Address by Board of Management

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Werner Baumann,
Chairman of the Board of Management (CEO) of Bayer AG:

Good morning, everybody! On behalf of the entire Board of Management, I would like to wish you all a very warm welcome to our virtual Financial News Conference.

Today, we will be looking back together on a very eventful 2022. A year dominated by the terrible war in Ukraine and the impact it has had on people all around the world. We really are living through a time of major upheavals. People are talking about the end of an era – and they’re right.

But what does that mean for us here at Bayer? First, it means that we’re active in the right fields, since health and nutrition are fundamental human needs. Both areas are dependent on innovation and scientific advances.

Fighting diseases, improving well-being, safeguarding harvests – our vision of Health for all, hunger for none is and will remain vitally important, especially in times like these. That’s why 2022 was a very successful year for Bayer despite the challenging environment we faced. We were able to deliver, even during these difficult times.

I’d like to share a few figures with you to illustrate this point: on an operational level, we increased sales by 9 percent last year on a currency- and portfolio-adjusted basis, to 50.7 billion euros. EBITDA before special items came in at 13.5 billion euros, which was 21 percent higher than the prior-year level.

That means that we met the upgraded financial targets we set in August 2022 – a great achievement by our entire workforce. Wolfgang Nickl will go over the financial details in more depth in a moment.

Equally important, however, is the significant progress we achieved with our innovations and future growth drivers.

At Pharmaceuticals, for example, this is evident with the cancer drug Nubeqa™ and the kidney disease treatment Kerendia™, as well as projects in late-stage development, such as asundexian and elinzanetant. We now believe these major growth drivers have a combined peak sales potential of over 12 billion euros annually. We have also further expanded our cell and gene therapy development portfolio.

At Crop Science, we advanced the launch of new products that are designed to protect harvests even more effectively against extreme weather conditions due to climate change, or against pests such as the corn rootworm, which would otherwise significantly reduce crop yields. In the field of biologicals, we shifted our research approach to an open innovation model, with our business engaging in strategic collaborations with the Boston-based biotech company Ginkgo Bioworks and the Spanish biologicals firm Kimitec, for example.

And finally, Consumer Health strengthened its product portfolio by launching the first steroid-free antihistamine spray on the US market that is available over the counter. It starts working much faster, providing allergy sufferers with the relief they need. The division also expanded its Nutritionals portfolio with the addition of products to help protect people’s immune system.

As you can see, all three divisions are making encouraging progress in developing their innovation pipeline and launching new products. My colleagues on the Board of Management will share some more detailed insights in a moment.

For Bayer overall, it remains crucial that we systematically harness the opportunities unleashed by science and technology. Biology and chemistry are converging with modern data science and artificial intelligence at an ever-faster pace, paving the way for a true paradigm shift in the development of groundbreaking innovations.

After adjusting for special effects, Bayer last year invested a total of 6.2 billion euros in research and development – 16 percent more than in 2021. This shows that, even in difficult times, we are not scaling back investment in our future – far from it.

Last year alone, our Leaps by Bayer impact investment arm added seven companies to its portfolio and participated in a further 15 rounds of financing for already established portfolio companies. Since 2015, we have invested a total of over 1.7 billion US dollars in over 55 highly innovative start-up companies through Leaps.

Our work here at Bayer is also highly relevant for the world’s efforts to achieve the climate and sustainability goals of the United Nations, as we look to mitigate the dramatic effects of climate change, feed a growing world population, and improve people’s health.

We also made good progress last year toward reaching our ambitious sustainability targets. For instance, we invested in climate-smart production facilities to support our endeavors to become carbon-neutral by 2030. One example I’d like to share with you is our new pharmaceuticals facility in Leverkusen, which incorporates a state-of-the-art geothermal system that reduces CO₂ emissions by 70 percent compared with conventional plants. In 2022, we once again managed to reduce our greenhouse gas emissions – while at the same time achieving dynamic growth in our businesses.

Yet here at Bayer, sustainability always goes hand in hand with social responsibility. We have therefore set ambitious targets for 2030 in this area as well. Supporting 100 million smallholder farmers in low- and middle-income countries is one such target, and so far, we have reached more than half of them. We also want to provide 100 million women in low- and middle-income countries with access to modern contraception – so far, we’ve succeeded in reaching 44 million. And finally, we’re aiming to support 100 million people in underserved communities with self-care – something we’ve achieved for 70 million people to date.

Our sustainability efforts are gaining ever greater recognition. Last year, for instance, the ratings agency MSCI upgraded its ESG score for Bayer from “BB” to “A” – a key milestone in bolstering our ESG profile. In addition, we for the first time made it into the top ten in the renowned Access to Medicine index, which ranks companies’ related endeavors in low- and middle-income countries. That, too, is a big success.

So when looking back at 2022, we can say that it was indeed a very successful year. We delivered very good results while navigating challenging conditions, and already attained important medium-term KPI targets for 2024 two years ahead of schedule. We successfully launched new products on the market. And we also made significant investments in research, innovation and sustainability – and thus in Bayer’s long-term success.

I’d now like to hand over to Wolfgang Nickl, who will take a closer look at the business data for 2022.

Wolfgang Nickl,
Chief Financial Officer of Bayer AG:

Thank you, Werner. I’d also like to wish you all a warm welcome.

I would now like to share some more in-depth information on our 2022 figures, especially with respect to the divisions. Werner Baumann has already mentioned the encouraging figures for Group sales and clean EBITDA.

I would like to add a few more important KPIs – starting with core earnings per share, which we increased by 22 percent to 7.94 euros.

Another key indicator we use is free cash flow, which is the total operating cash flow less capital expenditures in property, plant and equipment and intangible assets. This indicator climbed to 3.1 billion euros in 2022.

Thanks to our operational strength and the sale of the Environmental Science Professional business, we reduced net financial debt by 1.3 billion euros to 31.8 billion last year despite negative currency effects.

We had raised our full-year guidance in August 2022. We met that forecast and, for core earnings per share, even exceeded it.

These are very good results. Together with the Supervisory Board, we are therefore proposing a dividend of 2.40 euros to the Annual Stockholders’ Meeting – a 20 percent increase compared to the previous year.

That brings us to the business performance of our divisions. Please note that, as usual, the changes in sales are adjusted for currency and portfolio effects.

Sales at Crop Science increased 16 percent to 25.2 billion euros, with growth in all regions. In the regions Latin America and Europe/Middle East/Africa, we even achieved a double-digit percentage increase in sales. Growth was strongest in our Herbicides business, supported by substantial price increases. We also benefited from higher prices for corn seed.

Overall, we more than offset the inflation-driven cost pressure through higher prices and efficiency measures. EBITDA before special items at Crop Science climbed by 46 percent in 2022, to 6.9 billion euros.

At Pharmaceuticals, sales rose by just over 1 percent to 19.3 billion euros in 2022. While we are seeing significant headwinds for a number of our established drugs, the market launch of our new products Nubeqa™ and Kerendia™ has been very successful, with sales of our cancer drug Nubeqa™ almost doubling.

In ophthalmology, we saw a strong expansion of business with our blockbuster product Eylea™ across all regions, with sales up 9 percent.

By contrast, sales of Xarelto™ fell by 6 percent due to tender procedures in China, price pressure in the United Kingdom and the loss of exclusivity in Brazil.

EBITDA before special items at Pharmaceuticals amounted to 5.9 billion euros in 2022, which was slightly above the prior-year figure.

At Consumer Health, growth was higher than expected in 2022. Sales rose by more than 8 percent to 6.1 billion euros, with business up in all categories and regions.

The Allergy & Cold category registered the strongest gains. The Dermatology category also performed very well thanks to successful innovations, while sales in the Nutritionals category were up slightly against a very strong prior year.

EBITDA before special items at Consumer Health came in at 1.4 billion euros in 2022, up almost 15 percent from the prior year. This strong growth was driven by the division’s very good business performance and its continuous cost and price management efforts.

That concludes my review of our financial figures for full-year 2022, which just leaves the Group figures for the fourth quarter: Sales rose by 4 percent year on year to 12 billion euros on a currency- and portfolio-adjusted basis, and EBITDA before special items increased by almost 3 percent to 2.5 billion euros. And finally, core earnings per share stood at 1.35 euros in the fourth quarter of 2022 – an increase of 7 percent against the prior year.

And now it’s time to hear more from those in charge of running our operational businesses. So, I’d first like to hand over to Rodrigo Santos.

Rodrigo Santos, 
Member of the Board of Management of Bayer AG and President of the Crop Science Division:

Thank you, Wolfgang and hello, everybody. I’m pleased to add some color to our excellent results from a Crop Science perspective.

2022 was an outstanding year for us: Not only did we outgrow our strong 2021 performance; we also took further steps towards transforming agriculture for a more sustainable and digital future.

We had a good start to the year with the launch of Intacta 2 Xtend™ soybeans on more than 800,000 acres in Brazil, and we expect adoption to grow this season to as much as 6 million acres.

In Crop Protection, we pre-launched Fox Supra™, building on our No. 1 position in soybean fungicides in South America. The product is seeing its full commercial introduction this year.

In corn, we expanded our global leadership in seeds and traits with the launch of SmartStax PRO™ in the U.S.

The combination of these and many other innovations with stronger prices, especially for our glyphosate-based herbicides, helped us to more than offset inflationary cost pressure and supply chain challenges. As a result, we exceeded our divisional sales guidance for the year and achieved an industry-leading EBITDA margin in line with our outlook.

Beyond financial performance, we made meaningful progress with our pipeline in 2022. Here we are continuing to expand our competitive advantage resulting from our clean innovation investment of 2.6 billion euros.

Overall, we advanced more than 15 projects, including 9 new actives in crop protection, 4 new digital tools and 2 traits. We refreshed our seed portfolio with over 500 new varieties across corn, soybean, cotton, and vegetables. And our Crop Protection business saw 250 new registrations as well as the launch of 10 new formulations in 2022.

In the area of biological solutions, we are complementing our existing portfolio with our open innovation platform. This includes the three-year collaboration we forged with Ginkgo Bioworks, as well as the partnership with Kimitec and the commercialization agreement with M2i group announced earlier this year.

We are also making great advancements in the digital landscape. FieldView™, our flagship digital platform, now reaches more than 220 million acres in 23 countries and with ForGround, we launched a digital program that helps U.S. growers and connected companies to adopt climate-smart farming practices and meet their sustainability goals. With Perdue AgriBusiness, we already have our first major partner onboard to work towards large-scale reduction of carbon emissions throughout the company’s commodity sourcing network.

Our commitment to carbon reduction and better soil health also led us to take majority ownership of CoverCress Inc. The innovative company is developing a new winter oilseed crop. As a new source for biofuel, this crop has the potential to create additional income for farmers while providing the ecosystem benefits of a cover crop.

As we continue our transformation journey towards more sustainable farming and accelerated growth, we have a series of additional innovations lined up for launch in 2023.

Most notably, we will start commercializing the first conventionally bred Short Stature Corn hybrids as part of our Smart Corn System Ground Breaker™ trials in the U.S. By combining the seed with digital prescriptions for planting density, field placement and product application, the Smart Corn System adapts to every farmer’s situation, delivers maximum benefits, and paves the way for precise, sustainable farming.

The system approach in corn will be launched globally in the coming years and will serve as a blueprint for other crops to follow. In rice, for example, we are providing farmers with a Direct Seeded Rice system through our DirectAcres program, which aims to improve smallholders’ return on investment and bring about many sustainability benefits. We intend to scale this program to 2 million farmers over 1 million hectares by 2030.

Finally, we also plan to launch our first business-to-business solution for use in agriculture and adjacent industries via our Microsoft collaboration. This represents a significant milestone towards our target of setting a new standard for the industry in digital innovation.

We will have these and other exciting innovations to share at our Innovation Summit on June 20 in New York.

Let me finally share our outlook for 2023: We expect sales to grow 3 percent on a currency- and portfolio-adjusted basis, with a clean EBITDA margin in the range of 25 to 26 percent at constant currency. Importantly, while we are facing headwinds in glyphosate-based herbicide pricing, we see an opportunity to accelerate sales growth in the rest of our business in 2023, supported by the significant innovation we continue to provide to growers around the globe.

With that, I’ll hand over to Stefan to share an update on the Pharma business.

Stefan Oelrich,
Member of the Board of Management of Bayer AG and President of the Pharmaceuticals Division:

Many thanks, Rodrigo!

2022 was an important year for our pharmaceutical business, especially with respect to three focal areas.

First of all, our new drugs with blockbuster potential got off to a very good start. Both our cancer drug Nubeqa™ and our kidney drug Kerendia™ exceeded our sales expectations.

Second, our late-stage development portfolio continued to develop positively. For example, we launched Phase III trials for asundexian and elinzanetant.

Third, we successfully pressed ahead with the transformation of our pharmaceutical business through additional alliances and acquisitions. One example I’d like to highlight here is our agreement to collaborate with Mammoth Biosciences in the area of innovative gene editing technology. Overall, we have successfully laid the foundation for future growth – especially in the area of cell and gene therapy.

I’d like to talk about the three aspects in detail: we succeeded in doubling sales of our new cancer drug Nubeqa™ last year, largely due to the successful market development in the United States. The product already has a US market share of over 30 percent in the indication non-metastatic, castration-resistant prostate cancer. And we have also received marketing authorization in the United States for another indication thanks to the positive results of the ARASENS trial. For this year, we expect Nubeqa™ sales to almost double once again to over 800 million euros. We therefore recently confirmed that Nubeqa™ has a peak sales potential of more than 3 billion euros.

Another pharmaceutical with blockbuster potential is Kerendia™ – a novel medication for patients with chronic kidney disease and type 2 diabetes. With this product, we achieved one of the most successful market launches in the United States, considerably outperforming comparable cardiovascular product launches. Sales of Kerendia™ surpassed the 100-million-euro mark in 2022. We anticipate that this very encouraging pace of growth will continue, and we also expect a peak sales potential of more than 3 billion euros for Kerendia™.

We have also achieved major progress in late-stage development projects, such as our development candidate elinzanetant for the treatment of women in menopause. Up to 80 percent of these women experience vasomotor symptoms that can negatively impact their sleep, mood and thus overall quality of life. To make matters worse, there are only limited treatment options available. The current standard treatment, hormone therapy, is not an option for many women.

By contrast, elinzanetant is a novel, oral, non-hormonal drug candidate. We expect to receive the first results from the Phase III trial program OASIS in the second half of this year. We believe that elinzanetant also has a peak sales potential of more than 1 billion euros.

Asundexian is likewise undergoing Phase III clinical development. It is the first Factor XIa inhibitor of its class with the potential to suppress the development of blood clots and thus prevent thrombosis. Last year we launched the Phase III development program OCEANIC for asundexian, one of the largest Phase III programs we have ever initiated at Bayer. In total, we plan to include nearly 30,000 patients in the clinical trials worldwide.

We therefore just recently raised our expectation for the combined peak sales potential of the aforementioned products and development candidates to more than 12 billion euros.

In addition, we have continued to build our cell and gene therapy platform in recent years by making pioneering acquisitions, considerably strengthening our portfolio from a strategic perspective. We are now exploring completely novel therapies for various diseases such as Parkinson’s and Pompe disease. In total, we currently have seven projects at various stages of clinical development, including two Phase I trials with Parkinson’s patients. We expect to see initial results from one of these two studies in the second half of the year.

We are also making good progress in our efforts to digitalize the healthcare market. With the acquisition of Blackford Analysis, we will promote the application of artificial intelligence in everyday clinical practice while also expanding our radiology portfolio.

But that doesn’t mean we’re only strengthening our research by acquiring external expertise, as we are of course continuing to invest in our own innovation capabilities as well. For example, last year we opened our new Bayer Research and Innovation Center in Boston, giving us a base in one of the world’s preeminent innovation hotspots. At the center, we will further advance the development of cancer drugs.

All these milestones show that we are making good progress in implementing our strategy – despite the strict zero COVID measures in China, rapidly rising energy costs and inflation having negatively impacted our business. We will have to contend with these and other challenges again in 2023. Despite the business policy headwinds, we will do everything in our power to achieve long-term and, above all, sustainable growth. We will therefore continue to invest in our pharmaceuticals business – and thus in our future. For 2023, we forecast sales growth of 1 percent and a margin of above 29 percent.

And with that, I’d now like to hand over to Heiko Schipper.

Heiko Schipper,
Member of the Board of Management of Bayer AG and President of the Consumer Health Division:

Thank you, Stefan. And hello everyone. It’s my pleasure to share the performance of our Consumer Health Division in 2022 and our outlook for 2023.

In a volatile environment, we grew our business significantly, exceeding our updated guidance. Moreover, we were also able to make big investments in innovation in a highly inflationary environment.

Here’s what’s behind that performance. First, our growth was once again very broad-based. All regions and categories contributed. Over the past few years, we have seen unprecedented shifts in demand in categories like Nutritionals and Cough & Cold. Even with these shifts, we were able to deliver consistent growth, drawing on strengths of our category footprint. We focus on categories where sound science, innovation and strong brands make the difference. Our success over the past few years shows us that our focus is the right one.

It also shows us that we can successfully steer our business through unpredictable circumstances. In a very dynamic industry, my management team and all of our people have clearly demonstrated that they have what it takes to deliver against our commitments. We have capitalized on growth opportunities, expanding the share of sales coming from e-Commerce from 4 percent to roughly 11 percent. We have tapped into growth markets, like India. We executed successfully on our comprehensive productivity programs and have taken pricing measures to counteract inflation and fund innovation. Despite challenges from stretched supply chains, we were able to serve our customers well and overall hit or exceeded our targets.

Speaking of meeting our targets: We are committed to expanding access to everyday health for 100 million people in underserved communities by 2030. Less than four years into this commitment, we are well on the way.

How are we doing it? I want to highlight one effort from Central America, where we have reengineered each point in the value chain to reach more people with Aspirin™ Cardio, a product with life-saving potential. Cardiovascular disease causes more than 30 percent of all deaths in Guatemala. We have invested in more affordable pack sizes, innovative local production machinery, and new distribution channels – so that even mom and pop stores in remote areas can offer their customers one of the most trusted brands in heart health. We even pioneered a new approach to safe usage by printing a QR-code on the sachets. This not only makes our safety information readily accessible, it saves considerable amounts of paper.

Finally, innovation is key to unlocking profitable growth that lasts. In 2022, we launched Astepro™, the newest addition to our strong portfolio of prescription to over-the-counter switches. As the first OTC steroid-free antihistamine spray for allergy sufferers in the U.S., Astepro™ starts working much faster than competitors’ products. This truly differentiated solution will drive significant incremental growth for our allergy business.

We also advanced innovation in Nutritionals, a category that continued to grow slightly even after remarkable 12 percent growth in 2021 and 23 percent in 2020. We launched a new immunity formulation behind our Supradyn™, Redoxon™, and Berocca™ brands. The formulation is backed by seven clinical trials, supporting each layer of the immune system to help people get and stay healthy.

Looking ahead to 2023, innovation will once again be a key growth driver. We are totally focused on making sure Astepro™ is the nasal spray of choice in the upcoming U.S. allergy season. We also plan to launch an innovative offering in personalized health later in the year.

Further, we will maintain our laser focus on disciplined business steering. We expect continued inflationary headwinds in 2023 and we are prepared with our comprehensive productivity programs to further drive our margin progression.

These priorities translate into another competitive business outlook for 2023. While we expect continued growth across our industry, we plan to grow at the top of our industry with sales growth around 5 percent. In line with our mid-term ambition, we target an increase of our EBITDA margin before special items to around 23 percent.

With that, I’m happy to hand it over to you, Sarena.

Sarena Lin, 
Member of the Board of Management of Bayer AG, Chief Transformation and Talent Officer:

Thank you Heiko!

Let me start with an understatement: our external world is changing at a speed that forces corporations like ours to constantly evaluate who we are and how we operate, as well as how we lead our people through these unpredictable and volatile times.

Take Ukraine. Despite the omnipresent dangers, our 700 Ukrainian employees are continuing to serve patients, farmers, consumers, and customers, because they believe it’s the right thing to do.

As a company, we have donated more than 10 million euros to support the reconstruction of Ukraine's healthcare infrastructure and de-mining programs, as well as providing vital medicines and agricultural inputs such as seeds for smallholder farmers.

At the global level, the pandemic has also challenged all of us to reexamine what’s important in our own lives, the relationship between workplace and work, and the meaning of a corporate career. This goes beyond the discussions about return to office or hybrid work. Rather, it requires us to understand the needs of our employees now and in the future, and commit to creating the flexible yet inclusive environment that allows different talents to thrive.

At the heart of this transformation, our people leaders play a critical role. We are equipping our leaders with the tools and skills they need to engage our people differently and to shape the future, while continuing to drive strong performance. This includes our initiatives to strengthen our performance culture, immersive trainings on building trust and coaching teams, and redesigned office spaces that stimulate communication and creativity.

And we are making progress, as evidenced by the numerous external awards received in 2022 citing Bayer as one of the best employers in Germany, China, the United States and Brazil to name a few. Our clear commitment to further advance diversity, equity, and inclusion has landed us in the Bloomberg Gender Equality Index for the fourth year in a row – being one of a few companies that are headquartered in Germany. This puts us among the top group of companies worldwide that seriously promote equitable opportunities for everyone.

While brief, I hope this gives you an impression of how we are currently working to transform Bayer organizationally and culturally.

I would like to end by acknowledging the hard work of our 100,000 employees around the world, as well as their courage to fight through war and natural disasters, their determination to live up to their values, and their commitment to advancing our collective vision of Health for all, hunger for none.

And with that, I’ll hand it back to you, Werner.

Werner Baumann:

Thank you very much.

As you can see, our company is very well positioned to successfully navigate difficult times while delivering good results. We proved that last year, and we intend to continue doing so in the future as well. Our focus is on leading-edge science, as we look to systematically expand our technological capabilities.

That brings me to our outlook, which we are presenting on a currency-adjusted basis to enhance the comparability of our operational performance.

In fiscal 2023, we expect to generate sales of 51 to 52 billion euros. Following two consecutive years of high single-digit percentage growth rates, we expect our business to consolidate at a high level and grow by 2 to 3 percent in 2023 on a currency- and portfolio-adjusted basis.

We expect EBITDA before special items to come in at between 12.5 and 13 billion euros. Core earnings per share are projected to amount to 7.20 to 7.40 euros, and thus below the 2022 level.

We expect to face further inflation-driven cost increases this year. And we also anticipate lower prices for agricultural herbicides as well as for some of our established pharmaceutical products. The projected sales growth and contributions from our efficiency programs will not be sufficient to offset the headwinds caused by higher costs and lower prices.

Ladies and gentlemen,

As you know, I will continue to serve as Bayer CEO until the end of May before handing over the reins. I am very pleased that Bill Anderson will be my successor. We have spoken with one another quite often in the past weeks – and I firmly believe that he has exactly what it takes to lead Bayer into a successful future together with his fellow Board of Management members and the entire workforce. We will work together very closely on this transition, and it is an honor for me to help him get off to the best possible start.

And with that, I’d like to say thank you for your attention, ladies and gentlemen.

Forward-Looking Statements
This release may contain forward-looking statements based on current assumptions and forecasts made by Bayer 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.(Please check against delivery)