GERMANY – Bayer AG, the German pharmaceutical and agriculture giant, experienced its most significant market decline ever, witnessing a staggering loss of about €7.6 billion (US$8.3 billion) in market value.
This plunge follows major legal setbacks and the discontinuation of a crucial drug-development study, intensifying pressure on the company’s new CEO, Bill Anderson, to articulate a robust turnaround strategy.
The company’s troubles stem from the cessation of the primary study for its leading experimental drug and a substantial legal defeat in the United States concerning its weed killer, Roundup.
These setbacks triggered a share decline of up to 19% in Frankfurt trading, marking the lowest level in over a decade for Bayer.
Bill Anderson, who assumed the role of Chief Executive in June, now faces a daunting task as he contemplates the potential breakup of the conglomerate, which operates in both the pharmaceutical and agriculture sectors.
The challenges mounted after Bayer’s US$63 billion acquisition of Monsanto faced complications, and its pharmaceutical unit confronted looming patent expirations for key treatments.
The recent decision to halt a late-stage test for the anti-thrombotic drug asundexian, touted as a potential blockbuster therapy, due to insufficient efficacy has sent shockwaves through the industry.
Analysts, including Markus Manns of Union Investment, expressed surprise at this development, considering asundexian a cornerstone of Bayer’s pharmaceutical pipeline.
Manns suggested that Bayer should have sought a partner to share the development costs and risks associated with the drug.
In addition to the drug development setback, Bayer received an unfavorable verdict in a Missouri trial related to its weed killer, Roundup.
A jury ordered Bayer’s Monsanto unit to pay over US$1.5 billion to three former Roundup users who attributed their cancers to the product.
The legal battles around Roundup have been ongoing, with Bayer insisting on the product’s safety and pledging to appeal the verdicts.
The legal challenges pose a substantial risk to Anderson’s potential plan to spin off the agriculture division. Sebastian Bray, an analyst with Berenberg, pointed out that the looming legal risks could complicate such a strategic move.
The failed drug, asundexian, was positioned as a growth driver to compensate for the anticipated patent expirations of Bayer’s current best-selling medicines, Xarelto and Eylea.
Unfortunately, an independent panel found that asundexian underperformed the standard of care in preventing stroke and systemic embolism in patients with atrial fibrillation, a form of abnormal heart rhythm.
The discontinuation of the study dealing a blow to the estimated peak sales of €5.5 billion (US$6.02 billion) for the drug, especially in preventing strokes and systemic embolisms in atrial fibrillation patients, which constituted about €4 billion (US$4.4 billion) of the total. Analysts from Morgan Stanley termed this decision “a meaningful negative” for Bayer.
Bayer intends to proceed with another study involving asundexian, albeit with a narrower market opportunity. The company also faces the critical decision of whether to pursue a test in elderly patients.