Chairman’s Letter
Performance by Subgroup and Segment
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Bayer HealthCare
 Pharmaceuticals |
| Consumer Health |
| Bayer HealthCare | 2005 | 2006 | Change |
| € million | € million | % | |
| Sales | 7,996 | 11,724 | +46.6 |
| EBITDA* | 1,280 | 1,947 | +52.1 |
| Special items | (207) | (666) | |
| EBITDA before special items** | 1,487 | 2,613 | +75.7 |
| EBITDA margin before special items | 18.6 % | 22.3 % | |
| EBIT* | 923 | 1,313 | +42.3 |
| Special items | (254) | (402) | |
| EBIT before special items** | 1,177 | 1,715 | +45.7 |
| Gross cash flow* | 923 | 1,720 | +86.3 |
| Net cash flow* | 1,087 | 1,526 | +40.4 |
2005 figures restated
* for definition see Bayer Group Key Data
** for definition see Calculation of EBIT(DA) before special items for the Schering AG business
* for definition see Bayer Group Key Data
** for definition see Calculation of EBIT(DA) before special items for the Schering AG business
Sales of Bayer HealthCare in 2006 rose by 46.6 percent, or €3,728 million, to €11,724 million. The acquisition of Schering AG, Berlin, Germany, contributed €3,082 million to this figure. Currency- and portfolio-adjusted sales climbed by 10.0 percent. All divisions outperformed the market in terms of sales growth.
EBITDA of the subgroup before special items advanced by 75.7 percent to €2,613 million (2005: €1,487 million), with the Schering business accounting for €774 million. EBIT before special items rose by €538 million to €1,715 million (2005: €1,177 million). The net special charges of €402 million resulted primarily from expenses relating to the Schering integration. EBITof Bayer HealthCare moved ahead by €390 million, or 42.3 percent, to €1,313 million.
EBITDA of the subgroup before special items advanced by 75.7 percent to €2,613 million (2005: €1,487 million), with the Schering business accounting for €774 million. EBIT before special items rose by €538 million to €1,715 million (2005: €1,177 million). The net special charges of €402 million resulted primarily from expenses relating to the Schering integration. EBITof Bayer HealthCare moved ahead by €390 million, or 42.3 percent, to €1,313 million.
Pharmaceuticals
Sales of our Pharmaceuticals segment climbed by 83.9 percent to €7,478 million (2005: €4,067 million). This figure contains sales of €3,082 million due to the inclusion of the Schering AG business. Adjusted for currency and portfolio changes, business expanded by 11.5 percent. This encouraging growth in sales was particularly attributable to our Primary Care and Oncology business units.
The 2006 sales figures include the acquired business of Schering AG as of June 23, 2006. The Bayer Group financial statements do not include Schering AG results for the previous years. The commentaries given below on business developments related to the acquired Schering AG products are based on full year data that do not form part of the Bayer Group financial statements. Sales per product for the following discussion are based on sales data for the years ended December 31, 2006 and 2005 as prepared by Schering AG. We refer to those figures as “pro forma.”
Sales of the Primary Care business unit rose by 9.2 percent in 2006, to €3,091 million. This increase was due particularly to higher sales of
Levitra® (+20.8 percent), Aspirin® Cardio (+18.1 percent) and Avalox®/Avelox® (+8.8 percent). Sales were additionally boosted by the inclusion of the blood pressure treatments Pritor® and PritorPlus®, for which we acquired the marketing rights for certain European countries from GlaxoSmithKline in January 2006. Sales from the acquired Schering AG andrology business in 2006 were included for the first time, amounting to €31 million in 2006. Mounting competition from generic products led to a slight 2.3 percent decline in sales of Cipro®/Ciprobay®.
In our Women’s Health business unit, which focuses on contraception, we achieved sales of €1,320 million. The main growth drivers were the oral contraceptives in theYasmin®/YAZ®/Yasminelle® product line, pro forma sales of which were up by 35.5 percent in 2006. The FDA has since expanded the registration for YAZ®, which is thus the first and only oral contraceptive approved to effectively treat the emotional and physical symptoms of premenstrual dysphoric disorder as well as acne in women. Pro-forma sales of our intrauterine system Mirena® also advanced by a pleasing 23.9 percent.
Sales of the Diagnostic Imaging business unit came to €697 million. Pro-forma sales of our two main productsMagnevist® and Ultravist® dropped by 1.5 and 10.5 percent, respectively, with lower sales of the latter attributable to the voluntary withdrawal of the 370 mgI/ml formulation. We resumed sales of this product in numerous countries in the first quarter of 2007. Medrad, which markets application technologies for contrast agents worldwide, grew pro-forma sales by a pleasing 13.1 percent.
Sales of the Specialized Therapeutics business unit amounted to €678 million. Pro-forma business with our top productBetaferon®/Betaseron® to treat multiple sclerosis (MS) expanded by 14.3 percent. The FDA has expanded marketing authorization for Betaseron® so that it can now also be used to treat patients who have first clinical symptoms and diagnostic features consistent with MS.
Sales of the Hematology/Cardiology business unit receded by 4.9 percent to €1,142 million. The effects of terminating our plasma distribution in Canada at the end of March 2006 and markedly lower sales ofTrasylol® (-33.5 percent) were nearly offset by the pleasing growth in sales of Kogenate® (+18.7 percent). Two separate observational studies reported on a possible correlation between the administration of Trasylol® (aprotinin), our product for use during open-heart surgery, and severe renal dysfunction and vasoconstriction (myocardial infarction and stroke). A follow-up study to one of them reported on a possible correlation between administration of this product and increased long-term mortality. Based on our study data and many years of experience with Trasylol®, Bayer believes that this product is a safe and effective medicine when used correctly. We are currently cooperating closely with the relevant regulatory authorities to resolve the questions that have arisen.
Our Oncology business unit increased sales by €397 million to €432 million. This figure contains €238 million in sales of the Schering AG oncology business with the key productsFludara®, Androcur® and Campath®. Our new cancer drug Nexavar®, first launched in December 2005, performed very well in the market, with sales of €130 million.
The Dermatology (Intendis) business unit had sales of €118 million. The unit’s two best-selling products,Skinoren® (+17.1 percent pro forma) and Advantan® (+10.6 percent pro forma) developed particularly well.
The 2006 sales figures include the acquired business of Schering AG as of June 23, 2006. The Bayer Group financial statements do not include Schering AG results for the previous years. The commentaries given below on business developments related to the acquired Schering AG products are based on full year data that do not form part of the Bayer Group financial statements. Sales per product for the following discussion are based on sales data for the years ended December 31, 2006 and 2005 as prepared by Schering AG. We refer to those figures as “pro forma.”
Sales of the Primary Care business unit rose by 9.2 percent in 2006, to €3,091 million. This increase was due particularly to higher sales of
Levitra® (+20.8 percent), Aspirin® Cardio (+18.1 percent) and Avalox®/Avelox® (+8.8 percent). Sales were additionally boosted by the inclusion of the blood pressure treatments Pritor® and PritorPlus®, for which we acquired the marketing rights for certain European countries from GlaxoSmithKline in January 2006. Sales from the acquired Schering AG andrology business in 2006 were included for the first time, amounting to €31 million in 2006. Mounting competition from generic products led to a slight 2.3 percent decline in sales of Cipro®/Ciprobay®. In our Women’s Health business unit, which focuses on contraception, we achieved sales of €1,320 million. The main growth drivers were the oral contraceptives in the
Yasmin®/YAZ®/Yasminelle® product line, pro forma sales of which were up by 35.5 percent in 2006. The FDA has since expanded the registration for YAZ®, which is thus the first and only oral contraceptive approved to effectively treat the emotional and physical symptoms of premenstrual dysphoric disorder as well as acne in women. Pro-forma sales of our intrauterine system Mirena® also advanced by a pleasing 23.9 percent. Sales of the Diagnostic Imaging business unit came to €697 million. Pro-forma sales of our two main products
Magnevist® and Ultravist® dropped by 1.5 and 10.5 percent, respectively, with lower sales of the latter attributable to the voluntary withdrawal of the 370 mgI/ml formulation. We resumed sales of this product in numerous countries in the first quarter of 2007. Medrad, which markets application technologies for contrast agents worldwide, grew pro-forma sales by a pleasing 13.1 percent. Sales of the Specialized Therapeutics business unit amounted to €678 million. Pro-forma business with our top product
Betaferon®/Betaseron® to treat multiple sclerosis (MS) expanded by 14.3 percent. The FDA has expanded marketing authorization for Betaseron® so that it can now also be used to treat patients who have first clinical symptoms and diagnostic features consistent with MS. Sales of the Hematology/Cardiology business unit receded by 4.9 percent to €1,142 million. The effects of terminating our plasma distribution in Canada at the end of March 2006 and markedly lower sales of
Trasylol® (-33.5 percent) were nearly offset by the pleasing growth in sales of Kogenate® (+18.7 percent). Two separate observational studies reported on a possible correlation between the administration of Trasylol® (aprotinin), our product for use during open-heart surgery, and severe renal dysfunction and vasoconstriction (myocardial infarction and stroke). A follow-up study to one of them reported on a possible correlation between administration of this product and increased long-term mortality. Based on our study data and many years of experience with Trasylol®, Bayer believes that this product is a safe and effective medicine when used correctly. We are currently cooperating closely with the relevant regulatory authorities to resolve the questions that have arisen. Our Oncology business unit increased sales by €397 million to €432 million. This figure contains €238 million in sales of the Schering AG oncology business with the key products
Fludara®, Androcur® and Campath®. Our new cancer drug Nexavar®, first launched in December 2005, performed very well in the market, with sales of €130 million. The Dermatology (Intendis) business unit had sales of €118 million. The unit’s two best-selling products,
Skinoren® (+17.1 percent pro forma) and Advantan® (+10.6 percent pro forma) developed particularly well.| Pharmaceuticals | 2005 | 2006 | Change |
| € million | € million | % | |
| Sales | 4,067 | 7,478 | +83.9 |
| Primary Care | 2,831 | 3,091 | +9.2 |
| Women’s Health | • | 1,320 | • |
| Diagnostic Imaging (including Medrad) | • | 697 | • |
| Specialized Therapeutics | • | 678 | • |
| Hematology/Cardiology | 1,201 | 1,142 | -4.9 |
| Oncology | 35 | 432 | • |
| Dermatology (Intendis) | • | 118 | • |
| EBITDA* | 663 | 1,051 | +58.5 |
| Special items | (108) | (635) | |
| EBITDA before special items** | 771 | 1,686 | +118.7 |
| EBITDA margin before special items | 19.0% | 22.5% | |
| EBIT* | 475 | 563 | +18.5 |
| Special items | (140) | (371) | |
| EBIT before special items** | 615 | 934 | +51.9 |
| Gross cash flow* | 449 | 1,086 | +141.9 |
| Net cash flow* | 481 | 1,053 | +118.9 |
2005 figures restated
Data for the acquired Schering AG business are reflected for the period June 23 – December 31, 2006.
* for definition see Bayer Group Key Data
** for definition see Calculation of EBIT(DA) before special items for the Schering AG business
Data for the acquired Schering AG business are reflected for the period June 23 – December 31, 2006.
* for definition see Bayer Group Key Data
** for definition see Calculation of EBIT(DA) before special items for the Schering AG business
| Best-Selling Pharmaceutical Products | 2005 | 2006 | Change |
| € million | € million | % | |
| Betaferon®/Betaseron®* (Specialized Therapeutics) | • | 535 | • |
| Yasmin®/YAZ®/Yasminelle®* (Women’s Health) | • | 451 | • |
| Kogenate® (Hematology/Cardiology) | 663 | 787 | +18.7 |
| Adalat® (Primary Care) | 659 | 657 | -0.3 |
| Cipro®/Ciprobay® (Primary Care) | 525 | 513 | -2.3 |
| Avalox®/Avelox® (Primary Care) | 364 | 396 | +8.8 |
| Levitra® (Primary Care) | 260 | 314 | +20.8 |
| Mirena®* (Women’s Health) | • | 166 | • |
| Magnevist® * (Diagnostic Imaging) | • | 171 | • |
| Glucobay® (Primary Care) | 295 | 308 | +4.4 |
| Total | 2,766 | 4,298 | +55.4 |
| Proportion of Pharmaceutical sales | 68% | 57% |
Products are ranked by fourth-quarter sales 2006.
* acquired Schering AG product (sales included for the period June 23 – December 31, 2006).
* acquired Schering AG product (sales included for the period June 23 – December 31, 2006).
| Best-Selling Schering AG Products (pro forma, unaudited) | 2005 | 2006 | Change |
| € million | € million | % | |
| Betaferon®/Betaseron® | 867 | 991 | +14.3 |
| Yasmin®/YAZ®/Yasminelle® | 586 | 794 | +35.5 |
| Magnevist® | 328 | 323 | -1.5 |
| Mirena® | 243 | 301 | +23.9 |
EBITDA of the Pharmaceuticals segment before special items advanced by 118.7 percent to €1,686 million (2005: €771 million), with the business acquired from Schering AG in June 2006 accounting for €774 million. When adjusted for portfolio effects, earnings rose by €141 million, due especially to a gratifying sales performance by Kogenate®, Levitra® and Avalox®/Avelox®. EBIT before special items rose by €319 million, or 51.9 percent, to €934 million. The net special charges of €371 million in the Pharmaceuticals segment resulted chiefly from expenses for the integration of Schering AG, including a special gain of €74 million from the sale of an office building. EBIT moved ahead by €88 million, or 18.5 percent, to €563 million.
All divisions contributed to the gratifying performance of our Consumer Health segment, sales of which improved by 8.1 percent to €4,246 million. Adjusted for currency and portfolio effects, sales rose by 8.4 percent.
Business in the Consumer Care Division expanded by 7.5 percent to €2,531 million. Among our top products,Aleve® (+27.5 percent), Bepanthen®/Bepanthol® (+14.9 percent) and Canesten® (+11.7 percent) posted the largest sales gains.
There was a significant increase in sales of our Diabetes Care Division, where business improved by 12.8 percent to €810 million thanks mainly to the strong performance of our blood glucose monitoring systemAscensia® Contour® (+69.6 percent), which replaces the older Elite systems in the Ascensia® product line, sales of which rose by 12.4 percent overall.
Sales of the Animal Health Division rose by 5.7 percent to €905 million, due primarily to the pleasing performance of ourAdvantage® product line, where business was up 10.4 percent, and the continued market introduction of Profender®.
EBITDA of the Consumer Health segment before special items grew by €211 million, or 29.5 percent, to €927 million. This increase was attributable to positive sales development and reduced production costs. EBIT before special items advanced by 39.0 percent to €781 million. Earnings for 2006 were diminished by special charges totaling €31 million (2005: €114 million), the main items being expenses for the integration of the Roche consumer health business, which is largely completed, and restructuring activities in the United States. After special items, EBIT improved by 67.4 percent to €750 million.
The strong growth in sales led to an increase in current assets, particularly inventories and receivables, diminishing net cash flow from €606 million in the prior year to €473 million in 2006.
Business in the Consumer Care Division expanded by 7.5 percent to €2,531 million. Among our top products,
Aleve® (+27.5 percent), Bepanthen®/Bepanthol® (+14.9 percent) and Canesten® (+11.7 percent) posted the largest sales gains. There was a significant increase in sales of our Diabetes Care Division, where business improved by 12.8 percent to €810 million thanks mainly to the strong performance of our blood glucose monitoring system
Ascensia® Contour® (+69.6 percent), which replaces the older Elite systems in the Ascensia® product line, sales of which rose by 12.4 percent overall. Sales of the Animal Health Division rose by 5.7 percent to €905 million, due primarily to the pleasing performance of our
Advantage® product line, where business was up 10.4 percent, and the continued market introduction of Profender®. EBITDA of the Consumer Health segment before special items grew by €211 million, or 29.5 percent, to €927 million. This increase was attributable to positive sales development and reduced production costs. EBIT before special items advanced by 39.0 percent to €781 million. Earnings for 2006 were diminished by special charges totaling €31 million (2005: €114 million), the main items being expenses for the integration of the Roche consumer health business, which is largely completed, and restructuring activities in the United States. After special items, EBIT improved by 67.4 percent to €750 million.
The strong growth in sales led to an increase in current assets, particularly inventories and receivables, diminishing net cash flow from €606 million in the prior year to €473 million in 2006.
| Consumer Health | 2005 | 2006 | Change |
| € million | € million | % | |
| Sales | 3,929 | 4,246 | +8.1 |
| Consumer Care | 2,355 | 2,531 | +7.5 |
| Diabetes Care | 718 | 810 | +12.8 |
| Animal Health | 856 | 905 | +5.7 |
| EBITDA* | 617 | 896 | +45.2 |
| Special items | (99) | (31) | |
| EBITDA before special items | 716 | 927 | +29.5 |
| EBITDA margin before special items | 18.2% | 21.8% | |
| EBIT* | 448 | 750 | +67.4 |
| Special items | (114) | (31) | |
| EBIT before special items | 562 | 781 | +39.0 |
| Gross cash flow* | 474 | 634 | +33.8 |
| Net cash flow* | 606 | 473 | -21.9 |
2005 figures restated
* for definition see Bayer Group Key Data
* for definition see Bayer Group Key Data
| Best-Selling Consumer Health Products | 2005 | 2006 | Change |
| € million | € million | % | |
| Ascensia® product line (Diabetes Care) | 701 | 788 | +12.4 |
| Aspirin®* (Consumer Care) | 453 | 465 | +2.6 |
| Advantage®/Advantix® (Animal Health) | 249 | 275 | +10.4 |
| Aleve®/naproxen (Consumer Care) | 178 | 227 | +27.5 |
| Canesten® (Consumer Care) | 145 | 162 | +11.7 |
| Baytril® (Animal Health) | 163 | 162 | -0.6 |
| Bepanthen®/Bepanthol® (Consumer Care) | 114 | 131 | +14.9 |
| Supradyn® (Consumer Care) | 125 | 130 | +4.0 |
| One-A-Day® (Consumer Care) | 118 | 124 | +5.1 |
| Alka-Seltzer® (Consumer Care) | 95 | 101 | +6.3 |
| Total | 2,341 | 2,565 | +9.6 |
| Proportion of Consumer Health sales | 60 % | 60 % |
* total Aspirin® sales = €674 million (2005: €630 million), including Aspirin® Cardio, which is reflected in sales of the Pharmaceuticals segment
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