Bayer Posts Slowing Sales Growth in 3Q

Sales fell below our expectations in the quarter. The drug division gained only 2%, but we expect sales growth will accelerate over the next several quarters. Sales for hemophilia drug Kogenate fell 26% due to a breach in contracted sales from CSL, and while we expect Kogenate sales will decline due to increasing competition, we anticipate a more moderate decline over the long term. Sales for cardiovascular drug Xarelto increased just 7%, partly due to the timing of royalty payments. We expect current Xarelto indications should drive midteens growth, and the addition of Compass data (likely in third-quarter 2018) for coronary and peripheral artery disease should add EUR 2.5 billion to peak potential sales. Adding pressure to the quarter, the consumer division continues to weaken (down 3%), and while we expect stabilization by 2019, we believe pressures will continue through 2018. The pressures in the division stem from increasing online sales, where Bayer is still building out its presence. Partly offsetting these pressures, the crop science group posted a 3% gain, with strengthening from the environmental science group.

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