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Acquisition of Merck’s Consumer Care Business & Pharma sGC Cooperation

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Investor Conference Call on May 6, 2014 on the acquisition of Merck’s Consumer Care business and a new Pharma sGC cooperation

Investor Conference Call on May 6, 2014 on the acquisition of Merck’s Consumer Care business and a new Pharma sGC cooperation

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  • 1. Acquisition of Merck’s Consumer Care Business & Pharma sGC Cooperation Investor Conference Call May 6, 2014 / Marijn Dekkers, CEO • Investor Conference Call • Marijn Dekkers • May 6, 2014Page 1
  • 2. Disclaimer Page 2 This presentation may contain forward-looking statements based on current assumptions and forecasts made by Bayer Group or subgroup management. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. These factors include those discussed in Bayer’s public reports which are available on the Bayer website at www.bayer.com. The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments. • Investor Conference Call • Marijn Dekkers • May 6, 2014
  • 3. Page 3 Successfully Executing on Our Strategy  Creating a global leader in OTC (Consumer Care) – one of Bayer’s core platforms with a track record of performance  Improving the growth and margin profile of Bayer’s OTC business through a highly complementary business combination  Maximizing the value of Bayer’s innovative sGC* pipeline through leverage of sGC cooperation  Creating value for shareholders: core EPS accretion from year 1 • Investor Conference Call • Marijn Dekkers • May 6, 2014 Announced transactions are consistent with Bayer’s strategy of: *soluble guanylate cyclase
  • 4. A Major Step Forward for Bayer’s HealthCare Business • Investor Conference Call • Marijn Dekkers • May 6, 2014 Acquisition of Merck’s Consumer Care Business Strategic Pharma sGC Collaboration  Creation of a global leader in OTC  Complementary portfolio offering scale in key categories and optimized geographic footprint  Full trademark ownership for Claritin  Complementing Bayer’s sGC franchise, including Adempas, with Merck’s cardiovascular capabilities  Leverage joint development capability to fully explore broad potential of sGCs  Building Bayer’s US presence in specialty pharma while leveraging Merck’s US strength Page 4
  • 5. Page 5 Acquisition of Merck’s Consumer Care Business – Transaction Highlights • Investor Conference Call • Marijn Dekkers • May 6, 2014 Acquisition price $14.2bn (cash) Sales1 (2013) ~$2.2bn 2013 pro-forma EBITDA2 Multiple 21 Expected synergies Revenue synergies of already ~$400m by 2017 Cost synergies of ~$200m p.a. by 2017 Significant tax benefits from year 1 Core EPS accretion From year 1 (~2%) One-time charges Approx. $500m (primarily in 2014/2015) Expected closing Second half 20143 1including Rx-sales Claritin of ~$0.2bn; 2pre-special items; based on management financials for the OTC business and Bayer’s estimates for the Rx-business; 3subject to approval by the relevant authorities
  • 6. Page 6 • Investor Conference Call • Marijn Dekkers • May 6, 2014 Combined Portfolio Significantly Strengthens Global Positions Gastrointestinal Analgesics3 CASF2 Nutritionals Dermatology1 Total Others4 3,904 1,635 5,539 1,110 386 372 803 126 513 439 141 1,023 834 1 including sun care; 2 Cold, Allergy, Sinus, Flu; 3 including Cardio; 4 Foot Health, Women’s Health, Other 1,496 1,023 1,175 834 580 431 #1 #2 #3 #1 #2 Global position*2013 Sales in €m (pro-forma portfolio) Note: Merck sales converted at average USD rate of 1.33 (FY 2013) 305 *After allowing for the Novartis/Glaxo deal; excluding Dihon acquisition in China; excluding Rx MerckBayer
  • 7. Page 7 • Investor Conference Call • Marijn Dekkers • May 6, 2014 Combined Portfolio Significantly Strengthens Geographic Footprint Note: Merck sales converted at average USD rate of 1.33 (FY 2013) *After allowing for the Novartis/Glaxo deal; excluding Dihon acquisition in China; excluding Rx Latin America Europe North America Total Asia/Pacific 3,904 1,635 5,539 1,117 1,105 1,621 170 389 513 141 777 2,222 1,791 946 580 #1 #1 #5 #2 Global position*2013 Sales in €m (pro-forma portfolio) 191 169 MerckBayer
  • 8. Combined Top 10 Product Portfolio – Individual Annual Product Sales >€100 Million • Investor Conference Call • Marijn Dekkers • May 6, 2014 Product Category Company Sales 2013 Claritin CASF** Merck €576 Aspirin* Analgesics Bayer €464 Aleve Analgesics Bayer €321 Bepanthen Dermatology Bayer €310 Canesten Dermatology Bayer €257 Dr Scholl‘s Foot Care Merck €232 Alka Seltzer CASF/Gastro Bayer €214 Coppertone Dermatology Merck €207 One A Day Nutritionals Bayer €176 Supradyn Nutritionals Bayer €158 Top 10 Total €2,915 2013 Sales in €m (pro-forma portfolio) Note: Merck sales converted at average USD rate of 1.33 (FY 2013); based on pro-forma FY 2013 net sales Page 8 *excluding Rx-sales **Cold, Allergy, Sinus, Flu
  • 9. Combined Consumer Care Portfolio Offers Significant Synergy Potential • Investor Conference Call • Marijn Dekkers • May 6, 2014Page 9 Cost synergies of ~$200m p.a. by 2017 Tax benefits from year 1  Asset purchase with significant future tax savings  Savings in marketing costs  Savings in COGS, administration Step-up of EBITDA margin pre-special items at Consumer Care by ~1pp and core EPS accretion of 2% already in the first year Revenue synergies of already ~$400m by 2017  Incremental US sales  Realize brand penetration opportunities ex-US Revenue Cost Tax
  • 10. Strategic Pharma sGC Collaboration • Investor Conference Call • Marijn Dekkers  Maximize potential of all pipeline assets  Leverage R&D expertise in cardiovascular  Improve funding capabilities – thereby maximizing commercial potential of pipeline assets  Optimize combined marketing & sales power Collaboration between Merck and Bayer on sGC modulation to Page 10 Joint development and commercialization strategy with global 50-50 cost and profit sharing Merck to pay Bayer up to $2.1bn, comprising $1.0bn up-front and up to $1.1bn in contingent milestone payments • Investor Conference Call • Marijn Dekkers • May 6, 2014
  • 11. sGC Modulation Has Significant Potential  Cardiovascular diseases to be the #2 therapeutic area by 2019**  Significant areas of unmet medical need including heart failure, forms of pulmonary hypertension, resistant hypertension, etc.  Recently discovered mechanism of sGC modulation holds promise to address several areas of unmet need Unmet Medical Need in Cardiovascular Diseases *cyclic guanosine monophosphate **DecisionResources 2014 sGC Modulation Page 11 • Investor Conference Call • Marijn Dekkers • May 6, 2014 *
  • 12. The New sGC Franchise is Strong in the Industry Phase I Phase III Submitted LaunchedPhase IIIndicationProject PAH/CTEPH PH-IIP dSSc CF wCHF PH PH-HF Adempas Vericiguat MK 8892* rHT Research* in preparation in preparation in preparation Research/ Preclin. • Investor Conference Call • Marijn Dekkers • May 6, 2014Page 12 PH: Pulmonary hypertension; PAH:Pulmonary arterial hypertension; CTEPH: Chronic thrombmoembolic PH; PH-IIP: PH assoc. with interstitial idiopathic pneumonia; dSSc: Diffuse systemic sclerosis; CF: Cystic fibrosis; wCHF: Worsening chronic heart failure; rHT: Resistant hypertension; HF: Heart failure *Potential collaboration assets, subject to execution of options in the next 5 years after successful completion of Phase 1 BAY sGCstim * BAY sGCact * Raynaud’s
  • 13. Maximizing the Potential of sGC Modulation  Bayer has marketing rights in Americas; Merck in all other territories  Co-promotion option for both parties in territories of other party  Enables Bayer to build its commercial presence in US specialty pharma while maximizing value of Adempas *scope defined by sGC mechanism Adempas (Riociguat) Vericiguat (BAY 1021189)  Merck has marketing rights in Americas; Bayer in all other territories  Co-promotion option for both parties in territories of other party  Maximizes value of Vericiguat by leveraging Merck’s US strength Early/Future Pipeline Assets*  Option to include other sGC pipeline assets (of both parties) that successfully complete Phase 1 in the next 5 years  Global 50/50 cost/profit split; joint development and commercialization strategy Page 13 • Investor Conference Call • Marijn Dekkers • May 6, 2014
  • 14. Page 14 Transaction Fully Debt-Financed  Bridge financing of the purchase price secured by bank consortium  Bridge to be subsequently refinanced for the most part through senior and hybrid corporate bonds  No issuance of new equity planned  Committed to ‘single A’ credit rating category • Investor Conference Call • Marijn Dekkers • May 6, 2014
  • 15. Page 15 Important Strategic Progress Achieved  Creation of a global OTC leader with strong product brands  Scaling-up US consumer care  Leadership in key categories  Entering OTC ‘allergy’ indication • Investor Conference Call • Marijn Dekkers • May 6, 2014 Portfolio Impact Value Creation  Considerable contribution to OTC return profile  Strong cash flow generation  Enhancing opportunities in the cardiovascular therapeutic area  Immediate core EPS accretion  Smooth integration expected due to experienced management team
  • 16. Acquisition of Merck’s Consumer Care Business & Pharma sGC Cooperation Investor Conference Call May 6, 2014 / Marijn Dekkers, CEO • Investor Conference Call • Marijn Dekkers • May 6, 2014Page 16

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