Management Report & Annexes | Basic Information About the Group

5. Research, Development, Innovation

With strong and efficient research and development (R&D), a focus on growth areas and the Emerging Markets, and a national and international network of outstanding partners, we are creating the foundation for innovation and thus the company’s future success. In 2013 a total of €3,190 million (2012: €3,013 million) was spent on research and development. This was equivalent to 7.9% (2012: 7.6%) of sales. The number of employees working in research and development worldwide was 13,700.

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For our leading experts in research and development, we offer targeted career advancement opportunities through our Expert Career initiative. In addition, the 120-member Expert Club – headed by the member of the Board of Management responsible for research – promotes the sharing of best practices among scientific experts from different subgroups.

We also ensure that special contributions by individuals or employee groups are announced and honored. For example, we bestow research awards such as the Otto Bayer Medals, which are presented every two years to teams of scientists for outstanding achievements.

Employees use the Bayer Group’s suggestion system, known as the Bayer Ideas Pool, mainly to propose improvements to methods or processes. In 2013 the employees once again displayed their commitment to the company by making numerous valuable suggestions for potential improvements. Altogether some 4,800 ideas were submitted to the Bayer Ideas Pool. Of these, 51% were implemented, resulting in savings totaling more than €4 million by year end from the proposals implemented in 2013. We paid out a total of over €1 million in special employee bonuses for the suggestions implemented.

Research collaborations with external partners from academia and industry form an integral part of our innovation strategy. These collaborations and alliances with leading universities, public research institutes and partner companies are supplemented by incubators, crowdsourcing and science hubs in Asia and the United States to tap into external innovative potential using the open innovation approach. Some of our collaborations are supported by public funding.

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In Germany alone, Bayer participated in more than 100 publicly funded projects in 2013, receiving a total of about €8 million in grants. This is equivalent to roughly 0.3% of our annual R&D expenses.

Reliable, global protection of intellectual property rights is essential for an innovation company like Bayer. At the end of 2013, we owned approximately 67,400 valid patent applications and patents worldwide relating to some 8,700 protected inventions.

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The term of a patent is normally 20 years. Since it takes an average of 12 years to develop a new medicine, for example, only eight years of patent protection generally remain following the product’s approval. In most cases it would be impossible to cover the substantial costs incurred in the research and development of innovative medicines or of new indications or dosage forms for existing drugs without patent protection. We are therefore committed to protecting both the international patent system and our own intellectual property worldwide. You can read more about this topic in our political positions: www.annualreport2013.bayer.com/political-position-ip.

To support the development of intellectual property rights (IPR) and copyright in China, Bayer sponsors the IPR chair at Tongji University in Shanghai. As well as arranging law studies for more than 100 students, the chair works with Bayer – supported by the Chinese Patent Office – to organize an annual IPR forum dealing with issues related to the protection of intellectual property.

Strengthening research in the Life Sciences

Bayer is the only global company simultaneously researching improvements in human, animal and plant health. Systematic and intensive collaboration among researchers from both Life Science subgroups is providing new impetus. In this context, researchers from HealthCare and CropScience are collaborating on projects involving central biological processes such as gene regulation or energy metabolism. The joint use of technology platforms is being expanded. These projects have been supported since 2012 by Bayer’s internal “Life Sciences Fund” and are mostly implemented together with external partners.

HealthCare

In 2013 we spent €2,040 million (2012: €1,955 million) for research and development in the Pharmaceuticals and Consumer Health segments. This amounted to 63.9% of R&D spending in the Bayer Group and was equivalent to 10.8% (2012: 10.5%) of HealthCare sales. At the end of 2013, some 7,800 employees of HealthCare were working in research and development.

Research and development expenses in the Pharmaceuticals segment amounted to €1,654 million (2012: €1,561 million), or 14.8% (2012: 14.5%) of segment sales. Drug discovery in the Pharmaceuticals segment focuses on the areas of cardiology, oncology, gynecological disorders and hematology. Complementing this work is common mechanism research in areas such as ophthalmology and inflammation. We conduct research activities at four centers, of which two are located in Germany and two in the United States. Work in Berlin and Wuppertal, Germany, mainly focuses on the discovery, optimization and development of new active substances. Research is also carried out at these sites in the fields of drug metabolism, pharmacokinetics, toxicology and clinical pharmacology. Our research and development activities in the Mission Bay district of San Francisco and in Berkeley, California, United States, are concentrated on biologicals and hematology. We also operate innovation centers in Beijing, China, and Singapore, through which we coordinate our research partnerships in Asia.

We conducted clinical trials with several drug candidates from our research and development pipeline during 2013 to drive the development of new substances for treating diseases with a high unmet medical need. Following the completion of the required studies with a number of these drug candidates, we submitted applications to one or more regulatory agencies for approvals or approval expansions.

We have recently launched five innovative medicines on the market. Of special importance is our anticoagulant Xarelto™ (active ingredient: rivaroxaban). In the area of oncology, Stivarga™ (active ingredient: regorafenib) is approved for the treatment of advanced colorectal cancer and gastrointestinal stromal ­tumors (GIST) in some countries, and approvals are pending in others. In 2013 we received marketing authorization for Xofigo™ (active ingredient: radium-223 dichloride) in the treatment of bone metastases in prostate cancer patients. Other promising products recently launched include ­Eylea™ (active ingredient: aflibercept) to treat various eye diseases. Riociguat, a new substance to treat different forms of ­pulmonary hypertension, was approved in the U.S. and Japan in 2013 under the trade name Adempas™. In addition, we strengthen our products through life-cycle management to improve their value for patients and/or expand their indications.

The most important drug candidates in the approval process are:

Products Submitted for Approval*[Table 3.5.1]
Indication
Aflibercept E.U.; treatment of diabetic macular edema
Aflibercept Japan; treatment of myopic choroidal neovascularization
FC-Patch Low E.U.; contraceptive patch
Octocog alfa** (recombinant Factor VIII) U.S.A.; prophylaxis in adult patients with hemophilia A
 
Regorafenib
 
E.U.; treatment of metastatic and/or unresectable gastrointestinal stromal tumors
Riociguat E.U.; treatment of pulmonary hypertension (CTEPH)
Riociguat E.U.; treatment of pulmonary hypertension (PAH)
Rivaroxaban*** U.S.A.; secondary prophylaxis of acute coronary syndrome
Sorafenib E.U., Japan; treatment of thyroid cancer
* as of February 11, 2014
** octocog alfa = active ingredient of Kogenate™
*** submitted by Janssen Research & Development, LLC

The following table shows our most important drug candidates currently in Phase II or III of clinical testing:

Research and Development Projects (Phases II and III)*[Table 3.5.2]
Indication Status
Amikacin inhale Treatment of pulmonary infection Phase III
BAY 94-9027 (rFVIII mutein) Treatment of hemophilia A Phase III
Ciprofloxacin DPI Treatment of pulmonary infection Phase III
LCS-16 (ULD LNG Contraceptive System)
 
Intrauterine contraception, duration of use: up to 5 years Phase III
Prasterone ** Treatment of vulvovaginal atrophy Phase III
Regorafenib Treatment of refractory liver cancer Phase III
Regorafenib
 
Treatment of colorectal cancer following surgical removal of liver metastases Phase III
Rivaroxaban
 
Prevention of major adverse cardiac events (MACE) Phase III
Rivaroxaban
 
Anti-coagulation in patients with chronic heart failure*** Phase III
Sodium deoxycholate**** Injection for reduction of submental fat Phase III
Sorafenib Treatment of breast cancer Phase III
Sorafenib Treatment of liver cancer, adjuvant therapy Phase III
Sorafenib
 
Treatment of kidney cancer, adjuvant therapy Phase III
Tedizolid
 
Treatment of complicated skin infections and pneumonia Phase III
Copanlisib (PI3k inhibitor)
 
Treatment of recurrent/resistant non-Hodgkin’s lymphoma Phase II
BAY 85-8501 (neutrophil elastase inhibitor) Lung diseases Phase II
BAY 1021189 (sGC stimulator) Chronic heart failure Phase II
BAY 1067197 (partial adenosine A1 agonist) Heart failure Phase II
Finerenone (MR antagonist) Chronic heart failure Phase II
Finerenone (MR antagonist) Diabetic nephropathy Phase II
Molidustat (HIF-PH inhibitor) Anemia Phase II
Radium-223 dichloride Treatment of bone metastases in cancer Phase II
Refametinib (MEK inhibitor) Cancer therapy Phase II
Regorafenib Cancer therapy Phase II
Riociguat Pulmonary hypertension (IIP) Phase II
Riociguat Raynaud’s phenomenon Phase II
Riociguat Diffuse systemic sclerosis Phase II
Sorafenib Cancer therapy Phase II
* as of February 11, 2014
** prasterone = Vaginorm
*** conducted by Janssen Research & Development, LLC
**** sodium deoxycholate = ATX-101
The nature of drug discovery and development is such that not all compounds can be expected to meet the pre-defined project goals. It is possible that any or all of the projects listed above may have to be discontinued due to scientific and/or commercial reasons and will not result in commercialized products. It is also possible that the requisite Food and Drug Administration (FDA), European Medicines Agency (EMA) or other regulatory approvals will not be granted for these compounds.

We regularly evaluate our research and development pipeline in order to prioritize the most promising pharmaceutical projects.

Xarelto™ (active ingredient: rivaroxaban) has been approved for more indications than any of the other new oral anticoagulants. Xarelto™ is registered in the following indications in the United States and Europe:

  • prevention of venous thromboembolism (VTE) in adult patients after elective hip or knee joint ­replacement surgery
  • prevention of stroke and systemic embolism in adult patients with non-valvular atrial fibrillation (AF) and one or more risk factors
  • treatment of deep vein thrombosis (DVT) and pulmonary embolism (PE) in adults
  • prevention of recurrent DVT and PE in adults

In May 2013, Xarelto™ was additionally approved by the European Commission for the prevention of atherothrombotic events after acute coronary syndrome (ACS) in patients with elevated cardiac biomarkers in combination with standard antiplatelet therapy. In January 2014, the Cardiovascular and Renal Drugs Advisory Committee of the U.S. Food and Drug Administration (FDA) voted against the approval of Xarelto™ for the treatment of ACS. The FDA will consider the Advisory Committee’s recommendations in its review of the application for approval of rivaroxaban in this indication but is not bound by them. Xarelto™ is marketed in the U.S. by Janssen Pharmaceuticals, Inc., a subsidiary of Johnson & Johnson.

Beyond the already approved indications, rivaroxaban is also being investigated in other cardiovascular disorders. Ongoing clinical Phase III trials include COMPASS and COMMANDER-HF. The aim of the COMPASS study is to investigate the potential of rivaroxaban in the prevention of major adverse cardiac events. The COMMANDER-HF study is evaluating the potential additional benefit of rivaroxaban in combination with standard therapy in reducing the risk of mortality, myocardial infarction and stroke in patients with chronic heart failure and significant coronary heart disease.

Xarelto™ is approved in more than 125 countries worldwide across all indications, its approval status varying from country to country.

Rivaroxaban was discovered by HealthCare and jointly developed with Janssen Research & Development, LLC.

Riociguat is the first member of a new class of vasodilating agents known as soluble guanylate cyclase (sGC) stimulators. Administered in tablet form, riociguat is currently being investigated as a new ­approach for the treatment of various forms of pulmonary hypertension. Based on the Phase III studies CHEST-1 and PATENT-1, we submitted riociguat in February 2013 for marketing approval in the United States and the European Union for the treatment of inoperable chronic thromboembolic pulmonary ­hypertension (CTEPH) and pulmonary arterial hypertension (PAH). We received the first approval in the indication CTEPH in September 2013 in Canada. In October 2013, following priority review, the FDA ­approved riociguat in the U.S. under the trade name Adempas™ for use in CTEPH and PAH. In January 2014, we received approval for Adempas™ for the treatment of CTEPH in Japan, and in the European approval process, the European Committee for Medicinal Products for Human Use (CHMP) recommended that riociguat be approved to treat CTEPH and PAH. A final decision from the European Commission is expected in the first half of 2014.

Stivarga™ (active ingredient: regorafenib) is a novel, oral multikinase inhibitor. It inhibits various signal pathways that are responsible for tumor growth. Stivarga™ was approved in the United States in 2012 for the treatment of patients with metastatic colorectal cancer (mCRC). The Japanese Ministry of Health, Labour and Welfare (MHLW) approved the product in this indication in March 2013. In August 2013, the product was approved in the European Union.

In February 2013, the FDA approved Stivarga™ to treat patients with locally advanced, unresectable or metastatic gastrointestinal stromal tumors (GIST) who have been previously treated with imatinib and sunitinib. In August 2013, Stivarga™ was approved by the Japanese MHLW for the treatment of GIST. In September 2013, the product was submitted for approval in this indication in the European Union.

Regorafenib is a compound developed by Bayer and co-promoted by Bayer and Onyx Pharmaceuticals, Inc., a subsidiary of Amgen Inc., in the United States. In 2011, we signed an agreement with Onyx under which that company receives a royalty on any future global sales of Stivarga™ in oncology.

Xofigo™ (active ingredient: radium-223 dichloride), a cancer drug jointly developed with Algeta ASA, Norway, received FDA approval in May 2013 to treat adult patients with castration-resistant prostate cancer (CRPC) with symptomatic bone metastases and no known visceral metastases. In November 2013, the product was approved in this indication in the European Union. In the United States, Xofigo™ is co-promoted with Algeta US, LLC.

We are jointly developing and commercializing our cancer drug Nexavar™ (active ingredient: sorafenib) with Onyx Pharmaceuticals, Inc., United States. The successful active ingredient sorafenib, which targets both cancer cells and the vascular system of the tumor, has been registered for the treatment of ­advanced renal cell carcinoma since 2005 and hepatocellular carcinoma since 2007. We plan to develop the product beyond these two therapeutic areas with a broadly based life-cycle management program. Based on the clinical Phase III DECISION study, we submitted sorafenib to the European Medicines ­Agency (EMA) and the FDA in June 2013 for regulatory approval in the treatment of locally advanced or metastatic differentiated thyroid cancer refractory to radioactive iodine. The FDA granted this approval in ­November 2013 following a priority review. In September 2013, sorafenib was submitted to the Japanese MHLW for marketing authorization for the treatment of thyroid cancer. Sorafenib is also being ­investigated in Phase III registration studies as an adjuvant therapy following curative tumor resection in patients with renal cell carcinoma or hepatocellular carcinoma. We are also conducting Phase III registration studies in breast cancer.

Eylea™ (active ingredient: aflibercept) is our joint developmental project with Regeneron Pharmaceuticals, Inc., United States. Aflibercept blocks the natural growth factor VEGF (vascular endothelial growth factor), thus preventing the abnormal formation of new blood vessels that tend to leak blood. The medication is administered directly into the eye. Regeneron Pharmaceuticals holds exclusive rights in the United States, where Eylea™ is approved for the treatment of wet age-related macular degeneration (AMD) and treatment of macular edema secondary to central retinal vein occlusion (CRVO). Bayer markets the product outside the United States. Eylea™ has been approved since 2012 in Europe, Japan, Australia and additional countries for the treatment of wet AMD. In August 2013, the European Commission approved Eylea™ for the treatment of visual impairment due to macular edema secondary to central retinal vein occlusion (CRVO). In November 2013, Eylea™ was approved by the Japanese MHLW for the treatment of CRVO.

The first regulatory submissions in two further indications were made in November 2013: we applied to the EMA for approval of aflibercept in the treatment of diabetic macular edema (DME) and to the Japanese MHLW for approval in the treatment of choroidal neovascularization caused by pathologic myopia (mCNV).

In the area of hematology, a clinical Phase II/III trial with the developmental substance BAY 86-6150 did not show the desired results and was discontinued ahead of schedule in May 2013. The trial investigated the efficacy and safety of the substance in people with hemophilia A and hemophilia B in whom antibodies to coagulation factors had developed.

We are not currently pursuing approval for the oral contraceptive YAZ™ Flex Plus in the United States.

Five new drug candidates currently in clinical Phase I or II trials are at the focus of our early-stage development and are to be transitioned to Phase III trials as quickly as possible. Finerenone, a next-generation oral non-steroidal mineralocorticoid receptor antagonist, is being developed for use in cardiology. Finerenone is currently in clinical Phase IIb development for the treatment of worsening chronic heart failure and diabetic nephropathy. The second drug candidate in cardiology is an oral soluble guanylate cyclase (sGC) stimulator (BAY 1021189). A Phase IIb study in patients with worsening chronic heart failure began in November 2013. A Phase IIb program with the investigational new drug molidustat is under initiation for the treatment of cardiorenal syndrome in patients with anemia associated with chronic kidney disease and/or end-stage renal disease. In oncology, copanlisib, a novel, intravenous phosphatidylinositol-3 kinase (PI3K) inhibitor, was selected for accelerated development. We have also progressed toward the development of new treatment options for patients with gynecological diseases: sPRM (BAY 1002670) is a novel oral progesterone receptor modulator that shows promise in the long-term treatment of women with symptomatic uterine fibroids.

Some of our pipeline candidates are being developed for the treatment of serious, very rare diseases – also known as orphan diseases. For example, regorafenib was designated by the regulatory authorities as an orphan drug for the treatment of patients with gastrointestinal stromal tumors (GIST).

Bayer regards research into cancer stem cells as promising and is active in this area together with U.S.-based OncoMed Pharmaceuticals, Inc. Cancer stem cells are present in tumors and have typical characteristics of stem cells, such as self-renewal and differentiation potential. Cancer stem cells are those considered responsible for the genesis, metastasis and recurrence of cancer. However, Bayer is not active in the area of conventional stem cell research, which examines adult or embryonic stem cells.

Research and development expenditures in the Consumer Health segment amounted to €386 million (2012: €394 million), or 5.0% (2012: 5.0%) of segment sales.

In our Consumer Care Division, research and development activities at the product development centers in Morristown, New Jersey, United States, and Gaillard, France, focus on developing non-prescription (over-the-counter = OTC) products, medical skincare products and nutritional supplements to market ­maturity. Aligned to end consumers, our development strategies are geared toward expanding and ­improving our brand portfolio through new products, packaging and delivery forms. We also work to achieve reclassification of current prescription medicines as OTC products. We introduced a number of new product line expansions to various markets in 2013. They included new delivery forms and uses for existing brands such as Canesten™ and Bepanthen™/Bepanthol™.

The research and development activities of our Medical Care Division focus on blood glucose monitoring and the continuing development of contrast agents and medical equipment used in the diagnosis or treatment of various diseases.

At our two U.S. research and development locations for the Diabetes Care business unit – Tarrytown, New York, and Mishawaka, Indiana – we are focusing on strengthening our product lines and expanding into further attractive segments of the diabetes market. In 2013 we again launched a number of innovative products in key markets to meet the specific needs of people with diabetes. Examples included the Contour™ Next and Contour™ Link blood glucose meters in Europe and the new Contour™ Plus platform in selected markets in Europe, Africa and the Middle East.

The aim of our research and development activities in the area of contrast agents and medical equipment (Radiology & Interventional business unit) is to steadily improve our contrast agents and our contrast injection, thrombus removal and other vascular intervention systems in order to build on our leadership position. Our research and development centers are located near Pittsburgh, Pennsylvania, and Minneapolis, Minnesota, in the United States; in Berlin, Germany; and in Sydney, Australia. In 2013 we worked to expand the capabilities of our informatics product offerings by developing new software and ­informatics to improve contrast agent and radiation dose management.

In our Animal Health Division, we focus our research and development activities on antiparasitics, antibiotics and medicines to treat non-infectious disorders. We operate R&D centers in Germany, the United States, New Zealand and Brazil. Our central research activities are conducted in Monheim, Germany, as part of our Life Sciences platform in conjunction with pharmaceutical research and in close collaboration with our researchers at CropScience. We reinforce the business through numerous external collaborations and by inlicensing product development candidates.

Open innovation

We gain access to complementary technologies and external innovation potential through strategic collaborations with partners. Our Pharmaceuticals segment works with various partners during the individual development stages of a medicine. A number of examples are listed below:

Pharmaceuticals Cooperation Partners[Table 3.5.3]
Partner Cooperation objective
Algeta ASA
 
Codevelopment of radium-223 dichloride for the treatment of castration-resistant prostate cancer patients with bone metastases
Amgen Research GmbH Access to BiTE™ antibodies for developing novel tumor therapies
Ardea Biosciences Inc.
 
Codevelopment of oncological products based on MEK (mitogen-activated ERK kinase) inhibitors
BioInvent International AB Access to antibody library with antibody inlicensing option
Broad Institute
 
Strategic partnership in oncology to discover and develop active substances that specifically target tumor-specific gene mutations
Compugen Ltd. Collaboration for the research and development of new immunotherapy approaches in oncology
German Cancer Research Center Strategic partnership for the development of new therapeutic options in oncology and immunotherapy
Dyax Corp. Access to antibody library with the option to inlicense antibodies for the development and commercialization of novel tumor therapies
EndoCeutics Inc. Development of prasterone to treat vaginal atrophy and female sexual dysfunction
Evotec AG Research collaboration to identify and validate development candidates in endometriosis
ImmunoGen Inc. Cooperation in the field of antibody-drug conjugates (ADCs) for novel tumor therapies
Inception 4, Inc. Research into new approaches for the treatment of various eye diseases
Janssen Research & Development, LLC of Johnson & Johnson Development of Xarelto™ (rivaroxaban)
Ludwig Boltzmann Institutes Research into lung vascular disease, especially pulmonary hypertension, and search for ways to treat heart muscle weakness.
Nektar Therapeutics Codevelopment of a targeted antibiotic inhalation therapy for lung infections (amikacin inhale)
Novartis AG Development of a targeted antibiotic inhalation therapy for lung infections (ciprofloxacin DPI)
OncoMed Pharmaceuticals Inc. Discovery and development of novel anti-cancer stem cell therapeutics
Onyx Pharmaceuticals Inc. of Amgen Inc. Codevelopment of Nexavar™ (sorafenib) for various types of cancer
Peking University Research cooperation and establishment of a joint research center
Prometheus Laboratories Inc. Development of diagnostic in-vitro assays for personalized medicine
Qiagen Manchester Ltd. Development of diagnostic tests in personalized oncology treatment
Regeneron Pharmaceuticals Inc. Development of Eylea™ (aflibercept) to treat various eye diseases Development of a PDGFR-beta antibody for ophthalmology
Seattle Genetics Inc. Cooperation in the field of antibody-drug conjugates (ADCs) for novel tumor therapies
Trius Therapeutics Inc. of Cubist Pharmaceuticals Codevelopment of tedizolid to treat a range of infections
Tsinghua University Research cooperation and establishment of a joint research center

In 2008 we entered into a strategic alliance with the German Cancer Research Center (DKFZ) in Heidelberg, Germany, focusing on the identification and early development of new therapeutic approaches for cancer. This collaboration is designed to turn new scientific findings about cancer into new medicines or therapies as quickly as possible. A total of 26 projects have been initiated so far that relate to biological target identification for drug discovery or to early drug discovery. In April 2013, we expanded the collaboration to include immunotherapy. The first projects in this field began in June 2013.

Also in June 2013, we concluded a new licensing agreement with Seattle Genetics, Inc., United States, in the area of antibody-drug conjugates (ADCs). Under this agreement, we will receive worldwide rights to utilize Seattle Genetics’ special ADC technology for antibodies to several protein targets in the field of oncology.

In August 2013, we signed a collaboration and licensing agreement with Compugen Ltd., Israel, pertaining to the research, development, and commercialization of antibody-based therapeutics for cancer immunotherapy.

In September 2013, we entered into a strategic alliance with the Broad Institute, Cambridge, Massachusetts, United States, in the area of oncogenomics and drug discovery. The goal of this five-year collaboration is to jointly discover and develop therapeutic agents that selectively target cancer genome alterations.

In November 2013, we entered into a collaboration with Inception Sciences, Inc. and Versant Ventures, both in the United States, to conduct early research in the area of ophthalmology. The goal of the new alliance is to develop innovative treatment options for patients with eye diseases, such as wet age-related macular degeneration and geographic atrophy. This work will focus on a novel target and pathway and will be carried out by Inception 4, Inc., United States.

In January 2014, we signed an agreement with Regeneron Pharmaceuticals, Inc., United States, to jointly develop an innovative antibody to the platelet-derived growth factor receptor beta (PDGFR-beta) as a potential combination therapy with Eylea™ (aflibercept) for the treatment of wet AMD. The first clinical studies in this indication are scheduled to start in early 2014.

In January 2014, Bayer and Peking University, Beijing, China, signed a collaboration agreement on a three-year strategic partnership to promote translational research for drug discovery. Under this agreement, the two partners will establish a joint research center at Peking University.

Since 2009, we have operated the internet platform “Grants4Targets,” through which researchers at universities, other research institutions or start-up companies can propose biological targets for study in collaboration with Bayer. In 2013 we expanded this platform to include two further initiatives – “Grants4Leads” and “Grants4Apps”: “Grants4Leads” gives chemists and pharmacists the opportunity to submit biologically active molecules as leads for collaboration with Bayer. This program adds a chemical component to the biology-oriented Grants4Targets initiative. “Grants4Apps” is a portal for proposing IT solutions designed to enable a wide range of applications in the area of health care. Unlike the first two platforms, which are important for early research, “Grants4Apps” looks for applications that can be used from the research stage right through to commercialization. The program saw a very successful rollout in 2013, with 22 grants already awarded.

In 2012, we opened the CoLaborator™, a new center in the Mission Bay district of San Francisco with laboratory facilities for bioscience startup companies. With this incubator concept, the scientists benefit both from the laboratory infrastructure and from the expertise of the Bayer researchers, which can facilitate the professional, goal-oriented design of development programs, for example. At the same time, we aim to be the first contact point for young companies in their search for possible cooperation partners. A second CoLaborator™ is currently being established at the Berlin site.

CropScience

In 2013, CropScience invested €857 million (2012: €779 million) in research and development, which was 26.9% of R&D spending in the Bayer Group and equivalent to 9.7% (2012: 9.3%) of CropScience sales.

CropScience maintains a global network of research and development facilities employing some 4,700 people. Our largest R&D sites for chemical and biological crop protection products are located in Monheim and Frankfurt am Main, Germany; Lyon, France; and Davis, California, United States. The major ­research centers of the Seeds unit, which focuses on improving seed through seed technology and breeding, are located in Ghent, Belgium; Haelen, Netherlands; and Morrisville/Raleigh, North Carolina, United States. While research is carried out centrally at a small number of sites, our development and plant breeding activities take place both at these sites and at numerous field testing stations across the globe. This ensures that future active substances and crop varieties can be tested according to ­specific regional requirements.

In Crop Protection/Seeds, our scientists working in the areas of seed technology, agricultural chemistry and biologics are closely collaborating as part of our integrated research approach. This bundles the technical expertise acquired in chemical and biological research and field development, aligning it to our long-term research objectives and business strategies for the various crops.

In the Crop Protection unit, we identify and develop innovative, safe and sustainable products for use in agriculture as insecticides, fungicides, herbicides or seed treatments. In the fields of chemistry, biology and biochemistry, modern technologies such as high-throughput screening and bioinformatics play an important role in identifying new chemical lead structures. Collaborations with external partners complement our own activities.

In January 2013, CropScience acquired the German agrochemical company Prophyta Biologischer Pflanzenschutz GmbH. The transaction enables CropScience to further expand its research and product pipeline in the area of biological crop protection. The acquisition is also intended to promote the development of a leading technology platform for biological products and strengthen the fruit and vegetables business.

We are broadening the range of uses for our active ingredients by developing new mixtures or innovative formulations of products already on the market so that they can be applied in additional crops or be made easier to handle.

In mid-2014 we will combine our U.S. research and development activities in vegetable seeds and biological crop protection products at a new, integrated site in West Sacramento, California. Our goal is to better exploit the potential of our global research and development capacities by merging and expanding activities.

We plan to launch several more new products based on biological and chemical crop protection mechanisms in the coming years. For example, in 2014 we plan to introduce an insecticide to control nematodes under the Verango™ and Velum™ trademarks. In 2015 we expect to launch a further insecticide under the Sivanto™ brand, a new insecticide class to control sucking insects, and begin marketing the herbicide Council™ and a biological fungicide.

Research in our Seeds unit is devoted to optimizing plant traits. We are developing new varieties in our existing core crops – cotton, oilseed rape/canola, rice and vegetables. We have now expanded our research activities to include two new core crops – wheat and soybeans. Our work focuses on improving the agronomic traits of these crops. Our researchers are working to increase the quality and yield potential of crop plants – for example, by improving the profile of rapeseed (canola) oil or enhancing the properties of cotton fibers. We are also targeting the development of plants that have high tolerance against external stress factors such as drought and can better utilize water. Further areas of focus include developing new herbicide tolerance technologies based on alternative modes of action, and improving insect resistance and disease tolerance. To do this we employ modern breeding techniques ranging from marker-assisted breeding to plant biotechnology methods.

In March 2013, CropScience acquired the soybean seed producer Wehrtec Tecnologia Agricola Ltda. and the soybean business of Agricola Wehrmann Ltda., both headquartered in Brazil. This transaction strengthens the research and development activities of CropScience in soybeans and contributes to the development of varieties tailored to the requirements of Brazilian soybean growers.

Also in March 2013, CropScience and Syngenta filed for approval of a new herbicide-tolerance soybean trait in various countries. The application is currently being reviewed by the regulatory authorities in the United States, Canada, and major soybean-importing regions, including the European Union. This trait gives soybean plants tolerance toward the three active ingredients mesotrione, glufosinate-ammonium (Liberty™) and isoxaflutole, and is an important new way to combat difficult-to-control weeds. Its estimated launch date is between 2015 and 2020.

In April 2013, CropScience and Monsanto Company, U.S.A., entered into licensing agreements for next-generation technologies in the field of plant biotechnology. Monsanto will provide CropScience with a royalty-bearing license to herbicide tolerance technologies in soybeans in the United States and Canada. In addition, CropScience will receive a royalty-bearing license to an insect-resistance technology in soybeans in Brazil with an option on a royalty-bearing license in other Latin American countries. CropScience will grant Monsanto licenses to evaluate technologies for corn rootworm control and herbicide tolerance.

In December 2013, CropScience acquired the start-up company FN Semillas S.A., headquartered in Argentina. Closing of this acquisition remains subject to regulatory approvals. FN Semillas S.A. specializes in the breeding, production and marketing of improved soybean seeds in Argentina. This acquisition marks CropScience’s entry into the Argentinian market for soybean seeds.

In 2013 we also successfully launched Roundup-Ready™ hybrid canola seed in Australia and began marketing an oilseed hybrid in India. Here we introduced our mustard seed to the market.

Our proprietary glyphosate herbicide tolerance technology GlyTol™ has been available in FiberMax™ cotton seed varieties in the United States since 2011. In 2014, we plan to launch a new combination of insect resistance and herbicide tolerance for cotton containing both TwinLink™ and GlyTol™ technology, which will offer farmers integrated pest and weed control.

In the coming years we plan to market numerous new hybrid rice and canola varieties with improved stress and insect resistance under the Arize™ and InVigor™ trademarks.

With many crops, such as vegetables, major success can be achieved using conventional plant breeding methods. As vegetables are mostly intended to be marketed and eaten fresh, merchants and consumers have particularly strict requirements regarding their appearance, nutrient content, taste and shelf life. We are launching a succession of new vegetable seed varieties that satisfy these requirements.

Our integrated product pipeline for crop protection and seed technology contains more than 25 individual projects, along with numerous new seed varieties and improved products, that have estimated launch dates between 2011 and 2016. We believe these products have a combined peak sales potential in excess of €4 billion. Crop Protection plans to have launched around 10 products during this period. In our Seeds business, we plan to bring some 15 projects to market maturity for the broad-acre crops of cotton, oilseed rape/canola, rice, wheat and soybeans, along with several hundred new vegetable varieties, over the same period.

In Environmental Science, we evolve chemically and biologically based solutions for consumers and professional users by tailoring substances from our Crop Protection unit or external partners for use in non-agricultural scenarios. Current development projects include insect gels and baits, herbicides, fungicides and products for the control of disease-transmitting insects.

In 2013 Environmental Science expanded its range of biological solutions by adding to the Natria™ product line for the Bayer Garden™ business in the United States and Europe, and launched Harmonix™ Insect Control, the first biological insecticide for professional pest control, in the United States. The launch of Marengo™ for use on ornamental plants in the United States broadened our range of herbicides based on the active substance indaziflam. The golf course business was strengthened by the market launch of the fungicide Interface™ in the United Kingdom and South Korea and the herbicide Specticle G™ in the United States. The product range for professional pest control was expanded in numerous countries to include a new formulation of the insecticide Maxforce™.

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On the European market we offer a mild weed control product based on fatty acids derived from palm oil. As the production of palm oil is often associated with social and ecological problems, Bayer joined the Round Table for Sustainable Palm Oil (RSPO) in 2012. This underscores our commitment to responsible materials procurement. Bayer purchases GreenPalm certificates, which support the production of sustainable palm oil.

Open innovation

CropScience is part of a global network of research and industry partners from diverse segments of the agriculture industry, chemical and biological research, and the food industry. These cross-industry partnerships enable us to better understand and do justice to the needs of our customers over the long term. An example is the partnership between CropScience and the U.K.-based Innovative Vector Control Consortium (IVCC), which we extended by three years in 2012. We are cooperating with IVCC to develop new substances for use against mosquitoes that transmit diseases such as malaria and dengue fever.

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Malaria, for example, remains one of the most dangerous tropical diseases and is the leading cause of mortality in children under the age of five. Bayer has played an active role in the fight against malaria for more than 50 years. We estimate that indoor and outdoor insect sprays and larvicides from CropScience provided protection for up to 70 million people against malaria and for up to 30 million people against dengue fever in 2013. Dengue is currently the fastest-spreading mosquito-borne disease in tropical regions.

CropScience is a leading producer of indoor insecticide sprays to control malaria mosquitoes. Over the past three years, the Environmental Science product Ficam™ has played a particularly important role in controlling mosquitoes resistant to pyrethroids.

In 2013 these activities reached an important milestone: The World Health Organization issued a ­recommendation for a new, long-acting and thus more cost-effective, deltamethrin-based spray insecticide that offers a possible alternative to the older insecticide DDT (dichlorodiphenyltrichloroethane) for indoor use. It is planned to introduce the product in selected Sub-Saharan African countries and other malaria-endemic areas in 2014 as soon as the respective national approvals have been obtained.

CropScience also maintained its wheat research collaboration with the Commonwealth Scientific and Industrial Research Organisation (CSIRO) in Australia. This strategic collaboration, which began in 2009, is aimed at raising wheat yields and thus boosting global wheat production in the long term.

However, it is a long way from the breeding, cultivation and protection of crop plants to the production of healthy food products with a good shelf life and their distribution to retailers. Special mention should therefore be made of our food chain partnerships, in which CropScience supports all the players in the food chain – from farmers and food processors to importers, exporters, wholesalers and retailers. CropScience has initiated food chain partnership projects for over 40 crops in more than 30 countries, mainly in Asia, Latin America and Europe. Our experts advise farmers on sustainable growing methods – from seed selection and the controlled, eco-friendly use of crop protection products to the transparent monitoring of production.

Our cooperation with partner organizations in joint projects is now an internationally successful business model for all participants in the food chain. Small farmers in developing and emerging economies draw particular benefit from the improved production and marketing structures. In 2013 we continued to expand our partnerships in Latin America. An example is the project in Chile in which we work together with Walmart and lettuce growers to ensure the traceable production of lettuces. In Peru we are currently collaborating with PepsiCo and potato farmers to ensure sustainable potato chip production that conserves natural resources, creates value for developing communities and makes potato-growing more efficient by optimizing the use of crop protection products.

MaterialScience

In 2013, MaterialScience spent €208 million (2012: €241 million) for research and development. The subgroup thus accounted for roughly 6.5% of the Bayer Group’s R&D expenses. The ratio of R&D expenses to sales in the subgroup itself was 1.9% (2012: 2.1%). In addition, MaterialScience spent €97 million (2012: €115 million) on joint development projects with customers.

A total of about 1,100 people were employed in research and development in 2013, many of them at Innovation Centers in Leverkusen, Germany, and Pittsburgh, Pennsylvania, United States, or the new facility for the Asia/Pacific region that opened in Shanghai, China, in 2013. This increase in our local presence is aimed at bringing research and development even closer to our customers in the Emerging Markets.

Our activities in the Polyurethanes (PUR) business unit focus partly on the continuing development of polyurethane rigid foam as a highly efficient insulating material for buildings and refrigerated appliances. Our principal goal in this respect is to further improve the material’s insulating and flame retardancy properties. Among the most recent innovations is an especially fine-pored foam with up to 10% lower thermal conductivity than conventional polyurethane rigid foam.

Our research and development activities are also directed toward meeting the growing demand for added comfort. Our innovative solutions in this area include viscoelastic polyurethane flexible foam that is increasingly being used in furniture and mattresses.

We have made significant progress in recent years in the area of process development. We are currently working with carbon dioxide as a new source of carbon for polyurethanes to make us less dependent on petrochemical raw materials. In 2013 we completed the “Dream Production” research project in this field. We also pressed ahead with plans for the commercial exploitation of this new technology.

Our research and development activities in the Polycarbonates (PCS) business unit are geared to the development of new products – mainly for the automotive and electrical/electronics industries – that help to reduce weight, improve energy efficiency and safety, and increase design freedom.

Materials we have developed and introduced for the consumer electronics sector include extra lightweight, glass-fiber-reinforced materials for ultramobile laptop computers and other applications.

For the automotive industry, we are developing not only lightweight solutions but also materials and systems for high-quality, individual car interior designs. Here the “DirectCoating/DirectSkinning” technology co-developed by MaterialScience enables the efficient manufacture of coated components in a single production step. We also offer sustainable solutions for car bodies, laptop housings and other items using recycled plastics.

In the Coatings, Adhesives, Specialties (CAS) business unit, we are driving the development of raw ­materials for high-performance polyurethane coatings, adhesives and sealants. These are used in areas such as renewable energies, mobility and infrastructure facilities, as well as for textiles and sporting goods.

Our development activities are directed toward eco-friendly products that consume less resources and can be more efficiently applied. Here we are concentrating on low-solvent, solvent-free and waterborne systems. The use of renewable raw materials is also playing an increasingly important role. In addition to the conventional application areas, we aim to open up lucrative market segments by continuously evolving our product and technology portfolio.

Our activities in Functional Films center on products based on polycarbonates or thermoplastic polyurethanes, into which holographic functions can also be incorporated for attractive markets such as 3D flat screens.

Open innovation

In line with the open innovation approach, MaterialScience collaborates with external scientific institutions and with academic spin-offs and start-up companies. These collaborations are mainly based in Europe, the United States, China or Japan. They focus on areas such as renewable raw materials and energies, and new composite materials for lightweight construction.

Our partners include RWTH Aachen University in Germany, with which we jointly operate the CAT Catalytic Center, as well as Tongji University in China and several institutes of the Chinese Academy of Science. In the United States, too, we support research activities at renowned universities such as Pennsylvania State University, Case Western Reserve University, Carnegie Mellon University, Virginia Polytechnic Institute and State University. Key areas here include functional materials, renewable raw materials and fundamental subjects such as new crosslinking mechanisms for polymers.

In the scientific field, we take either a leading or an advisory role in numerous publicly funded projects, as in the area of “sustainable chemistry” in the German research cluster SusChemSys and in the program run by the German Federal Ministry of Education and Research aimed at using CO2 as a building block for plastics. We also participate in industry associations and other specialist bodies such as the German Chemical Society (GDCh), the DECHEMA Society for Chemical Engineering and Biotechnology in Germany and the American Chemical Society.

Our innovation capability is also spurred by collaborations with customers or other industry sectors. Examples here include the “future_bizz” corporate network or “CLIB2021,” which is concerned with renewable raw materials. We aim to work with the best partners from the industry sectors that are important to us in order to combine competencies and turn them into innovations.

Bayer Technology Services

Bayer Technology Services is an important innovation partner to the subgroups in the areas of technological development, plant construction and production. All Bayer subgroups work closely with this service company worldwide on technology solutions, particularly in the fields of process technology, engineering, and the safe and efficient operation of production facilities.

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Together with the subgroups, Technology Services is developing process technology, biotechnology and systems biology platforms to support the research, development and production of new products and applications, with the focus on open innovation. Development activities at the INVITE research center, a collaborative venture with Dortmund Technical University, include work on new flexible, modular production concepts. At the Joint Research Center on Computational Biomedicine, a collaboration with RWTH Aachen, computer-assisted models and methods for investigating fundamental biological mechanisms are researched and developed for clinical use together with Aachen University Hospital.

Last updated: July 28, 2014  Copyright © Bayer AG
http://www.annualreport2013.bayer.com