Bayer Announces Restructuring, Increased Focus in Healthcare Business

Nov 24, 2010

Bayer (Leverkusen, Germany) announced last week a restructuring program and a strategy to strengthen its focus in research, development, and marketing of new products in its healthcare and crop-sciences businesses, as well as an interest in expanding its activities in emerging markets.

The company said that sales and earnings pressure from generic products, rising development costs, and the effects of healthcare reform have made it necessary to find ways to fund its growth strategies. “To finance the expansion of our growth activities, we therefore need to redirect resources, improve efficiencies, and cut costs,” said Bayer AG Management Board Chairman Marijn Dekkers, in a Nov. 18, 2010, press release.

Bayer did not detail the specifics of where its cuts would be, but said that the company plans to reduce its global headcount of 108,700 by a net aggregate of about 2000 by 2012. Approximately 4500 positions, including roughly 1700 in Germany, are to be cut. The company added it plans to create approximately 2500 new jobs during the same period, particularly in emerging markets. 

The company is seeking to achieve annual cost savings of EUR 800 million ($1.1 billion) beginning in 2013. About half of this amount is to be reinvested. By the end of 2012, the company said it is likely to take one-time charges of approximately EUR 1 billion ($1.4 billion), with part of this amount already being incurred in the fourth quarter of 2010.

The Bayer Group, which had 2009 sales of EUR 31.2 billion ($42.6 billion), consists of three main subgroups: Bayer HealthCare, Bayer MaterialScience, and Bayer CropScience. Bayer HealthCare accounted for little more than half of the company’s 2009 sales with approximately EUR 16 billion ($21.9 billion) in sales. Bayer HealthCare consists of four divisions: Bayer Schering Pharma (prescription medicines), Consumer Care (over-the counter drugs and dietary supplements), Medical Care (blood glucose-monitoring devices and contrast-agent injection systems), and Animal Health (veterinary medicines and grooming products). Bayer CropScience provides crop-protection and pest-control products, and Bayer MaterialScience produces polyurethane, polycarbonate, coatings, adhesives, and sealants.

“Bayer has great business potential in all three subgroups. To better exploit this potential, we must continue to bundle existing resources and streamline our structures. That is the only way we can sustainably finance our investment in growth and innovation, for example in new pharmaceutical products, in our BioScience business and in the expansion of our capacities in Asia,” Dekkers said.

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