivargaTM was also approved in the United States, Japan and other countries for the treatment of gastrointestinal stromal tumors (gist). In July 2014, the European Commission granted approval for the treatment of gist.

In February 2014, we initiated a Phase iii trial investigating the effect of regorafenib as an adjuvant treatment option for colorectal cancer patients following resection of liver metastases with curative intent and completion of all planned chemotherapy.

StivargaTM was developed by Bayer. In 2011, Bayer and Onyx Pharmaceuticals, Inc., a subsidiary of Amgen Inc., United States, agreed that Onyx would receive royalties on global sales of StivargaTM in the area of cancer treatment.

XofigoTM (active ingredient: radium-223 dichloride) is approved in the e.u. and the United States for the treatment of adult patients with castration-resistant prostate cancer (crpc) with symptomatic bone metastases but no known visceral metastases.

In April 2014, a new Phase iii trial began that is evaluating radium-223 dichloride in combination with abiraterone acetate and prednisone/prednisolone for the treatment of asymptomatic or mildly symptomatic patients with bone-predominant metastatic castration-resistant prostate cancer who have not received chemotherapy.

We are jointly developing and commercializing our cancer drug NexavarTM (active ingredient: sorafenib) with Onyx Pharmaceuticals, Inc., United States. The active ingredient sorafenib, which targets both cancer cells and the vascular system of the tumor, is registered in more than 100 countries for the treatment of liver cancer and advanced kidney cancer. In May 2014, NexavarTM was approved by the European Commission for the treatment of patients with progressive, locally advanced or metastatic, differentiated thyroid carcinoma refractory to radioactive iodine. In June 2014, the Japanese mhlw approved sorafenib for the treatment of patients with unresectable differentiated thyroid carcinoma.

Two clinical Phase iii trials with sorafenib failed to meet their respective primary endpoints in March and July 2014. The trials investigated sorafenib as an adjuvant treatment for hepatocellular carcinoma and as a combination therapy for breast cancer.

Copanlisib is a novel, intravenous phosphatidylinositol 3-kinase (pi3k) inhibitor currently in Phase ii clinical development for the treatment of non-Hodgkin’s lymphoma.

Ophthalmology

EyleaTM (active ingredient:aflibercept) is our joint developmental project with Regeneron Pharmaceuticals, Inc., United States. Aflibercept blocks the natural growth factor vegf (vascular endothelial growth factor), thus preventing the abnormal formation of new blood vessels that tend to leak blood. The medication is administered directly into the eye. Regeneron Pharmaceuticals, Inc. holds exclusive rights to the product in the United States, while in other countries it is marketed by Bayer.

EyleaTM is approved in more than 80 countries for the treatment of wet age-related macular degeneration (amd). In 2013, EyleaTM was also approved in Europe, Japan, the United States and further countries for the treatment of visual impairment due to macular edema secondary to central retinal vein occlusion (crvo). In August 2014, the European Commission approved EyleaTM in the treatment of diabetic macular edema (dme). The Japanese mhlw approved EyleaTM in this indication in November 2014. We also submitted the first applications – to the European Medicines Agency (ema) in June 2014 and to the Japanese mhlw in September 2014 – for marketing authorization of aflibercept in the treatment of patients with visual impairment due to macular edema secondary to branch retinal vein occlusion (brvo). In September 2014, the mhlw approved EyleaTM for the treatment of myopic choroidal neovascularization (mCNV). Pathologic myopia and the associated myopic CNV is the second most common cause of blindness in Japan.

Hematology

In May 2014, the recombinant Factor viii Kogenate fs (octocog alfa) was approved in the United States for routine prophylaxis to prevent or reduce the frequency of bleeding episodes in adults with hemophilia a.

In December 2014 we submitted applications for marketing authorization to the European Medicines Agency (ema) and the u.s. fda for bay 81-8973 for the treatment of hemophilia a in adults and children. bay 81-8973 is a full-length recombinant factor viii (rFVIII) which has demonstrated clinical evidence of efficacy when used for prophylaxis twice or three times per week, with standard dosages.

In February 2014, a Phase iii study with damoctocog alfa pegol (Bay 94-9027), a long-acting recombinant Factor viii, reached its primary objective of ensuring effective protection against bleeding caused by hemophilia a with fewer infusions.

We consider that gene therapy holds potential to offer new long-term treatment options for hemophilia a. Gene therapy could transform the treatment of hemophilia by inserting a correct version of the faulty gene responsible for the disease. We are currently working with our partner Dimension Therapeutics on a treatment option of this kind.

Gynecology

Vilaprisan (sprm) is a novel oral progesterone receptor modulator that is currently being investigated in a Phase ii trial for the treatment of uterine fibroids.

In February 2014, we successfully concluded the registration procedure in the European Union for a new transparent low-dose contraceptive patch (FC-Patch Low).

Consumer health

In our Consumer Care Division, research and development activities at the product development centers in Morristown, New Jersey and Memphis, Tennessee, United States, and Gaillard, France, focus on developing non-prescription medicines, medical skincare products, foot care products, sunscreens and nutritional supplements to market maturity. Aligned to end consumers, our development strategies are geared toward expanding and improving our brand portfolio through new products and delivery forms. We also work to achieve reclassification of current prescription medicines as otc products. We introduced a number of new product line expansions to various markets in 2014. They included new delivery forms and uses for existing brands such as CanestenTM, BepanthenTM/BepantholTM, CoppertoneTM and Dr. Scholl’sTM.

The research and development activities of our Medical Care Division focus on blood glucose monitoring and the continuing development of contrast agents and medical equipment used in the diagnosis or treatment of various diseases.

At our two u.s. research and development locations for the Diabetes Care business unit – Tarrytown, New York, and Mishawaka, Indiana – we are focusing on strengthening our product lines. Among the innovative products we launched in key markets in 2014 was the ContourTM ts platform in Europe.

The aim of our research and development activities in the area of contrast agents and medical equipment (Radiology business unit) is to steadily improve our contrast agents and our contrast injection systems in order to build on our leadership position. Our research and development centers are located near Pittsburgh, Pennsylvania, United States; in Toronto, Canada; in Berlin, Germany; and in Sydney, Australia. In June 2014, GadavistTM (gadobutrol) was approved by the fda as the first contrast agent in magnetic resonance imaging (mri) for detection and evaluation of breast cancer. In January 2015, GadavistTM was the first contrast agent to receive fda approval for use in children under two years of age. In 2014 we also worked to expand the capabilities of our informatics product offerings by developing new software and informatics to improve contrast agent and radiation dose management.

In our Animal Health Division, we focus our research and development activities on antiparasitics, antibiotics and medicines to treat non-infectious disorders. We operate r&d centers in Germany, the United States, New Zealand and Brazil. Our central research activities are conducted in Monheim, Germany, as part of our Life Sciences platform in conjunction with pharmaceutical research and in close collaboration with our researchers at CropScience. We reinforce the business by continually identifying further product development candidates through our existing collaborations.

Open innovation

We gain access to complementary technologies and external innovation potential through strategic collaborations with partners. Our Pharmaceuticals segment works with various partners during the individual development stages of a medicine. A number of examples are listed below:

Pharmaceuticals Cooperation Partners[Table 3.5.4]
Partner Cooperation objective
Amgen Research GmbH Access to BiTETM antibodies for developing novel tumor therapies
Ardea Biosciences Inc. Codevelopment of oncology products based on MEK (mitogen-activated ERK kinase) inhibitors
BioInvent International AB Access to antibody library with antibody inlicensing option
Broad Institute Strategic partnership in oncology to discover and develop active substances that specifically target tumor-specific gene mutations
Compugen Ltd. Collaboration for the research and development of new immunotherapy approaches in oncology
Cubist Pharmaceuticals, Inc. Codevelopment of tedizolid to treat various infections
German Cancer Research Center Strategic partnership for the development of new therapeutic options in oncology and immunotherapy
Dimension Therapeutics, Inc. Development of a novel gene therapy for hemophilia A
Dyax Corp. Access to antibody library with the option to inlicense antibodies for the development and commercialization of novel tumor therapies
Evotec AG Research collaboration to identify and validate development candidates in endometriosis
ImmunoGen Inc. Cooperation in the field of antibody-drug conjugates (ADCs) for novel tumor therapies
Inception 4, Inc. Research into new approaches for the treatment of various eye diseases
Janssen Research & Development, LLC of Johnson & Johnson Development of XareltoTM (rivaroxaban)
Ludwig Boltzmann Institute Research into lung vascular disease, especially pulmonary hypertension
Merck & Co., Inc. Development and marketing collaboration in the field of soluble guanylate cyclase (sGC) modulation
Nektar Therapeutics Codevelopment of a targeted antibiotic inhalation therapy for lung infections (amikacin inhale)
Novartis AG Development of a targeted antibiotic inhalation therapy for lung infections (ciprofloxacin DPI)
OncoMed Pharmaceuticals Inc.1 Discovery and development of novel anti-cancer stem cell therapeutics
Onyx Pharmaceuticals Inc. of Amgen Inc. Codevelopment of NexavarTM (sorafenib) for various types of cancer
Orion Corporation Development of ODM-201 for the treatment of patients with prostate cancer
Peking University Research cooperation and establishment of a research center for joint projects
Prometheus Laboratories Inc. Development of diagnostic in-vitro assays for personalized medicine
Qiagen Manchester Ltd. Development of companion diagnostic tests in personalized oncology treatment
Regeneron Pharmaceuticals Inc. Development of EyleaTM (aflibercept) to treat various eye diseases
Development of a PDGFR-beta antibody for ophthalmology
Seattle Genetics Inc. Cooperation in the field of antibody-drug conjugates (ADCs) for novel tumor therapies
Tsinghua University Research cooperation and establishment of a research center for joint projects
University of Oxford Strategic research alliance for the development of novel gynecological therapies
1 Bayer is not active in the area of conventional stem cell research, which examines adult or embryonic stem cells.

In June 2014, we signed an agreement with Orion Corporation, Espoo, Finland, for the global development and commercialization of odm-201, an investigational novel oral androgen receptor inhibitor in clinical development for the treatment of patients with prostate cancer. A joint clinical Phase iii study to further evaluate the efficacy and tolerability of odm-201 in patients with non-metastatic castration-resistant prostate cancer was initiated in September 2014.

In June 2014, we entered into an agreement with Dimension Therapeutics concerning the joint development and commercialization of a novel gene therapy for the treatment of hemophilia a.

In July 2014, we entered into a strategic research alliance with the University of Oxford, u.k., in the area of novel gynecological therapies. The collaboration focuses on innovative treatment options for women with endometriosis and uterine fibroids.

In October 2014, we began our strategic pharmaceutical collaboration with Merck & Co., Inc. in the area of soluble guanylate cyclase (sGC) modulation. This collaboration includes AdempasTM (riociguat), which was developed by Bayer and is already approved for the treatment of certain forms of pulmonary hypertension, and its development for additional indications. The development candidate vericiguat also forms part of the collaboration.

In the area of oncology, we began collaborating in 2014 with the md Anderson Cancer Center, United States, for early clinical development.

In April 2014, we announced our participation in the “High-Tech Gründerfonds ii,” in which we are the first investor from the pharmaceutical industry. This fund supports and finances promising start-ups in the life sciences and other areas in Germany. In November 2014, we also announced that we will participate as a strategic investor in the newly established “Versant Venture Capital V” fund. In this way we aim to support the development of new therapies in areas with a high unmet medical need.

Since 2009 we have been operating an internet platform called “Grants4Targets,” through which researchers at universities, other research institutions or start-up companies can propose biological targets for a collaboration with Bayer. In 2013 we added two more platforms: “Grants4Leads” for proposals concerning biologically active molecules as leads, and “Grants4Apps” for proposals regarding it solutions with potentially multiple applications in the health care field. In August 2014 a further initiative was launched: the “Grants4Apps Accelerator Program.” Five start-ups with innovative health care and therapy-relevant solution approaches are each receiving a start-up package under this program.

Since 2012, we have run the CoLaboratorTM, a center in the Mission Bay district of San Francisco with laboratory facilities for bioscience startup companies. With this incubator concept, the scientists benefit both from the laboratory infrastructure and from the expertise of the Bayer researchers, which can facilitate the professional, goal-oriented design of development programs, for example. At the same time, we aim to be the first contact point for young companies in their search for possible cooperation partners. We opened a second CoLaboratorTM at the Berlin site in May 2014.

CropScience

Research and development expenses at CropScience rose by 13.6% (Fx adj.) in 2014 to 974 million. Adjusted for special items of 0 million (2013: 3 million), this represented an increase of 14.0% (Fx adj.) and was equivalent to 10.3% of CropScience sales.

CropScience maintains a global network of research and development facilities employing some 5,000 people. Our largest r&d sites for chemical and biological crop protection products are located in Monheim and Frankfurt am Main, Germany; Lyon, France; and Sacramento, California, United States. The major research centers of the Seeds unit, which focuses on improving seed through seed technology and breeding, are located in Ghent, Belgium; Haelen, Netherlands; and Lubbock, Texas and Morrisville/Raleigh, North Carolina, United States. While research is carried out centrally at a small number of sites, our development and plant breeding activities take place both at these sites and at numerous field testing stations across the globe. This ensures that future active substances and crop varieties can be tested according to specific regional and local requirements.

In Crop Protection/Seeds, our scientists working in the areas of seed technology, agricultural chemistry and biologics are closely collaborating as part of our integrated research approach. This bundles the technical expertise acquired in chemical and biological research and field development, aligning it to our long-term research objectives and business strategies for the various crops.

In the Crop Protection unit, we identify and develop innovative, safe products for use as insecticides, fungicides, herbicides or seed treatments in sustainable agriculture. In the fields of chemistry, biology and biochemistry, modern technologies such as high-throughput screening and bioinformatics play an important role in identifying new chemical lead structures.

In addition, we are steadily broadening the range of uses for our active ingredients by developing new mixtures or innovative formulations so that they can be applied in additional crops or in different regions or be made easier to handle. Successful collaborations with external partners complement our own activities.

In March 2014, CropScience signed an agreement to acquire Biagro Group, a producer and distributor of biological seed treatment solutions based in Argentina. Its portfolio of established brands includes biological seed treatment products, plant-growth-promoting microorganisms and other products for integrated pest management based on bacterial and fungal strains.

Also in March 2014, CropScience announced plans to significantly expand its research site in Wismar, Germany, in order to serve the growing global demand for biological crop protection solutions. The planned investment includes the construction of a new manufacturing facility for biological crop protection products along with the necessary infrastructure. The production capacities will be expanded in stages, and work should be completed by 2016 at the latest. The planned total investment amounts to approximately €18 million.

In May 2014, CropScience’s rice herbicide CouncilTM Complete received regulatory approval in South Korea – its first registration worldwide. The market launch in South Korea is scheduled for 2015, with other major rice-growing countries in Asia to follow. CouncilTM Complete is based on two innovative active ingredients, triafamone and tefuryltrione, which considerably improve integrated weed control. In 2014 Bayer CropScience also launched a new nematicide based on the active ingredient fluopyram and marketed under the brand names VelumTM and VerangoTM. In field trials, these products have shown a significant increase in yield and quality in a broad spectrum of crops such as fruit, vegetables and tobacco. We plan to launch several more new products based on chemical and biological crop protection mechanisms in the coming years. For example, in 2015 we expect to launch a further insecticide under the SivantoTM brand, a new insecticide class for the control of sucking insects.

In September 2014, we combined our u.s. research and development activities in vegetable seeds and biological crop protection products at a new, integrated site in West Sacramento, California. Our goal is to better exploit the potential of our global research and development capacities by merging and expanding activities.

Research in our Seeds unit is devoted to optimizing plant traits. We are developing new varieties in our existing core crops – cotton, oilseed rape/canola, rice and vegetables. We have now expanded our research activities to include two new core crops – wheat and soybeans. Our work focuses on improving the agronomic traits of these crops. Our researchers are working to increase the quality and yield potential of crop plants – for example, by improving the profile of rapeseed (canola) oil or enhancing the properties of cotton fibers. We are also targeting the development of plants that have high tolerance to external stress factors, such as drought, and can more efficiently utilize water. Further areas of focus include developing new herbicide tolerance technologies based on alternative modes of action, and improving insect resistance and disease tolerance. To do this we employ modern breeding techniques ranging from marker-assisted breeding to plant biotechnology methods.

In January 2014, CropScience signed two new agreements with Cellectis Plant Sciences, United States. The extended partnership aims to develop plant traits specifically for canola seed using new breeding methods. The collaboration also gives Bayer access to technologies that enable the direct engineering of plant genomes in order to develop improved crop varieties.

We aim to jointly develop advanced hybrid rice varieties with Kaiima Bio-Agritech Ltd., Israel. The goal of the multi-year collaboration is to breed new high-yielding hybrid rice varieties.

In June 2014, the first global soybean brand from CropScience – CredenzTM – was launched in the United States. Under this brand, the company intends to offer soybean growers innovative varieties and traits. hbkTM Seed, the brand of Hornbeck Seed Company, United States, which CropScience acquired in 2011, will also be sold under the CredenzTM name.

At the end of September 2014, we acquired the seeds business of Granar s.a., headquartered in Encarnación, Paraguay, a company specializing in the breeding, production and marketing of improved seed, especially soybean seed. Granar has a strong presence in Paraguay and Uruguay, and an increasing presence in Brazil. At the focus of the acquisition is Granar’s IgraTM Semillas brand. Granar retained responsibility for marketing IgraTM seed until the end of 2014. For CropScience, this acquisition represents one more step towards achieving an international platform of excellence in soybean seed. It also underscores the importance of the Latin American region for the soybean seed business.

Our proprietary glyphosate herbicide tolerance technology GlyTolTM has been available in FiberMaxTM cotton seed varieties in the United States for several years. In 2014 we launched a new combination of insect resistance and herbicide tolerance for cotton that for the first time contains both TwinLinkTM and GlyTolTM technology, offering farmers integrated pest and weed control.

In the 2014 planting season, CropScience began marketing a new canola variety in Canada under the InVigorTM brand. The hybrid variety features a new trait that prevents the pods from opening prema­turely, thus enabling higher yields.

In the coming years we plan to market numerous new hybrid rice and canola varieties with improved stress and insect resistance under the ArizeTM and InVigorTM trademarks.

We plan to launch the first CropScience wheat seed in 2015. In September 2014, CropScience announced plans to invest a total of €1.5 billion in the research and development of wheat seed and crop protection products for wheat between 2010 and 2020.

With many crops, such as vegetables, major success can be achieved using conventional plant breeding methods. As vegetables are mostly intended to be marketed and eaten fresh, merchants and consumers have particularly strict requirements regarding their appearance, nutrient content, taste and shelf life. We are launching a succession of new vegetable seed varieties that satisfy these requirements.

Our integrated product pipeline for crop protection and seed technology contains a total of 25 individual projects, along with numerous new seed varieties and improved products that have estimated launch dates between 2011 and 2016. We believe these products have a combined peak sales potential of more than €4 billion. In Crop Protection, we plan to have launched around 10 products by the end of this period. In our Seeds business, we plan to bring some 15 projects to market for the broad-acre crops of cotton, oilseed rape/canola, rice, wheat and soybeans, along with several hundred new vegetable varieties, over the same period.

In Environmental Science, we evolve chemically and biologically based solutions for consumers and professional users by tailoring substances from our Crop Protection unit or external partners for use in non-agricultural scenarios. Current development projects include insect gels and baits, herbicides, fungicides and products for the control of disease-transmitting insects.

In 2014 Environmental Science expanded its portfolio in all business segments. We strengthened our range of turf care products for golf courses with the introduction of the new fungicide MirageTM in the United States and the new herbicide TributeTM in South Korea. In the area of professional pest control, we launched new formulations of the insecticides MaxforceTM (MaxforceTM Fusion, MaxforceTM Prime) in Europe. The herbicide EsplanadeTM (active ingredient: indaziflam), which is already used very successfully in the u.s. industrial vegetation management sector, became available to customers in Canada in 2014. We launched a number of new insecticides for private customers in Europe. In addition, we expanded the NatriaTM range of biological solutions in the United States.

In October 2014, CropScience announced plans to purchase certain assets of DuPont Crop Protection’s land management business in the United States, Canada, Mexico, Australia and New Zealand. The transaction was closed at the beginning of December 2014 after it received regulatory approvals. This acquisition will enable Environmental Science to offer a comprehensive portfolio of effective weed control products for industrial vegetation management. In addition, the company will gain access to the growing forestry and range and pasture business segments in North America. DuPont will continue to sell its land management products outside the United States, Canada, Mexico, Australia and New Zealand.

Open innovation

CropScience is part of a global network of research and industry partners from diverse segments of the agriculture industry, chemical and biological research, and the food industry. These cross-industry partnerships enable us to better understand and do justice to the needs of our customers over the long term. An example is the partnership between CropScience and the u.k.-based Innovative Vector Control Consortium (ivcc). We are cooperating with ivcc to develop new substances for use against mosquitoes that transmit diseases such as malaria and dengue fever.

Bayer has played an active role for over 50 years in the fight against malaria, which remains among the most dangerous tropical diseases. The product portfolio of CropScience enables it to offer a unique range of solutions. For example, CropScience – through its Environmental Science operating segment – is a leading producer of indoor spray insecticides to control malaria mosquitoes. Over the past three years, FicamTM has played a particularly important role in controlling mosquitoes resistant to pyrethroids. In 2014, CropScience once again made an important contribution to malaria protection by supplying FicamTM in Ethiopia. After the who had already recommended our new, long-acting and thus more cost-effective deltamethrin-based spray insecticide K-Othrine PolyZoneTM in 2013, national registration applications were submitted in 2014 in several countries of sub-Saharan Africa.

In April 2014, CropScience and Targenomix GmbH, Potsdam, Germany, entered into a five-year research collaboration to jointly develop and apply systems biology approaches to gain a better understanding of genetic and metabolic process regulation in plants. The aim is to use novel active sub­stances and plant traits to develop innovative crop protection and plant health solutions.

CropScience also continued its wheat research collaboration with the Commonwealth Scientific and Industrial Research Organisation (csiro) in Australia. This strategic collaboration, which began in 2009, is aimed at raising wheat yields and thus boosting global wheat production in the long term.

Special mention should be made of our food chain partnerships, in which CropScience supports all the players in the food chain – from farmers and food processors to importers, exporters, wholesalers and retailers. CropScience has now been working in food chain partnerships for 10 years, helping to improve the quality of crops and raise yields. It has initiated such projects for over 40 crops in more than 30 countries, mainly in Asia, Latin America and Europe. Our experts advise farmers on sustainable growing methods – from seed selection and the controlled, eco-friendly use of crop protection products to the transparent monitoring of production.

We also worked with certifier global g.a.p. to lay the foundation for training designed to help small farmers understand and meet the requirements of good agricultural practice using CropScience’s training programs. It is planned to introduce “BayGAP foundational training” throughout the world in 2015, enabling small farmers to supply local customers according to their needs.

CropScience: Important Collaborations[Table 3.5.5]
Partner Cooperation objective
Celletics Plant Sciences Targeted modification of certain plant genes and genomes to improve the plants
CSIRO Increase in wheat yields and long-term increase in global wheat production
IVCC Joint development of new substances to control mosquitoes that transmit diseases such as malaria and dengue fever
Kaiima Development of modern hybrid rice varieties
Targenomix Development and application of systems biology processes to better understand genetic and metabolic process regulation in plants

MaterialScience

Research and development expenses at MaterialScience decreased by 8.2% in 2014 to €210 million. Adjusted for special items of minus €3 million (2013: €20 million), this represented an increase of 0.9% (Fx adj.) and was equivalent to 1.8% of MaterialScience sales. In addition, MaterialScience spent €79 million (2013: €97 million) on joint development projects with customers.

A total of about 900 people were employed in research and development in 2014, many of them at major Innovation Centers in Leverkusen, Germany; Pittsburgh, Pennsylvania, United States; and Shanghai, China. The strong international presence is also geared toward aligning our research and development to regional market trends and customer needs, especially in the emerging economies.

Our activities in the Polyurethanes (pur) business unit include work on products and material solutions to drive forward the use of environmentally friendly wind energy. The most recent developments include polyurethane infusion resins used in the interior of wind turbine rotor blades to bond fiber layers to a stable core. The resin is better distributed and cures more quickly than conventional infusion material, thus significantly reducing production times and saving costs. The material can also be used without difficulty for very long rotor blades capable of generating larger quantities of electricity.

In the area of process development, we are progressing with the use of carbon dioxide as a new source of carbon for polyurethanes in order to reduce dependence on petrochemical raw materials. In 2014, for example, we began transitioning an existing research project (“Dream Production”) to commercial use. The goal is to begin marketing an innovative form of the polyol component of polyurethane with a co2 content of around 20% in 2016. At the laboratory level, we also succeeded in producing another polyol type through direct and indirect integration of co2 using 40% alternative raw materials – a further contribution to resource efficiency.

Our activities in the Polycarbonates (pcs) business unit are mainly geared to the development of products for the automotive and electrical/electronics industries as well as the it sector. The focus here is on reducing weight, improving energy efficiency and safety, and enabling greater design freedom.

In the automotive industry, our focus is partly on exterior applications. Not only add-on components such as spoilers, but also glazing and entire panorama roofs and their frames are increasingly being manufactured from polycarbonate or polycarbonate blends that weigh up to 50% less than equivalent glass or steel components. This supports the industry’s efforts to produce cars that are as light as possible and therefore more fuel-efficient. We are working to further improve the properties of these products and the respective manufacturing processes.

Light-emitting diodes also contribute to sustainability in vehicles and in other applications, as they require significantly less energy and last longer than traditional light sources. We have developed special materials for channeling, scattering and reflecting led light that feature high transparency, design freedom and heat resistance. Special materials can also be used in the production of thermally conductive parts, helping to make led light sources last longer.

We are also working on the evolution of polycarbonate-based composite materials that address the needs of the automotive, consumer electronics and other industries. In this area we are developing especially lightweight, continuous-fiber-reinforced materials that can be used in the future in applications such as chassis and structural components, or as housing materials for ultra-mobile laptops, tablet computers and smartphones.

In the Coatings, Adhesives, Specialties (cas) business unit, we are driving the development of raw materials for high-performance polyurethane coatings, colorants, adhesives and sealants. Among our fields of research and development are coatings for textiles and synthetic leather. For these coatings we have developed a new generation of purely waterborne polyurethane dispersions. This technology, which was launched in mid-2014 under the name InsqinTM, enables all types of coated textiles and synthetic leather to be manufactured without using solvents.

Our development activities as a whole are focused on eco-friendly products that spare resources and can be more efficiently applied. The use of renewable raw materials is also playing an increasingly important role.

Open innovation

In line with the open innovation approach, MaterialScience collaborates with external scientific institutions and with start-up companies and academic spin-offs. These collaborations are mainly based in Europe, the United States, China or Japan.

Our partners in Germany include rwth Aachen University, Germany, with which we jointly operate the cat Catalytic Center. In China we maintain a close alliance with Tongji University in particular, while in the United States we support research activities at renowned universities.

In the scientific field, we take either a leading or an advisory role in numerous publicly funded projects. We also participate in industry associations and other organizations such as the German Chemical Society (GDCh), the dechema Society for Chemical Engineering and Biotechnology in Germany and the American Chemical Society. Our innovation capability is also spurred by collaborations with customers or other industry sectors, an example being the “future_bizz” corporate network.

Bayer Technology Services

Bayer Technology Services is a major driver of innovation for the subgroups in the areas of technology development, engineering and production. All Bayer subgroups work closely with this service company worldwide on technology solutions, particularly in the fields of process technology, engineering, and the safe and efficient operation of production facilities.

limited assurance

Online annex: 3-5-4

Together with the subgroups, Technology Services is developing process technology, biotechnology and systems biology platforms to support the research, development and production of new products and applications – with a deliberate focus on open innovation. Development activities at the invite research center, a collaborative venture with Dortmund Technical University, include work on new flexible, modular production concepts. At the Joint Research Center on Computational Biomedicine, a collaboration with rwth Aachen, computer-based models and methods for investigating key biological mechanisms are researched and developed for clinical use together with Aachen University Hospital.

Last updated: February 26, 2015  Copyright © Bayer AG
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