Management Report & Annexes | Basic Information About the Group
3. Strategies of the Subgroups
The subgroups’ strategies are outlined below (for the Bayer Group strategy, see Chapter 1.2).
The health care sector worldwide is in a state of flux driven by the rise in life expectancy, growing demand for health care products particularly in the emerging markets, greater patient and consumer influence on health-related decisions, and increasing insistence that the health care industry demonstrate the value added by new therapies. In addition, health systems everywhere need to find ways to curb rising costs while safeguarding and improving health care quality and access.
Our strategy in this environment is aimed at achieving above-average, profitable and sustainable growth. To this end, our focus is on innovation and on further strengthening our position in the Emerging Markets.
In our largest segment in terms of sales – Pharmaceuticals – we aim to become a leader in cardiovascular health and defend our market position in women’s healthcare. In the area of specialty therapeutics, we aim to strengthen or defend our respective market positions. To achieve our growth targets, we are focusing particularly on Xarelto™, Eylea™, Stivarga™, Xofigo™ and riociguat (approved in the United States and Japan under the trademark Adempas™), whose market introduction is continuing in additional countries. We plan to steadily expand the indications for these medicines through comprehensive study programs and make them available to additional patient groups.
We intend to step up our investment in research and development. First, for example, we plan to drive forward the development of five drug candidates in cardiology, oncology and gynecology. We are also conducting research in the therapeutic area of hematology. Complementing this work is common mechanism research in areas such as ophthalmology and inflammation.
In addition, we are selectively expanding and supplementing our product portfolio through licensing agreements and acquisitions. In June 2013, we acquired the U.S. company Conceptus, Inc., whose product Essure™ rounds out our contraception portfolio with the only approved non-surgical permanent birth control method.
The focus on certain therapeutic areas is supplemented by tailored measures in key markets such as the United States, Japan, Germany, Brazil and China.
We are developing concepts to facilitate access to our products, especially in developing and emerging countries, as part of our “Access to Medicine” (ATM) strategy.
In the area of hormonal contraception, we collaborate in family planning programs with international development partners. We support the World Health Organization (WHO) in the fight against neglected tropical diseases and tuberculosis and also offer patient access programs in some markets where large segments of the population cannot currently benefit from innovative medicines.
Targeted family planning
As the world market leader in oral contraceptives, the Pharmaceuticals Division has many years of expertise in the field of hormonal contraception. We have been supporting family planning programs of national and international organizations for 50 years. Our support represents a significant contribution toward achieving the United Nations Millennium Development Goals, including that of improving maternal health. Self-determined family planning also supports the struggle against poverty and strengthens women’s role in society. We provide a broad range of hormonal contraception methods for family planning programs: apart from oral contraceptives, we offer monthly and three-monthly injections and the contraceptive implant Jadelle™, a reversible long-term contraceptive method that is effective for up to five years.
In 2013 we provided the following quantities of oral contraceptives, injections and implants to family planning programs in developing countries. CYP* (couple-years of protection) is the number of couples for whom one year of contraception is provided.
Jadelle™: 3 million packs (10.5 million CYPs)
oral contraceptives: 130 million cycle packs (8.7 million CYPs)
injections: 9.2 million (1.7 million CYPs)
The total of 20.9 million CYPs represents a 10% increase over the previous year.
* All CYPs are determined using the MSI Impact Calculator (Version 1.2) and the calculation basis of the U.S. Agency for International Development (USAID). Example for oral contraceptives: 1 CYP = approx. 15 cycle packs
The Bayer-USAID Contraceptive Security Initiative
At the same time, we are looking for new ways to improve the availability of our contraceptives. In 2009, for example, we launched the Contraceptive Security Initiative (CSI) jointly with USAID and introduced an oral contraceptive, Microgynon™ Fe, to the African market at a reduced price. The CSI aims to complement subsidized aid programs by making oral contraceptives available mainly to middle-class couples. The supply price is adjusted such that pharmacies can offer the products at prices that match the financial resources of middle-income women and couples. At the same time, we cover our costs and can thus provide a continuous supply beyond the five-year term of the agreement. As local wholesalers and pharmacists benefit from sales, CSI has the effect of generating national income and thus further reducing dependence on charitable support. Since December 2010 the initiative has been successively introduced in Ethiopia, Uganda, Tanzania, Rwanda, Ghana, Kenya and Malawi; four more countries are scheduled to join the program by the end of 2014.
The Jadelle™ Access Program
Since January 2013, a partnership between HealthCare and the U.S.-based Bill & Melinda Gates Foundation has been improving access to our contraceptive implant Jadelle™. Under this agreement, we have reduced the price for our Jadelle™ implant, which was prequalified by the WHO in September 2009, by more than half, and up to 27 million women in the world’s poorest countries can gain access to this effective, long-acting reversible contraceptive by 2018. In 2013 the program won the CIPS (Chartered Institute of Purchasing & Supply) Annual Award for “Best International Procurement Project of the Year.”
Tackling neglected tropical diseases
Many diseases that primarily affect the poorest sections of the population can only be tackled through a substantial international effort. In 2012 13 pharmaceutical companies – including Bayer HealthCare – therefore joined with the governments of the United States, the United Kingdom and the United Arab Emirates, the Bill & Melinda Gates Foundation, the World Bank and several global health organizations to launch the largest ever campaign designed to combat neglected tropical diseases. The goal of the “London Declaration on Neglected Tropical Diseases” is to contain or, if possible, eliminate 10 of these tropical diseases by 2020. The various companies’ commitments reflect their respective areas of expertise. For more than 10 years we have supported the WHO by providing medicines to treat African sleeping sickness and Chagas’ disease free of charge.
We are providing the WHO with up to one million tablets of Lampit™ (active ingredient: nifurtimox 120 mg) per year, along with US$300,000 for logistics and distribution, to combat Chagas’ disease. We are also currently developing a smaller nifurtimox tablet with a lower active ingredient content (30 mg) to simplify the treatment of children with Chagas’ disease.
Since 2002 we have supported the WHO in the fight against African sleeping sickness – also known as human African trypanosomiasis (HAT) – by providing 10,000 ampoules of Germanin™ per year free of charge to combat a form of the disease that mainly occurs in eastern and southern Africa. West African sleeping sickness, the most widespread form, can be treated since 2009 with a combination therapy (NECT) using two active ingredients – nifurtimox from Bayer and eflornithine from Sanofi. Following completion of the clinical studies, the new treatment was included in the WHO List of Essential Medicines. Bayer has been supplying the WHO with 400,000 nifurtimox tablets per year for the combination therapy since 2009. The rate of new infections has declined since then.
Currently some 70% of all registered cases of HAT worldwide occur in the Democratic Republic of the Congo. In 2013 we therefore increased our commitment to the fight against African sleeping sickness, setting up a project for an initial term of three years during which we will provide €100,000 per year for the mobile intervention teams deployed by the WHO in DR Congo to tackle local outbreaks. With the help of these teams, people in remote areas are gaining better access to diagnosis and treatment. This also represents a major step toward achieving the target set by the London Declaration on Neglected Tropical Diseases of eradicating African sleeping sickness by 2020.
New treatments for tuberculosis
The current six- to eight-month standard therapy for tuberculosis (TB) is based on four drugs that were discovered more than 30 years ago and often have to be administered under the direct supervision of health care professionals. The long period makes consistent treatment more difficult to achieve, and the number of resistant strains of bacteria is therefore increasing. The available medicines are not effective against the multi-drug-resistant TB (MDR-TB) caused by resistant bacteria. As part of the WHO’s STOP-TB partnership, we have therefore provided our Avalox™/Avelox™ (active ingredient: moxifloxacin) antibiotic at a reduced price for an emergency aid program to combat MDR-TB since 2011.
16 countries have joined the program since December 2011. A total of around 1.3 million moxifloxacin tablets were supplied to six countries (China, Georgia, Armenia, Haiti, Russia and Indonesia) in 2013. This quantity of the drug enables the treatment of a good 2,450 MDR-TB patients for the minimum treatment period of 18 months. Since 2005 we have also been collaborating with the U.S.-based Global Alliance for TB Drug Development (TB Alliance) on a broadly based clinical trial program investigating the efficacy and tolerability of moxifloxacin as part of a combination therapy to shorten the treatment period for pulmonary tuberculosis. The results of this trial are currently being evaluated. We have committed to file for registration of moxifloxacin to treat TB and provide the drug at a reduced price if the trial outcome is positive.
Programs for improved drug access
In certain countries where large segments of the population do not have access to innovative medicines – such as India and China, but also in the United States – patient access programs are established for selected products. These programs, jointly run with partners from local health authorities and non-governmental organizations, help to fill existing treatment gaps by making available innovative products for cancer treatments, for instance, or therapeutic options for patients with chronic diseases such as multiple sclerosis or hemophilia, for example. Some of the programs go beyond the supply of medicines and provide patient and family support, medical personnel and access to the necessary diagnostic facilities. The programs are developed on a local or regional basis to optimally meet specific patient needs.
Our Consumer Health segment includes non-prescription medicines, dermatology products, blood glucose meters, medical devices and contrast agents, as well as pharmaceutical and grooming products for livestock and companion animals.
The goal of the Consumer Care Division is to become the market leader for over-the-counter (OTC) medicines. We aim to achieve this mainly by exploiting the organic growth potential of proven brands such as Aspirin™, Aleve™, Bepanthen™/Bepanthol™ and Canesten™. In addition, we are investing heavily in the Emerging Markets of Eastern Europe, Latin America and Asia. We are also utilizing external growth opportunities in the form of acquisitions or product inlicensing, an example being the acquisition in July 2013 of Steigerwald Arzneimittelwerk GmbH, Darmstadt, Germany, a company specializing in non-prescription herbal medicines.
In the Medical Care Division, we continue to focus on our competitive positions in the core areas of diabetes management, contrast agents and medical devices. In the Diabetes Care business unit, we are expanding our range of products and services by developing new blood glucose monitoring systems to help people with diabetes better manage the disease. In the Radiology & Interventional unit, our core focus is in the areas of contrast agents, contrast agent injection systems, and thrombectomy and atherectomy systems. We are also developing new software and IT solutions to optimize contrast agent and radiation dosage management.
The Animal Health Division is among the world’s major producers of veterinary pharmaceuticals. We aim to strengthen our position through organic growth, acquisitions and inlicensing.
Sustainable agriculture, higher crop yields and improved crop quality are becoming increasingly important in view of the need to ensure adequate food supplies for a growing world population despite the limited amount of arable land and the increased demand for animal feed and renewable raw materials.
CropScience aligns its corporate planning to long-term trends in the markets for agricultural products.
The subgroup’s strategy for future growth is built on four key elements: enhancing the Crop Protection and Environmental Science portfolio, increasing customer centricity along the entire value chain, leading the way in the area of innovation, and expanding the Seeds business.
We aim to enhance our Crop Protection and Environmental Science portfolios by adding new and improved products, concentrating on core brands and offering integrated solutions in major crops. We have a significant technology platform for both chemical and biological crop protection, enabling us to offer customers complete solutions from seed treatment through to the harvest. We are investing substantially in our production capacities to meet rising demand for our products.
Another major part of our strategy is to strengthen customer centricity along the entire value chain and optimize distribution management. We are also steadily expanding the successful business model of food chain partnerships in the form of collaborations with food processors and retailers. This supports our objective of sustainably increasing our customers’ productivity. In these partnership projects, CropScience works with all participants in the food chain to safeguard and increase yields and improve the quality of harvested produce.
To lead the way in innovation, we aim to build on our expertise in the integration of seed technology and chemical and biological crop protection so that we can develop holistic solutions.
Another key element in our strategy is the expansion of our Seeds business. We plan to further strengthen our positions in our established crops – cotton, oilseed rape/canola, rice and vegetables – and plan to build significant positions in soybeans and wheat. For example, we intend to gain long-term access to high-quality breeding material through acquisitions, inlicensing and partnerships and to steadily expand our existing breeding expertise.
MaterialScience, with its high-tech polymer materials and application solutions, is helping to address the challenges posed by population growth, the depletion of fossil resources, climate change, greater mobility and increasing urbanization. We are continuing to develop our product portfolio, which mainly comprises components for polyurethane foams, high-tech polycarbonate plastics and raw materials for coatings and adhesives. In addition to product innovations, we are working on new or improved, eco-friendly production processes that also bring cost benefits for ourselves and our partners.
Against this background, MaterialScience is targeting long-term, profitable growth. We aim to sustainably earn a premium on our capital costs and thus help to increase corporate value. We intend to safeguard or expand our leading competitive positions in world markets in a challenging environment. This applies particularly to emerging economies such as China, India, Brazil and Russia.
We take sustainability principles fully into account in our business processes. We want our products to benefit both the environment and society. We aim to continue our steady investment in process technology in order to increase safety, mitigate environmental impacts and raise efficiency.
In the Polyurethanes (PUR) business unit, we intend to safeguard our strong position on the world market as an integrated raw material and systems supplier, mainly for rigid and flexible foams. Demand is expected to continue increasing in the coming years. The uses for polyurethane foams include insulations for buildings and refrigerated appliances. These materials thus help to reduce energy consumption and greenhouse gas emissions. They also ensure added comfort in many areas of everyday life. In line with our objective of achieving cost leadership, we are concentrating on further increasing efficiency at our production facilities, partly through the use of the latest process technologies. At our site in Dormagen, Germany, for example, we are erecting a large-scale, state-of-the-art facility for toluene diisocyanate (TDI), a key precursor for flexible foams. In the rigid foam sector, we are further expanding our capacities in Shanghai, China, for the precursor diphenylmethane diisocyanate (MDI) to service the demand in Asia.
The global market for polycarbonates is focused on Asia, which accounts for more than 60%. The Polycarbonates (PCS) business unit has several large production facilities for this high-tech plastic in the region. To safeguard our position in the world market, we plan to gradually increase production capacity in Shanghai. We also aim to further improve the efficiency of our plants worldwide. This particularly lightweight and stable polymer material is used in the automotive and consumer electronics industries and other sectors due to its versatility.
The focus of the Coatings, Adhesives, Specialties (CAS) business unit is on the production of polyurethane-based raw materials for coatings and adhesives. Here we aim to maintain our excellent position in our core business and open up new, related growth areas. Our chemical expertise and years of experience in formulation development make us a preferred development partner and supplier of customized solutions for many new coating and adhesive applications that offer not only attractive design options, but also provide effective mechanical protection.