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Shareholders have high hopes for Bayer’s new chairman

aAfter Bill AndersonWerner Baumann, the outgoing CEO of the German pharmaceutical and chemical giant, will be on standby for two months to ensure a smooth transition. Given Anderson’s lack of experience in crop science, Bayer’s biggest business, you might ask what the board was thinking of handing him the reins. The answer is that he has two qualifications that compensate for his defect. He ran the pharmaceutical business for the Swiss pharmaceutical giant Roche. And he is American. That makes him just the guy for a company betting big on its pharmaceutical business across the Atlantic.

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Mr. Anderson will need to accelerate three challenges facing Bayer. He must deal with the legacy of Baumann’s ill-fated 2018 $63 billion acquisition of Monsanto, the US crop chemicals company. Then there are Bayer’s transatlantic ambitions. By the end of the decade, it wants to double its drug sales in America, the world’s largest market — and launch new therapies to replace blockbuster products like Xarelto, a blood thinner whose patent protection expires this year. Finally, Anderson needs to deal with calls to split the Bayer pharmaceutical and crop science businesses, or at least sell the consumer health unit, which makes aspirin, alka-seltzer and other over-the-counter staples.

Bowman left the top job a year earlier than planned amid growing discontent with investors, whose shares had lost a third of their value during his seven-year tenure. Much of the €26 billion ($27 billion) drop in Bayer’s market value over that period is attributed to the Monsanto acquisition. The costly acquisition made a lot of business for Bayer, which already had a crop business. But Bowman miscalculated the potential cost of suing the Americans: Monsanto makes Roundup, a glyphosate-containing weedkiller. Bayer has been inundated with 154,000 lawsuits from people claiming that glyphosate causes cancer. Bayer denies this and has the support of many scholars. But to overturn the order, it has paid $9.5 billion in settlements with 109,000 plaintiffs, and set aside another $6.4 billion for the rest.

Monsanto’s experience did not put Bayer out of the US market. The company has 30,000 employees across 150 locations in America, making it one of the largest life sciences companies in the country, says Patrick Lockwood-Taylor, president of Bayer’s US business division. Its three US units (including Monsanto) accounted for 40% of the company’s revenue last year. To reach the ambitious goal of doubling its $5 billion North American drug business, Bayer plans to increase the number of marketing and distribution workers from 1,000 to 3,000 by 2030. Last year, it opened a $140 million molecular biology research center near from Boston. America has high hopes for two recently launched drugs: Nubeqa, a treatment for prostate cancer, and Kerendia for diabetics with kidney disease.

Bayer has no plans to sell its consumer health business, let alone split in two. This will not silence calls for secession. Two activist investors, Inclusive Capital and Bluebell Capital, bought Bayer at the start of the year. Jeffrey Oppen, head of Inclusive, which owns more than €400m of equity, calls the crops unit a “gem” in times of heightened concerns about food security. As a separate company, he argues, its valuation could be similar to that of Corteva, the agribusiness that spun off in 2019 from DowDuPont, the US chemical giant. Corteva trades at 20 times earnings, ahead of Bayer, by seven.

Meanwhile, the standalone drug business may be better off without the legal risks associated with Roundup. Other drug spin-offs, such as when Switzerland’s Novartis abandoned its generics unit or US-based Pfizer sold its animal health arm, have fared well.

Anderson, 56, is ambitious: He resigned from Roche last year after being passed over for the top job. He’s also a risk-taker: He has bet Roche on three costly drug trials for Alzheimer’s, breast and lung cancer, despite unpromising results in early clinical studies. Trials failed. Bayer shareholders hope Anderson will bring to Leverkusen a trait more associated with Ireland – luck.

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