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Strategy and Management

Strategy and Targets

Group strategy

The steadily growing and aging global population presents fundamental challenges in health care and nutrition. How will we feed up to 10 billion people in 2050 while contending with the impact of climate change? How will we ensure quality of life for an ever-increasing number of elderly people?

These are the challenges that we are looking to address. In line with our corporate purpose “Science for a better life,” we are driving the development of better medicines and the production of high-quality food through innovative solutions. We continuously develop our businesses such that they assume leadership positions in their respective industries and market segments to create value and achieve long-term success for our company. Our efforts are sustained by our employees and by our core competencies of innovation, customer focus, quality, process efficiency and portfolio management.

We are committed to the United Nations Sustainable Development Goals (SDGs). In line with our core competencies, we actively support SDGs 2 and 3: “Good Health and Well-Being” and “Zero Hunger.”

Portfolio, efficiency and structural measures – Bayer 2022 program

We aim to strengthen our core life science businesses through 2022 by implementing a series of portfolio, efficiency and structural measures designed to enhance productivity and innovation while significantly improving competitiveness. Through these measures, we are paving the way for sustainable business success. The planned portfolio measures include exiting the Animal Health business and the sun care (Coppertone™) and foot care (Dr. Scholl’s™) product lines, as well as divesting our 60% interest in Currenta. We also intend to significantly improve cost structures. The planned efficiency and structural measures are set to include a reduction in internal research and development capacities at the Pharmaceuticals segment, with the freed-up resources set to be directed toward strengthening investment in collaborative research models and external innovations. Furthermore, we have decided not to utilize the factor VIII facility constructed in Wuppertal, Germany, and to focus all recombinant factor VIII production in Berkeley, United States. At the Consumer Health segment, we will adapt the organizational structure and reduce costs to succeed in a rapidly changing market environment. At the Crop Science segment, the focus is on successfully integrating the acquired business and realizing the resulting sales and cost synergies. The aforementioned efficiency and structural measures also entail the planned reduction of approximately 12,000 jobs. The changes in the segments and the efforts to streamline the portfolio will be complemented by extensive adjustments within the company, particularly within the corporate and supporting functions, Business Services and the country platforms.

Strategies of the Segments

Pharmaceuticals

Demographic change is impacting health care systems through the growing number of chronic diseases and the increasing occurrence of multiple conditions. In addition, digital technologies have the potential to transform the way health care is delivered. Examples include telemedicine, artificial intelligence-driven diagnostic and treatment support, as well as combining computer processing power with the availability of large data sets to enable personalized testing and treatment.

We are seeking to contribute to medical progress through our focus on researching, developing and marketing innovative medicines, primarily in the therapeutic areas of cardiology, oncology, women’s health, hematology and ophthalmology.

Our near- to medium-term growth is being primarily driven by Xarelto™ and Eylea™. It is expected to be further fueled by several promising late-stage R&D pipeline candidates. To safeguard long-term growth, we are continuing to invest in research and development (R&D) in areas in which a substantial need for innovation remains. Moreover, given the continued growth opportunities in biologics and novel technologies, we are expanding our efforts to access more external innovation through research collaborations and inlicensing.

We continue to build capabilities in leveraging data, advanced analytics and artificial intelligence to deliver greater value to patients and customers, and to increase productivity across the pharmaceutical value chain from R&D to Medical Affairs, Commercial and Product Supply. One successful example of our efforts is the digital transformation of Bayer’s production site in Garbagnate, Italy, which the World Economic Forum in 2018 acknowledged as an advanced digital lighthouse across industries. The project drives improvements in key production processes and thus ensures the availability of products for patients.

To improve access to our products in developing and emerging countries ( Access to Medicine (ATM) describes activities to promote general access to essential medicines and improve knowledge on health. , or ATM for short), we have entered into a series of long-term partnerships focusing on aspects such as the provision of contraceptives and logistics support for both multilateral and bilateral family planning programs. We work closely with the World Health Organization as part of our endeavors to combat neglected tropical diseases. As well as making product donations and providing financial support, Bayer is also involved in the further development of active ingredients.

Consumer Health

Cost pressure on public health care systems and the growing empowerment of consumers are increasingly putting the spotlight on the benefits of self-care and point to further long-term growth of the consumer health market. At the same time, digitalization is reshaping marketing, commercial and business models.

We provide our consumers and customers with the information, knowledge, products and services they need to take more responsibility for their health, improving their quality of life.

We invest in innovation to reinforce our core brands Claritin™, Aspirin™, Aleve™, Bepanthen™, Canesten™, Alka-Seltzer™, One A Day™, MiraLAX™, Iberogast™, Elevit™, Redoxon™, Supradyn™, Berocca™, Rennie™, Afrin™ and others. We are also placing greater focus on digital marketing and e-commerce, and are enhancing our presence in key markets such as the United States, Germany, Russia and China, as well as additional countries.

Our strategy moving forward will accelerate our core categories, geographies and the transfer of prescription medicines and active ingredients to nonprescription status. We will strengthen our capabilities including digital and insights and drive marketing and sales execution. A new operating model will enhance consumer and customer-centricity and drive agility, efficiency and consistency in execution.

Crop Science

The world faces enormous challenges including a changing climate, limited natural resources and a growing population. At the same time, the need for food, animal feed and renewable raw materials is growing worldwide.

Following our acquisition of Monsanto, we are now the world leader in agriculture. As such, we are even better positioned to shape agriculture through Breakthrough innovation is a term used to describe disruptive innovations in the form of pioneering advances in technology and business models with the power to change markets. for the benefit of farmers, consumers and our planet. Our strategy is based on three key elements: innovation, sustainability and digital transformation.

Our industry-leading innovation engine builds on a unique combination of seeds and traits, crop protection and digital tools. It enables us to deliver more innovation to farmers even more quickly. We offer tailored solutions to reflect the specific needs of our customers’ farms, crops and soil.

Crop Science supports farmers in growing healthy, safe and affordable food in a sustainable way. Together with partners, the global alliance Better Life Farming was launched to provide holistic and innovative solutions for smallholder farmers in the developing world to enable them to grow their farms into sustainable businesses. Furthermore, we partner with public and private partners in numerous sustainability initiatives worldwide.

In the area of digital transformation, we are using the latest technologies and decision science to take our operations and agriculture to the next level. The Climate Corporation, a subsidiary we acquired through the Monsanto transaction, plays a key role in this respect. In the field of digital farming, we work with innovative partners and utilize new technologies, including advanced seed scripting tools, that combine multiple data sets as we look to support farmers with seed selection, placement and seeding density, helping them to better reach their farming potential.

Animal Health

The development of the animal health market is primarily driven by a growing global population and higher average incomes. This leads to higher pet ownership levels and, in the farm animals segment, to rising meat and dairy consumption – with a corresponding increase in demand for medicines that effectively and safely protect and treat those animals.

We meet this demand by offering innovative medicines and services. Our promising pipeline is a key driver for future growth.

In the companion animals business, Animal Health holds a leading position in the global parasiticide segment. We are focusing on maximizing the continued growth of the innovative Seresto™ collar, opening new distribution channels and leveraging the brand equity of our Advantage™ product family.

In the farm animals business, we are commercializing and developing antiparasitics and anti-infectives. We are continuing to strengthen our customer engagement while also driving cross-species initiatives, such as the Antibiotic Stewardship Program promoting the responsible use of antibiotics.

Targets and key performance indicators

Our strategy is aimed at achieving long-term profitable growth balanced with our responsibility for the environment and society. To advance the consistent implementation of our strategy, we have set ambitious Group targets.

Bayer Group Financial Targets

Target

 

Target attainment
2018

 

New target
2019

Fx & portfolio adj. = adjusted for currency and portfolio effects

Growth and Profitability

 

 

 

 

Group sales (Fx & portfolio adj. change);
revised forecast in September 2018: more than €39 billion

 

Increase by 4.5% to €39.6 billion

 

Increase by approx. 4% to around €46 billion

EBITDA before special items;
revised forecast in September 2018: increase by a low- to mid-single-digit percentage

 

Increase by 2.8%

 

Currency-adjusted increase to approx. €12.2 billion and margin of around 27%

Core earnings per share;
revised forecast in October 2018: €5.70 – €5.90

 

€5.94

 

Currency-adjusted increase to approx. €6.80

Our nonfinancial targets through 2020 will cease to apply in the current form from the end of 2018 as they pertain only to the Bayer Group excluding the acquired agriculture business. The following table illustrates the attainment of these targets through the end of 2018. In view of the portfolio changes, we conducted a new materiality analysis in fall 2018 that will serve as the basis for new, ambitious Group targets that will be defined in 2019.

Nonfinancial Bayer Group Targets (concluded in 2018)

Target

 

Target attainment1

1

Excluding the acquired agriculture business

Innovation

 

 

Group: target adjusted in September 2018: R&D investment of around €4.9 billion (2018)

 

€5.2 billion

Pharmaceuticals: Transition of nine new molecular entities (NMEs) and one new indication or one new formulation project into development (2018)

 

Five NMEs transferred

Consumer Health: Transition of 25 consumer-validated concepts into early development (2018)

 

40 new concepts transferred

Crop Science: Transfer of three to four new molecular entities (NMEs), plant traits or biologics into confirmatory technical proof-of-concept field studies

 

Start of field studies on five NMEs

Supplier management

 

 

Evaluation of all potentially high-risk suppliers with significant Bayer spend (2020)

 

100%

Development and establishment of a new sustainability standard for our supply base (2020)

 

Implemented

Resource efficiency

 

 

Improvement of 10% in energy efficiency (2020); reference value 2015: 143 kWh / €1,000 external sales

 

126 kWh / €1,000 external sales (12% improvement)

Reduction of 20% in specific greenhouse gas emissions (2020); reference value 2015: 55.7 kg CO2e / €1,000 external sales

 

42.0 kg CO2e / €1,000 external sales (–25 %)

Safety

 

 

Reduction of 35% in occupational safety incident rate (Recordable Incident Rate – RIR) (2020); reference value 2012: 0.50

 

RIR 0.36 (–28%)

Reduction of 30% in process and plant safety incidents (Loss of Primary Containment Incident Rate – LoPC-IR) (2020); reference value 2012: 0.21

 

LoPC-IR 0.13 (–38%)

Product stewardship

 

 

Conclusion of assessment of hazard potential of all substances (> 99%) used in quantities exceeding one metric ton per annum (2020)

 

85%

Compliance

 

 

Annual compliance training for virtually 100% of Bayer managers

 

98%

Employees

 

 

Continuous improvement in employee satisfaction; reference value 2017: 79%

 

77%

Increase in the proportion of women in senior management to 35% (2020); reference value 2010: 21%

 

34%

Increase in the proportion of senior managers from outside the European Union, the United States or Canada to 25% (2020); reference value 2013: 18%

 

21%

As the table above shows, we already attained our 2020 targets for supplier management, safety (LoPC-IR) and resource efficiency in 2018. We had also been making good progress in attaining the other targets. We will generally continue to expand our activities in the target categories in 2019 and report on attainment. However, we will need to fundamentally realign our targets in view of the integration of the acquired agriculture business and the impact it has on our enterprise.

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