Management Report & Annexes | Fundamental Information About the Group

3. Strategies of the Subgroups

HealthCare

The rise in life expectancy and the associated increase in chronic diseases are driving the demand for innovative medicines. Due to the need to contain costs in the health care systems of the industrialized regions, particularly North America, Europe and Japan, cost carriers are exerting more and more pressure on drug prices and increasing their demands for the health care industry to demonstrate the value added by new therapies. In the emerging economies, patients and consumers are gaining improved access to health care and thus the opportunity to benefit from innovative medicines.

In this environment, our strategy is geared toward achieving above-average, profitable and sustained growth by continuously developing innovative health care products with a positive cost-benefit ratio and strengthening our consumer health business.

In our largest segment in terms of sales, Pharmaceuticals, we intend to step up our activities in cardiology, oncology, gynecology, hematology and ophthalmology. To achieve our medium-term growth targets, we are relying particularly on our recently launched products XareltoTM, EyleaTM, StivargaTM, XofigoTM and AdempasTM. We plan to steadily expand the indications for these medicines through comprehensive study programs and thus make them available to further patient groups. We also consider entering into partnerships with other pharmaceutical companies.

To safeguard long-term growth, we will further increase our investment in research and development. Among other projects, we plan to achieve crucial progress in the development of five drug candidates in cardiology, oncology and gynecology. In addition, we are selectively expanding and supplementing our development portfolio through licensing agreements and acquisitions. In March 2014, we acquired Algeta asa, Norway, which specializes in the development of novel cancer therapies. We had partnered with Algeta in the development and marketing of XofigoTM since 2009. In June 2014, we entered into a licensing agreement with Orion Corporation, Finland, concerning the global development and marketing of the development candidate odm-201 for the treatment of prostate cancer.

This focus on certain therapeutic areas is supplemented by specific measures for key markets such as Japan, Germany, Brazil, China and Russia. In the medium term, we aim to strengthen our presence in the United States. We want to maximize the potential of our extensive portfolio of established products, especially in the Emerging Markets.

We are developing concepts to facilitate access to our products, especially in developing and emerging countries, as part of our “Access to Medicine” (atm) activities.

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Online annex: 3-3-BHC-1:

In the field of hormonal contraception, we partner in family planning programs with international development organizations such as the United States Agency for International Development (usaid), the United Nations Population Fund (unfpa) and the non-governmental organization International Planned Parenthood Federation (ippf). We support the World Health Organization (who) in the fight against neglected tropical diseases. In some markets where large segments of the population have no access to innovative medicines, we offer patient assistance programs. Detailed information on all events can be found on our website.

Targeted family planning

We support family planning programs by offering a broad range of hormonal contraception methods. In addition to oral contraceptives, these products include monthly and three-monthly injections as well as the JadelleTM contraceptive implant, a reversible long-term contraceptive method used for a period of up to five years. In 2014 we made available 25.8 million cyps of oral contraceptives, injections and implants, an increase of 18.5% compared with the previous year. (The figures for 2011–2013 were calculated using the msi Impact Calculator version 1.2, while the figures for 2014 were obtained using version 2.0. In order to compare the figures from the last two years, 2013 was recalculated using the most recent version. This resulted in an overall increase of 18.5%.) The indicator cyps (Couple Years of Protection) denotes the number of couples who used the contraceptives provided for a year.

In addition to our commitment to family planning programs run by aid organizations, we are finding new ways to give women in developing countries secure, long-term access to our contraceptives. In 2009, for example, we established the Contraceptive Security Initiative (csi) together with usaid and introduced the oral contraceptive MicrogynonTM Fe to the African market at a reduced price. In addition to subsidized aid programs, csi aims to make contraceptive pills available particularly to middle-class couples in developing countries. Since January 2013, a partnership between HealthCare and the Bill & Melinda Gates Foundation, United States, has expanded access to our contraceptive implant JadelleTM. As part of this agreement, we reduced by more than half the price of the JadelleTM implant, which has been prequalified by the who. The agreement provides for up to 27 million women in the world’s poorest countries to receive access to this reversible, long-term contraceptive method by 2018.

Another cornerstone of our commitment is education for youths and young adults. Together with the German Foundation for World Population, we have established an innovative education and advancement program for young people. Adolescents between the ages of 10 and 14 receive age-appropriate information on sexuality and contraception. The Young Adolescents Project (yap) was launched in Uganda in 2009 and extended to Kenya in 2013.

Tackling neglected tropical diseases

Many diseases that primarily affect the poorest sections of the population can only be combated with a substantial international effort. In 2012 prominent stakeholders such as HealthCare established the biggest initiative to date in the fight against neglected tropical diseases. The goal of the London Declaration on Neglected Tropical Diseases is to contain or, if possible, eliminate 10 of these tropical diseases by 2020. For more than 10 years now, HealthCare has supported the who by providing medicines to treat African sleeping sickness and Chagas’ disease free of charge.

In the fight against river blindness, HealthCare and the non-profit organization DNDi (Drugs for Neglected Diseases) have entered into a new collaboration to develop emodepside, a macrofilaricidal drug, to treat this neglected tropical disease. Emodepside originates from the Japanese company Astellas and was developed by HealthCare’s Animal Health Division for use in veterinary medicine. This active ingredient may provide an effective way to treat river blindness by killing the threadworms that cause the disease in humans.

Programs for improved access to medicines

In some countries where large sections of the population have no access to innovative medicines, patient assistance programs are being established for selected products. These programs, which are carried out jointly with partners from local health systems and non-governmental organizations, help to satisfy unmet medical needs. This applies both to treatment with innovative products, e.g. in oncology, and to therapies for chronic diseases such as multiple sclerosis and hemophilia. These programs are developed locally and regionally to do maximum justice to specific patient needs. Patient assistance programs exist in the United States, China, India, certain south and southeast Asian countries, and a number of countries in southeastern Europe.

Our investment in the Consumer Health segment is concentrated on fields of business in which we are aiming for leadership.

The strategy of the Consumer Care Division is aimed at building on our position in the over-the-counter (OTC) medicines business. In 2014, we expanded our Consumer Care portfolio by acquiring the consumer care business of Merck & Co., Inc., United States, adding leading brands such as ClaritinTM, CoppertoneTM and Dr. Scholl’sTM. We also acquired Dihon Pharmaceutical Group Co. Ltd., China, which offers self-medication products in the fields of dermatology and traditional Chinese medicine, and now are primarily focusing on integrating these acquired business areas. We intend to continue exploiting external growth opportunities through acquisitions and inlicensing as part of the global consolidation of the otc industry.

To sharpen our regional focus, we are expanding our position in important markets such as the United States, Brazil, Russia and China. We aim to strengthen our established brands, such as AspirinTM, AleveTM and BeroccaTM, through product line extensions and geographical expansion. We are also working to get certain prescription products transitioned to otc status.

The Medical Care Division comprises two business units, Diabetes Care and Radiology.

At Diabetes Care, we are focusing on our core business of innovative blood glucose meters and developing strategic partnerships for further market penetration, such as the collaboration with Medtronic in the United States.

In the Radiology business unit, we aim to defend our leading position through innovative product and service offerings and by streamlining our portfolio. Against this background, we divested our Interventional business with thrombectomy and atherectomy systems to Boston Scientific, United States, in September 2014.

Our Animal Health Division aims to strengthen its position in the already heavily consolidated market for veterinary medicines. Here we rely not only on organic growth, such as through the increased use of existing distribution channels, especially specialist retail chains, but are also adding to our portfolio with targeted inlicensing and acquisitions.

CropScience

Sustainable agriculture, higher crop yields and improved crop quality are becoming increasingly important. Global agricultural production must increase by approximately 60% by 2050 in order to ensure adequate nutrition for a growing world population despite the limited amount of arable land and the increased demand for animal feed and renewable raw materials. CropScience is aligning its corporate planning to these long-term trends in the agricultural markets. Our aim is to help shape the future of the agricultural industry, increase its productivity and thus generate profitable and sustainable growth for our business. CropScience’s strategy is built on four key elements:

  • enhancing the Crop Protection and Environmental Science portfolio,
  • increasing customer centricity along the entire value chain,
  • leading the way in innovation,
  • and expanding the Seeds business.

Our activities focus on implementing these elements.

We aim to enhance our Crop Protection and Environmental Science portfolios by adding new and improved products, concentrating on core brands and offering integrated solutions in major crops. Support for this endeavor is provided by our important technology platform for both chemical and biological crop protection. We are investing heavily in the expansion of our production capacities to meet rising demand for our products.

Another major part of our strategy is to strengthen customer centricity along the entire value chain and continuously optimize distribution. In this context we are also steadily expanding the successful business model of food chain partnerships in the form of collaborations with food processors and retailers. This furthers our objective of sustainably increasing productivity through a joint effort with our customers. In these projects, CropScience works with all participants in the food chain to safeguard and increase yields, and to improve the quality of harvested produce. To strengthen customer centricity, we are also increasing our commitment to direct cooperation with farmers as part of the Bayer Forward Farming initiative. At these “ForwardFarms” we can demonstrate the advantages of our integrated solutions and services to interested stakeholders.

To lead the way in innovation, we aim to build on our expertise in the integration of seed technology with chemical and biological crop protection in order to develop holistic solutions. New areas of innovation, such as digitization in agriculture, account for a major part of this.

Another key element in our strategy is the expansion of our Seeds business. We plan to further strengthen our positions in our established crops – cotton, oilseed rape/canola, rice and vegetables – and to build significant positions in soybeans and wheat. For example, we intend to gain long-term access to high-quality breeding material through acquisitions, inlicensing and partnerships and to steadily expand our existing breeding expertise.

MaterialScience

MaterialScience, with its high-tech polymer materials and application solutions, is helping to address the global challenges posed by population growth, the depletion of fossil resources, climate change and increasing urbanization. We are steadily developing our product portfolio, which mainly comprises components for polyurethane foams, high-tech polycarbonate plastics and raw materials for coatings and adhesives. These products are supplied to key industry sectors such as automotive, construction and electronics. Our innovations extend not only to products, but also to the production processes, which we design to be as environmentally friendly and efficient as possible, always observing the highest levels of safety and reliability at our plants. Our activities are based on a comprehensive approach to sustainability: we aim to burden the environment as little as possible, benefit society and create value.

Against this background, the strategy of MaterialScience is aimed at ensuring long-term, profitable growth. We aim to sustainably earn a return that exceeds our capital costs and thus helps to increase the company’s value. We intend to safeguard or expand our leading competitive positions in world markets in a challenging environment. This applies to the established core markets of Europe and the United States, as well as to emerging countries such as China. Our investment policy there is aligned to the needs of the market.

In the Polyurethanes (pur) business unit, we intend to safeguard our strong position on the world market as an integrated raw material and systems supplier, mainly for rigid and flexible foams. Demand for these products is expected to rise further. Flexible foam ensures added comfort in everyday life through its use in products such as mattresses and upholstery. Rigid foam serves above all as an insulating material for buildings and refrigerated appliances, and thus helps to lower energy consumption and greenhouse gas emissions. In the manufacture of polyurethane components, we are focused on achieving further improvements in the efficiency of our facilities through new process technologies. At the site in Dormagen, Germany, for example, a large-scale, state-of-the-art facility was commissioned at the end of 2014 for toluene diisocyanate (tdi), a key precursor for flexible foams. In the future we plan to produce the second polyurethane component, polyol, with the help of carbon dioxide, initially in limited quantities. It is planned to build a production line for this purpose in Dormagen. co2 can partly replace the traditional raw material, oil, as the carbon base. In the rigid foam business, we further increased capacities for the precursor mdi (diphenylmethane diisocyanate) at the Shanghai, China, site in 2014 in view of the demand situation in Asia.

The global polycarbonate market is focused on Asia. In this region, the Polycarbonates (pcs) business unit operates several large-scale facilities for this high-tech plastic, which boasts numerous favorable properties such as low weight, stability, durability and relatively high design freedom. We plan to gradually raise production capacity in Shanghai to safeguard our position in the world market. We also intend to further improve the efficiency of our plants worldwide. It is planned to more closely align the product portfolio to applications that make particularly high demands on the material – so that customers in the automotive, consumer electronics and other industries can derive maximum benefit from the respective products.

The Coatings, Adhesives, Specialties business unit (cas) develops and manufactures polyurethane-based raw materials, mainly for coatings and adhesives. The main areas of application include transportation and traffic, infrastructure and construction, and wood and furniture. Our aim is to maintain our leading position in our core business. The focus here continues to be on market- and customer-centric solutions for coating and adhesive applications that offer protection, attractive design and high functionality in numerous areas. As one of the leading suppliers, we also offer a broad range of waterborne polyurethane dispersions. We see these products as innovative system solutions and plan to replace solvent-based coatings by waterborne solutions. In addition to our core business, we are working in further growth areas such as cosmetics, medicine and textiles.

The Industrial Operations unit (io) supports the business units. It is responsible for ensuring a dependable supply of raw materials and services, developing modern production technologies to enable the efficient use of resources, and for the safety and reliability of operations. It also manufactures and markets basic chemicals such as chlorine, sodium hydroxide solution and hydrochloric acid.

Further information on the planned stock market listing of Bayer MaterialScience is given in Chapter 1.2 “Group Strategy.”

Last updated: February 26, 2015  Copyright © Bayer AG
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