First Read: Bayer "Takeaways from post-1Q CFO roadshow" (Buy) Weston

Research evidence excerpt

First Read: Bayer "Takeaways from post-1Q CFO roadshow" (Buy) Weston

Forecast returns

Forecast price appreciation 37.0%

Forecast dividend yield 1.6%

Forecast stock return 38.6%

Market return assumption 7.7%

Forecast excess return 30.9%

Company Description

Bayer is a diversified life sciences company, based in Germany. Key pharma franchises are

women's health, cardiovascular, imaging agents and specialty/oncology. Consumer Health is

one of the leading OTC businesses globally, and includes dermatology, nutritionals and GI.

Following the 2018 acquisition of Monsanto, Crop Science comprises crop protection

chemicals and seeds/germline. Glyphosate and PCB litigation overhangs remain, with

exposure to future cases.

Valuation Method and Risk Statement

All biopharma companies face risks around R&D pipeline success/failure, regulatory oversight

& approval decisions, PBM/country drug pricing negotiations, competitor product

developments, patent challenges and product liability. Bayer company-specific risks include -

in Pharma: (1) Xarelto and Eylea growth being impacted by increasing competition and

generic entry; (2) failure to convert phase 3 results into commercial success for Nubeqa,

Kerendia, Lynkuet and asundexian; and (3) significant patent expiries in 2030-2033 with

limited visibility on pipeline replacement power. In Crop Science: (1) renewed competition in

seeds, and/or crop chemicals; (2) unpredictable/changing weather impact on demand; (3)

greater regulatory oversight leading to increased R&D requirements or litigation; and (4)

further legacy portfolio litigation beyond glyphosate/PCBs.

Valuation: We set our Bayer price target using a Sum-of-the-Parts methodology using EV/

EBITDA multiples for Crop and Consumer and a multiple of our Pharma Values NPV for

Pharma.