(Bloomberg) -- Bayer AG shares plunged to the lowest in two decades after the German conglomerate cut profit guidance for this year and said earnings will probably fall in 2025.
The stock tumbled as much as 14% in German trading, the biggest intraday drop since last November, bringing the decline this year to 36%.
“The key takeaway is that 2025 may be looking a bit worse across business segments than the street has been modelling,” Barclays analyst Emily Field wrote in a note.
Chief Executive Officer Bill Anderson, who took over in June of last year, is confronting multiple crises and struggling to win back the faith of investors. The Texas native is betting that the best way to revive the company’s fortunes is to improve its three divisions — focused on agriculture, drugs and consumer health — rather than split them apart.
Bayer on Tuesday lowered its annual sales guidance at two of those three units, while at the group level cutting its targeted range for earnings before interest, taxes, depreciation, amortization and special items this year.
The company now expects sales to decline as much as 3% this year at its agriculture unit, hurt by low prices for products including the controversial weedkiller Roundup. Growth will also be slower than previously predicted at the consumer health division.
Xarelto Erosion
At the pharmaceutical business, sales growth will likely reach the high end of its flat-to-3% range, thanks to the strong performance of new drugs like cancer treatment Nubeqa and kidney medicine Kerendia. They should help offset the sales decline of blockbuster blood thinner Xarelto, which is facing patent expiry. The erosion this quarter was “more rapid” than anticipated, JPMorgan analyst Richard Vosser said in a note.
For 2025, Bayer expects earnings to decline, hurt by the rising generic competition for Xarelto and regulatory challenges at its crop protection business. Those issues include the phasing out of insecticide Movento in the European Union and a delayed approval for the soy crop herbicide Dicamba.
“We don’t expect that this approval will come in time for the 2025 season,” Anderson said on a call with journalists. “So this is basically kind of a one year hit for us.”
The CEO has implemented across-the-board cost-cutting measures, including reducing headcount by some 5,500 people so far this year. About 70% to 80% of the structural changes are complete, he added, noting that some headcount figures show up later due to employees’ contracts.
“We plan to accelerate our cost and efficiency measures,” Chief Financial Officer Wolfgang Nickl said. The reduction in headcount is associated with some €500 million in savings this year, he added.
Weedkiller Litigation
One of Bayer’s biggest challenges remains US litigation over the weedkiller Roundup, which tens of thousands of plaintiffs blame for their cancer. Bayer insists the product is safe and is looking to get beyond the expensive legal situation by appealing lost trials — potentially to the US Supreme Court — winning more jury trials on the matter and lobbying state and federal politicians to pass laws making it harder for plaintiffs to sue the company.
Asked about the impact of the new US administration, Anderson said he’s confident that American policymakers will ensure that reliable crop protection remains available. Glyphosate products are “one of the main things we have to help keep food prices affordable,” he added.
Bayer has already spent at least $10 billion of the $16 billion it earmarked to resolve the mass litigation over Roundup in the US. The company inherited the product with its $63 billlion takeover of Monsanto in 2018.
--With assistance from Lisa Pham and Subrat Patnaik.
(Adds comments from CEO, CFO starting in 10th paragraph)
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