Science For A Better Life. Investor Handout

Transcription

1 Science For A Better Life Investor Handout Q3 2006

2 Important Information This presentation contains forward-looking statements based on current assumptions and forecasts made by Bayer Group management. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. These factors include those discussed in our public reports filed with the Frankfurt Stock Exchange and with the U.S. Securities and Exchange Commission (including our Form 20-F). The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.

3 We are accelerating our successful strategy We are driving the HealthCare focus We are delivering growth and performance We are generating value for our shareholders Bayer Investor Handout Q3'06 Slide 1 We are accelerating our successful strategy Bayer Investor Handout Q3'06 Slide 2

4 Bayer Positioned to Accelerate its Successful Strategy Milestones 2002 Since July Major 2004Milestones Achieved 2005 Sales 29.6bn Underlying EBIT 0.8bn CFRoI 8.0% Fast, flexible and market-oriented new holding organization More than 2.2bn in savings and efficiency improvements Exit of mature, low-growth chemicals businesses in several stages A focused, growing Pharma business A promising, late-stage Pharma pipeline A world-leading agrochemical business A world-leading OTC business Reduction of net debt by almost 10bn Sales 27.4bn Underlying EBIT 3.3bn CFRoI 12.4% Bayer Investor Handout Q3'06 Slide 3 Driving Lifescience Focus Total Sales 2005: 27.4bn Pro-forma Sales 2005: 30.0bn MaterialScience 10.7bn HealthCare 9.4bn MaterialScience 9.4bn HealthCare 13.3bn Rec. 1.4bn 39% 34% 5% 22% CropScience 5.9bn + Schering 5.3bn - H.C. Starck 0.9bn - Wolff Walsrode 0.3bn - Diagnostics 1.4bn - GE Bayer Silicones* * 49.9% minority interest 5% Rec. 1.4bn 31% 20% CropScience 5.9bn 44% Bayer Investor Handout Q3'06 Slide 4

5 Acquisition of Schering Accelerates Bayer's successful HealthCare strategy Combination creates a leader in specialty care Strong growth with lower risk from a diversified portfolio Approx. 700m of synergies; creating value for shareholders Complementary product portfolios and similar cultures Improved financial outlook All-cash proposal to acquire 100% of Schering for approx bn Financed by a combination of debt, equity and disposal proceeds Bayer Investor Handout Q3'06 Slide 5 Accelerates Focus towards Specialty Care Pro-forma Pharma Portfolio* Key Characteristics Primary Care 31% Oncology 5% Cardiology / Hematology 11% Focus areas can grow faster due to increased flexibility in resource allocation Bayer will concentrate on three key areas: Oncology, Cardiology / Hematology and Gynecology Balanced portfolio of growth and cash generating businesses Gynecology 22% The combined portfolio is already 70 % specialty care Other specialty 9% Contrast Media 22% * 2005 Pro-forma revenues excluding Plasma sales of 296m Bayer Investor Handout Q3'06 Slide 6 * 2005 Pro-forma revenues excluding Plasma sales of 296m

6 Creates a Leader in Specialty Pharma Specialty Franchises 1. Roche/Genentech $ 13bn 2. Johnson&Johnson $ 12bn 3. Amgen $ 10bn 4. Pfizer $ 8bn 5. Novartis $ 8bn 6. Sanofi-Aventis $ 8bn 7. Bayer-Schering $ 8bn 8. GlaxoSmithKline $ 8bn 9. AstraZeneca $ 5bn 10. Wyeth $ 5bn Bayer-Schering: hematology, multiple sclerosis, oncology, gynecology, contrast media Source: WoodMackenzie, 2004 Corporate Franchise Analysis Advantages of Specialty Approach Less about scale, more about innovation Products addressing high unmet medical need Focused marketing, less promotion intensive Limited sales force and marketing requirements Products have better cost / clinical benefit characteristics More profitable and easier to defend business segment Bayer Investor Handout Q3'06 Slide 7 Bayer Will Successfully Integrate Schering Bayer has a strong track record of successfully managing large scale transactions and integrations 7bn ACS acquisition Spin-off of 6bn chemical activities into Lanxess Alliance with Schering-Plough 2.4bn Roche OTC acquisition Market share gains during integration phase Accomplished in record-time following announcement Smooth transition of entire US primary care business (1,800 people) Ahead of schedule, integration costs below budget, more savings A senior team drawn for both businesses is overseeing the integration Pharma-business called Bayer Schering Pharmaceuticals Bayer Schering Pharmaceuticals headquartered in Berlin Builds on strong heritage, culture and brand strength of both businesses Bayer Investor Handout Q3'06 Slide 8

7 We are Accelerating the Integration of Schering Domination and profit and loss transfer agreement registered on October 27 Extensive preparations allowed immediate implementation of several major decisions Management team nominated down to 3rd level R&D activities will be consolidated on three major sites Berlin, Wuppertal, Germany and Berkley, USA R&D sites in West Haven and Richmond will be closed US Pharma Headquarters will be located in Wayne and Montville, New Jersey Concept for the future of some 70 Bayer Schering Pharma sites decided 700m synergy target validated Update on 2009 HealthCare margin target during Q4 conference call Bayer Investor Handout Q3'06 Slide 9 Identified Synergy Areas Synergies from Leverage of combined oncology business Procurement and supply chain optimization Production site rationalization Integration of head office and central functions Rationalization of country platforms and commercial infrastructures Optimization of R&D activities Global headcount reduction approx. 10% of combined healthcare business (60,000 people) Cost synergies to be realized across both organizations Bayer Investor Handout Q3'06 Slide 10

8 700m Synergy Target From Integration of Schering Validated Procurement & Manufacturing ~25% ~15% Marketing & Sales ~30% ~30% G&A R&D Integration cost* approx. 1bn majority in 2006 and 2007 Approx. 400m special charges in Q4'06 (thereof ~ 300m non-cash) 165m synergies already announced, implementation underway Expect to generate 250+m synergies in 2007 and to fully realize synergy target by 2009 Bayer Investor Handout Q3'06 Slide 11 *excluding work down of step-up on inventories and impact from purchase price allocation Improved Financial Outlook Transaction allows Bayer to upwardly revise its financial targets 25% EBITDA* margin in HealthCare targeted for 2009 compared to 23% previously Margin target under review - update with full year 2006 results in March '07 Acceleration of the achievement of 22% Group EBITDA* margin target * EBITDA pre exceptionals Bayer Investor Handout Q3'06 Slide 12

9 We are driving the HealthCare focus Bayer Investor Handout Q3'06 Slide 13 Bayer Continues to Focus its Portfolio Divestment of Diagnostics business unit for 4.2bn to Siemens HealthCare focus sharpened on pharmaceuticals and consumer health After-tax proceeds of 3.6bn, expected book gain around 2bn Closing expected in Q1'07 Divestment of H.C. Starck and Wolff Walsrode Reduction of cyclical exposure, financing of Schering acquisition Auction on H.C. Starck disposal successfully concluded transaction volume approx. 1.2bn Closing expected in Q1'07 Divestment of 49.9% interest in GE Bayer Silicones joint venture Financing of Schering acquisition, attractive timing Proceeds of 475m, improvement of FY'06 non-operating result by ~ 250m Bayer Investor Handout Q3'06 Slide 14

10 A Decade of Increasing Focus for Growth 1996 Sales 24.9bn 2005 Sales 30.0bn* HealthCare CropProtection Polymers Major examples since 1996 Generics + Schering Household insecticides Plasma + Roche OTC Diagnostics 1) + Chiron Diagnostics Antitrust requirements + Visible Genetics + Pritor HealthCare H.C. Starck Wolff Walsrode Lanxess To be divested To be divested spun-off + Aventis CropScience + Flint + Seed treatment activities CropScience EC Erdölchemie Haarmann & Reimer Agfa Real estate divested divested GE Bayer Silicones 1) divested divested 1) Pending + Lyondell Polyols MaterialScience Headcount 142,200 Headcount 109,000* Bayer Investor Handout Q3'06 Slide 15 * Pro-forma combined business of Bayer and Schering A Leader in its Markets Pro-forma sales 2005: 30.0bn Market rank Diagnostics - Pharmaceuticals # 7 in Specialty Pharma Consumer Health 14% 13% MaterialScience 31% A world-class specialty pharma business Consumer Health # 2/3-4 World-class businesses in OTC, Diabetes Care and Animal Health CropScience # 1/2 The market leader in agrochemicals 18% 20% H.C. Starck Schering MaterialScience # 1/2 5% Wolff Walsrode + - A genuine world-market leader Others CropScience Bayer Investor Handout Q3'06 Slide 16

11 Bayer's Portfolio Management Strategy Direction World-leading businesses capable of achieving benchmark performance Continue to deliver performance Drive the HealthCare focus by strengthening Pharma and OTC Stay in MaterialScience, organic growth as the top priority Stay in CropScience, possibly some opportunities in seeds Retain strict investment criteria Balanced mix of debt, equity and portfolio if needed Maintaining "single A" credit rating target Financing Constant monitoring and active management. Aquisitions and disposals are therefore part of our regular business activities Timing Bayer Investor Handout Q3'06 Slide 17 We are delivering growth and performance Bayer Investor Handout Q3'06 Slide 18

12 Group: Key Financials 2005 In million FY 2005 FY 2004 Sales 27,383 23, % EBITDA underlying 5,082 4, % EBIT underlying 3,300 2, % Net income 1, % Net cash flow (continuing) 3,542 2, % Operating free cash flow 2,113 1, % Net debt 5,494 5, % Bayer Investor Handout Q3'06 Slide 19 Acquisitions Provide Additional Boost Sales and Earnings Increase Strongly in Q3 in million Q3'06 Q3'05 Sales EBITDA underlying EBIT underlying Net income Core EPS* Gross cash flow Operating free cash flow Net debt Pension liabilities 7,783 1, ,170 1,170 19,021 7,043 6,177 1, ,080 19,945 6, % + 39% + 22% - 35% + 23% + 36% + 8% 30 Sep Jun * Fully diluted, derived from adjusted net income of 655m over million shares, see also Q3 Interim Report for further details Bayer Investor Handout Q3'06 Slide 20

13 Q3'06: Upward Trend at Bayer Continued 1,236 1,142 Underlying EBIT in million 3, * , ** , '02 '03 '04 '05 06 '02 '03 '04 '05 '06 '02 '03 '04 '05 '06 '02 '03 '04 '05 '06 '02 '03 '04 '05 '06 Q1 Q2 Q3 Q4 FY Bayer Investor Handout Q3'06 Slide underlying EBIT as reported in FY 2003 * Including 90m EBIT from divested products 2003 underlying EBIT as restated in 2004 ** Including 120m reversal of pension provisions 2004 underlying EBIT as reported in underlying EBIT as reported in underlying EBIT in Q1 incl. Diagnostics, in Q2 and Q3 incl. Schering Q3'06: Group Sales Growth Driven by Strong Volumes and Acquisition In million 364 8,147 1,371 7,783 6,531 (354) 398 (158) 6,177 (5) % Schering +1,410 Plasma (CAN) -37 Others Reported Q3 05 Diagnostics (DO) Restated Q3 05 Bayer Investor Handout Q3'06 Slide 22 Prices *Plasma (CAN) = termination of the plasma distribution in Canada Volumes Translation Portfolio* Continuing Q3 06 Diagnostics (DO) Pro-forma Q3 06

14 Q3'06: Group Underlying EBIT Driven by Higher Volumes and Performance In million (38) 653 (5) (22) (113) % Diagnostics Restated Raw material/ Volumes/ Prices Translation Schering (DO) Q3 05 energy costs Performance Reported Q3 05 Continuing Q3 06 Bayer Investor Handout Q3'06 Slide 23 Q3'06: HealthCare Outlook Raised Following Strong Underlying Margin Expansion in Q3 and 9M In million Sales 3,482 5,839 2,019 EBITDA underlying EBIT underlying ,148 7,942 1,817 1, Q3 9M Bayer Investor Handout Q3'06 Slide 24 Sales +72.5% reported, +7.5% adjusted* Strong performance of key products: Betaferon +10%, Yasmin +25%, Avelox +23%, Levitra +15%, Advantage +9%, Kogenate +6% Nexavar continued to do well, generating sales of 37m Ascensia flat after destocking following US price increase in July Trasylol at 38m (down 40%) Schering added 1,410m sales, termination of plasma distribution in Canada diminished sales by 37m Underlying EBIT +57.1% underscoring the potential of the business combination Driven by the strong performance of pharmaceuticals (+84%) and Consumer Health (+30%) Underlying EBIT Bayer Pharma excl. Schering up 34% Improved financial outlook % underlying EBITDA margin expected Contribution of ~ 700m underlying EBITDA from Schering expected Expected higher R&D expenses in Q4 as pipeline advances strongly, marketing and sales expenses back on normal levels in Q4 (combined impact ~ 100m) *Fx and portfolio adjusted

15 Q3'06: CropScience Solid Performance in Challenging Markets, Counteractions Initiated In million Sales 1,171 1,049 EBITDA underlying ,519 4,398 1,0711,062 Sales -10.4%, Fx and portfolio adjusted -5.9% Insecticides -8% on Fx, disposals and drought in the US Fungicides -32% due to unfavorable weather and Brazil Herbicides -8%, good start of cereals season in EU Seed treatment +8% due to success of new products Environmental/BioScience almost flat if adj. for Fx New product sales up +16% on target for sales of 1 billion in 2006 Underlying EBIT down 14m in the quarter but up during 9M Savings and product mix improvements compensated EBIT underlying Q3 9M Bayer Investor Handout Q3'06 Slide 25 Financial outlook 2006 sales and underlying EBITDA margin below previous year Targeting additional efficiency improvements of 300m through new restructuring program Continuous product mix improvements Targeting to achieve 25% EBITDA margin by 2009 Q3'06: MaterialScience Continued Strong Demand In million Sales 2,920 2,639 EBITDA underlying EBIT underlying ,917 8,614 1,509 1,501 1,109 1, Q3 9M Bayer Investor Handout Q3'06 Slide 26 Sales +10.6% Growth driven by higher volumes (+11%), prices slightly up (+1%) Polycarbonates growth accelerated (+4%) on very strong volumes, yet weaker selling prices MDI with strong volumes but lower prices TDI posted very strong, mainly price driven growth Polyols up double-digit on higher prices Coating raw materials business continued steady expansion Underlying EBIT -19.9% chiefly on higher raw material costs 113m higher raw material costs, not fully passed on to customers Strong performance of polyurethanes and coating raw materials business Financial outlook 2006 Underlying EBIT and EBITDA expected on a par with previous year Expect market environment to remain positive Some risks inherent to higher raw material cost and production shortfalls

16 Group Underlying EBITDA Margin at 20.3% in First 9 Months 9M Underlying EBITDA margin in % * 23.5* Health Care Pharma Consumer Health Crop Science Material Science Group * Including Schering Bayer Investor Handout Q3'06 Slide 27 We are generating value for our shareholders Bayer Investor Handout Q3'06 Slide 28

17 Targeting to Generate Value Also in The Future Value Generation in 2005 CFRoI CFRoI hurdle CFRoI (as reported) * CVA of 823m generated All subgroups exceeded their target returns including asset reproduction CFRoI is the ratio of gross cash flow to capital invested ( 28.1bn) CFRoI-hurdle (9.7%) as minimum requirement covers cost of capital and reproduction of depletable assets Group WACC at 7.0% Bayer Investor Handout Q3'06 Slide 29 *CFRoI as reported, 10.8% if restated Outlook 2006 On Target for Mid-Term Financial Objective Group Subgroups Sales: approx. 30bn* EBITDA underlying: approx. 5.7bn Approx. 700m underlying EBITDA contribution from Schering expected EBIT underlying: approx. 3.5bn Underlying EBITDA margin target Generate approx. 19% HealthCare Raised Underlying EBITDA margin approx. 22% CropScience Unchanged vs. Q2 Sales and underlying EBITDA margin below last year MaterialScience Unchanged vs. Q2, some risks emerged Underlying EBIT and EBITDA on a par with previous year *Incl. Schering, H.C. Starck, Wolff Walsrode; excl. Diagnostics Bayer Investor Handout Q3'06 Slide 30

18 Impact of the Schering Acquisition* Sales contribution in 2006 approx. 3bn Underlying EBITDA contribution of around 0.7bn in 2006 Additional amortization of intangibles and step-up of inventory (Not cash-relevant, not tax-deductible) Impact on reported EBIT approx m in 2006 approx. -0.9bn - 1bn p.a. thereafter Impact on underlying EBIT approx m in 2006 approx bn p.a. thereafter No impact on underlying EBITDA Tax payment rate increases, effective tax rate for the Group at 32-33% for 2006 and estimated at approx. 35% going forward. Non-operating result for H2'06 now expected at approx m** Approx. 0.4bn one-time charges related to the acquisition of Schering assumed for Q4 06, of which 0.3bn are not cash relevant * All figures are indicative as of November 27, 2006 **Including approx. 250m one-time gain from the divestiture of Bayer s stake in the GE-Bayer Silicones JV. Subject to closing of the transaction in Bayer Investor Handout Q3'06 Slide 31 Delivering on Committed Milestones 1H'06 Nexavar: Start of phase III trials in NSCLC Alfimeprase: Second phase lll trial in catheter occlusion (CO) Nexavar: Initiate clinical studies in adjuvant treatment of RCC through collaboration with cooperative groups in US Alfimeprase: Second phase lll trial in PAO Factor Xa inhibitor: Initiate phase III trials in chronic indications 2H'06 Factor Xa inhibitor: Presentation of full data set of phase II dose finding data for chronic indications Alfimeprase: Start of phase ll trial in the treatment of ischemic stroke Nexavar: EU launch At least three Pharma pipeline projects expected to move into phase II Start of phase II/III clinical study for Kogenate liposome formulation Update on Schering integration Outline of new CropScience restructuring project Construction start of 350kt MDI plant (completion in 2008) in China Inauguration of new 100kt Polycarbonate plant in China Bayer Investor Handout Q3'06 Slide 32

19 Bayer HealthCare Bayer Investor Handout Q3'06 Slide 33 HealthCare Strategic Priorities Maximise benefits from the acquisition of Schering Growth at or above market in all businesses Continue to strengthen Pharmaceuticals and Consumer OTC Maximise value of pipeline projects Target of underlying HealthCare EBITDA margin of 25 % by 2009 under review update on new target in full year 2006 release in March '07 We are accelerating our successful strategy Bayer Investor Handout Q3'06 Slide 34

20 We are building a world-class pharmaceutical specialty business Bayer Investor Handout Q3'06 Slide 35 Schering Acquisition Accelerates Focus towards Specialty Care Pro-forma Pharma Portfolio* Key Characteristics Primary Care 31% Oncology 5% Cardiology / Hematology 11% Focus areas can grow faster due to increased flexibility in resource allocation Bayer will concentrate on three key areas: Oncology, Cardiology / Hematology and Gynecology Balanced portfolio of growth and cash generating businesses Gynecology 22% The combined portfolio is already 70 % specialty care Other specialty 9% Contrast Media 22% * 2005 Pro-forma revenues excluding Plasma sales of 296m Bayer Investor Handout Q3'06 Slide 36 * 2005 Pro-forma revenues excluding Plasma sales of 296m

21 Creates a Leader in Specialty Pharma Specialty Franchises 1. Roche/Genentech $ 13bn 2. Johnson&Johnson $ 12bn 3. Amgen $ 10bn 4. Pfizer $ 8bn 5. Novartis $ 8bn 6. Sanofi-Aventis $ 8bn 7. Bayer-Schering $ 8bn 8. GlaxoSmithKline $ 8bn 9. AstraZeneca $ 5bn 10. Wyeth $ 5bn Bayer-Schering: hematology, multiple sclerosis, oncology, gynecology, contrast media Source: WoodMackenzie, 2004 Corporate Franchise Analysis Advantages of Specialty Approach Less about scale, more about innovation Products addressing high unmet medical need Focused marketing, less promotion intensive Limited sales force and marketing requirements Products have better cost / clinical benefit characteristics More profitable and easier to defend business segment Bayer Investor Handout Q3'06 Slide 37 Strong Position in High-Margin Biologicals Protein Drugs 1. Amgen $ 13bn 2. Roche/Genentech $ 7bn 3. Johnson&Johnson $ 6bn 4. Novo Nordisk $ 4bn 5. Eli Lilly $ 3bn 6. Serono $ 2bn 7. Bayer-Schering $ 2bn 8. Sanofi-Aventis $ 2bn 9. Biogen-Idec $ 1bn 10. Schering-Plough $ 1bn What Makes Biologicals So Special? Biological products less prone to generic competition Manufacturing expertise key to success Higher margin products with longer life cycles Bayer-Schering: Kogenate, Betaseron,Trasylol, Campath, Leukine Source: IMS 2005 Bayer Investor Handout Q3'06 Slide 38

22 Combined Growth Drivers Sales in million Business Area 2005 % yoy Betaferon/Betaseron Specialized Therapeutics Kogenate Cardiology / Hematology Yasmin Gynecology & Andrology Avalox/Avelox Antiinfectives Magnevist Contrast Media Levitra Gynecology & Andrology Mirena Gynecology & Andrology Aspirin Cardio Cardiology / Hematology Bayer Schering Bayer Investor Handout Q3'06 Slide 39 Improved Financial Outlook Transaction allows Bayer to upwardly revise its financial targets 25% EBITDA* margin in HealthCare targeted for 2009 compared to 23% previously Margin target under review - update with full year 2006 results in March '07 Acceleration of the achievement of 22% Group EBITDA* margin target * EBITDA pre exceptionals Bayer Investor Handout Q3'06 Slide 40

23 We maximize the value of our pipeline products Bayer Investor Handout Q3'06 Slide 41 Nexavar to Establish Bayer as an Emerging Player in Targeted Cancer Therapy Updated data from phase III kidney cancer trial confirmed positive survival trend (approx. 35 % improvement in overall survival in Nexavar patients vs. Placebo) Nexavar provides clinical benefit without adversely impacting overall quality of life Combinability demonstrated in multiple phase I trials Encouraging start in the kidney cancer market Indication Renal Cell Carcinoma Melanoma Hepatocellular Carcinoma Non-Small Cell Lung Cancer Various cancer types Status Approved in the US, EU and other countries Filings completed in several other countries Phase III in adjuvant treatment initiated Phase II in first line therapy ongoing Enrollment completed in phase III trial; Launch expected in 2007 Enrollment completed in phase III trial; Launch expected in 2008 Phase III trial initiated February 2006; Launch expected in 2009 Various clinical trials ongoing Bayer Investor Handout Q3'06 Slide 42

24 Rivaroxaban Moving Forward Phase III program for VTE prevention on track Phase III RECORD* program initiated end 2005 with once-daily dosing regimen; trials are recruiting well Regulatory filing planned for late 2007 in EU and 2008 in the US Phase III program for stroke prevention in atrial fibrillation and treatment of venous thromboembolism initiated Studies in chronic indications to involve more than 20,000 patients First regulatory submission for chronic indication planned for 2010 Phase II dose finding program in patients with recent acute coronary syndrome (ACS) started *REgulation of Coagulation in major Orthopaedic surgery reducing the Risk of DVT and PE Bayer Investor Handout Q3'06 Slide 43 Rivaroxaban - Status of Clinical Development Primary prevention of VTE after elective orthopedic surgery (hip & knee) Treatment of VTE and long-term secondary prevention Prevention of stroke in patients with atrial fibrillation Acute Coronary Syndrome secondary prevention Preclinical Ph I Ph IIa Ph IIb Ph III Reg Review VTE orthopedic surgery (knee and hip) Ph Ph II II Ph III Ph III Ph III Reg Review Reg Review VTE treatment Stroke prevention in AF Ph II Acute Coronary Syndrome secondary prevention Bayer Investor Handout Q3'06 Slide 44

25 Alfimeprase Perfectly Complements our Hematology and Cardiology Portfolio Factor VIII Factor Xa Thrombin Fibrin Kogenate Factor Xa Inhibitor Discovery activities Alfimeprase Alfimeprase A recombinant, truncated form of fibrolase A direct-acting fibrinolytic through degradation of fibrin Rapid clot dissolution Excellent safety profile, reduced bleeding risk Phase III program ongoing in two indications: acute Peripheral Arterial Occlusion (PAO) and Catheter Occlusion (CO) Collaboration agreement with Nuvelo: Bayer receives exclusive commercialization rights for territories outside the U.S. Bayer Investor Handout Q3'06 Slide 45 VEGF TRAP-Eye Underscores our Specialty Focus Indication: Mechanistic basis: Market: wet age-related macular degeneration (AMD) and diabetic macular edema (DME) Inhibition of VEGF-mediated neovascularization market volume for wet AMD is expected to be approx. $2bn by 2010 Collaboration with Regeneron Pharmaceuticals Joint commercialization outside U.S. Wet AMD is caused by abnormal blood vessel growth in the eye and accounts for approx. 90% of AMDrelated blindness Additional opportunities in other eye diseases Currently in Phase II for wet AMD and Phase I for DME Preliminary Data from the wet AMD Phase II trial are expected in early 2007 Initiation of Phase III trial in wet AMD in early 2007 Bayer Investor Handout Q3'06 Slide 46

26 We Continue to Build our Pipeline Four projects moved into phase II in new development projects being tested for efficacy in humans BAY Adenosine agonist Coronary heart disease Phase II BAY Soluble Guanylate cyclase stimulator Pulmonary hypertension Phase II BAY BAY Soluble Guanylate cyclase activator Acute heart failure Angiogenesis inhibitor Cancer Phase II Phase II BAY CETP-Inhibitor - Dyslipidemia Phase I BAY BAY Dual-acting kinase inhibitor Cancer Elastase-Inhibitor - Pulmonary hypertension in COPD Phase I Phase I Bayer Investor Handout Q3'06 Slide 47 Addressing the Medical Need in Growing Markets BAY (soluble Guanylate cyclase stimulator) in Pulmonary Hypertension Poor prognosis for pulmonary hypertension patients (median life expectancy 2.8 years from diagnosis) Robust growth of the market expected (market expected to exceed US$1bn in 2010) BAY (soluble Guanylate cyclase activator) in Acute Heart Failure Acute heart failure treatment options limited (mortality rate for severe heart failure 40-60%) Global growth opportunity (market expected to exceed US$1.5bn in 2010) BAY in Coronary Heart Disease / Angina Pectoris Coronary heart disease is leading single cause of death in the US with no major innovations in the past decade (1 of every 4.8 deaths) Additional opportunities in further indications due to frequent co-morbidities Bayer Investor Handout Q3'06 Slide 48

27 Stasch/a s/3 Pioneering Field of soluble Guanylate Cyclase (sgc) for the Treatment of CV Diseases NO sgc Stimulator sgc Activator sgc Fe(II) heme Stimulation Oxidative Stress sgc Fe(III) heme Activation sgc Stimulator Amplifies protective effects of Nitric Oxide in the cardiovascular system Potential indications are hypertension, pulmonary hypertension Bayer Investor Handout Q3'06 Slide 49 cgmp sgc Activator Nitric Oxide independent mode of action Selective vasodilation of diseased or oxidative stress impaired blood vessels Potential indications: heart failure, hypertension with other risk factors Adenosine Receptor Research Program Novel A1 receptor agonist Extracellular III NH 2 IV III V VI II I VII Adenosine receptor research at Bayer Pharma resulted in First-in-class approach (non-nucleoside structures) Cytoplasm Gi HOOC γ 2nd β γ messenger Inhibition ATP camp First adenosine agonists for oral application R Mechanistic basis: Inhibition of camp formation Heart rate control Angina pectoris, Atrial fibrillation R R Myocardial protection Acute coronary syndrome R 2 N N SR Prevention of lipolysis Dyslipidemia, Metabolic syndrome Bayer Investor Handout Q3'06 Slide 50

28 HealthCare: Key Deliverables 2005 Strong sales growth of % to 9.4bn Underlying EBIT improved by 26.9 % to 1.3bn 2006 EBITDA margin target of 17 % already achieved Roche OTC business successfully integrated, ahead of schedule Pharma business refocus successfully managed Launch of Nexavar in the US; filing in EU Cooperation with J&J for factor Xa inhibitor Agreement for longer-acting Kogenate Buy-back of Levitra co-promotion rights ex-us from GSK Bayer Investor Handout Q3'06 Slide 51 HealthCare: Key Financials 2005 In million FY 2005 FY 2004 Sales 9,429 8, % EBITDA underlying 1,782 1, % EBIT underlying 1,319 1, % Net cash flow 1,351 1, % CapEx % Operating free cash flow 1, % R&D % Capital invested 7,747 5, % CFRoI 14.9% 17.3% pp Bayer Investor Handout Q3'06 Slide 52

29 Top 15 HealthCare Products First Nine Months Sales in million Betaferon/Betaseron* Kogenate Ascensia product line Yasmin* Aspirin (Pharma+Consumer Care) Adalat Ciprobay/Cipro Avalox/Avelox Magnevist* Levitra Glucobay Advantage/Advantix Mirena* Aleve/Naproxen Canesten 9M M % yoy * Pro forma, prior Q3'06 based on figures reported by Schering Bayer Investor Handout Q3'06 Slide 53 HealthCare Q3'06 Financials* In million Q y-o-y 9M 2005 y-o-y Sales 3, % 7, % EBITDA underlying % 1, % EBITDA Margin (underlying) 25.3% 22.9% EBIT underlying % 1, % EBIT Margin (underlying) 14.3% 15.8% Gross cash flow % 1, % Net cash flow % % R&D / Sales (Bayer-Schering- Pharma) 17.1% Full year guidance: 15 17% Bayer Investor Handout Q3'06 Slide 54 *Continuing operations incl. Schering, excl. Diagnostics

30 HealthCare Improved Financial Outlook 2006 With the integration of Schering proceeding on schedule, we are now planning an underlying EBITDA margin of approx. 22% (combined businesses) Contribution of ~ 700m underlying EBITDA from Schering expected Expected higher R&D expenses in Q4 as pipeline advances strongly, marketing and sales expenses back on normal levels in Q4 (combined impact ~ 100m) Bayer Investor Handout Q3'06 Slide 55 Delivering on Committed Milestones 1H'06 2H'06 Nexavar: US launch (12/2005) Nexavar: Start of phase III trials in NSCLC Alfimeprase: Second phase lll trials in PAO and catheter occlusion (CO) Nexavar: Initiate clinical studies in adjuvant treatment of RCC through collaboration with cooperative groups in US Factor Xa inhibitor: Decision to initiate phase III trials in chronic indications At least three Pharma pipeline projects expected to move into phase II Factor Xa inhibitor: Presentation of full data set of phase II dose finding data for chronic indications Nexavar: EU launch Alfimeprase: Start of phase ll trial in the treatment of ischemic stroke Start of phase II/III clinical study for Kogenate liposome formulation Update on Schering Integration Bayer Investor Handout Q3'06 Slide 56

31 Bayer CropScience Bayer Investor Handout Q3'06 Slide 57 CropScience: Strategic Priorities Fully exploit commercial potential of leadership position in agrochemicals Focus is on product mix improvements and cost savings Deliver best-in-class agrochemicals pipeline and increase share of sales from new active ingredients Further develop biotechnology business Execution of new restructuring initiative Targeting to achieve underlying EBITDA margin of 25 % by 2009 Committed to deliver against these objectives Bayer Investor Handout Q3'06 Slide 58

32 Restructuring Actions to Improve the Cost Base Current efficiency programs and new cost structure initiative (in million) Challenge Integration synergies ~ New initiative New efficiency initiative to reduce infrastructure and process costs Approx. 300 million savings p.a. by the year 2009 Expected cash charge of approx. 330 million along with write-downs of about 120 million, mainly in 2007 and 2008 Accretive to EBIT starting 2008 Challenge until 2009 Volume of restructuring measures since acquisition of Aventis CropScience in 2002 is expected to amount to more than 1 billion Bayer Investor Handout Q3'06 Slide 59 Overview on new Package of Measures Reduction of personnel costs by cutback of about 1,500 positions worldwide Consolidation of global production network with site closures, divestments and restructuring in all regions Reduction from currently about 50 sites to approx. 35 sites in 2010 Further saving measures, e.g. sourcing, waste, energy, maintenance etc. Measures expected to be largely implemented by end of 2009 Savings by functions / business operations units as of 2010 ~ 300 million Industrial Operations & QHSE Development Research Central Functions Business Operations Units Achieve cost leadership as well as optimize sites and assets Bayer Investor Handout Q3'06 Slide 60

33 Innovative Agrochemicals and Seeds Business drive Market Growth Estimated market development (in billion) 44 Seeds** 48 Seeds** Non-ag Use* Non-ag Use* Crop protection Generics GMOs Other factors, e.g. regulatory changes A.I. & product innovation Seeds Other factors, e.g. renewable resources Crop protection Market 2005 Market 2015(E) Crop Protection market decline mainly driven by generic and GMO entry Value increase in the overall market due to innovation and the dynamic growing seed market Bayer Investor Handout Q3'06 Slide 61 * non-agricultural use (Environmental Science only relevant market) ** excluding technology value Focus on Top Products and New Actives with Over-proportional Margin Contribution Gross Margin Development of our Crop Protection Portfolio (Index: Portfolio Average 2003 = 100) Portfolio Average 2003 (Index) Focus on higher-margin top products Optimizing portfolio by out-phasing of older low-margin products Consistently introducing new active ingredients Average Portfolio Top 12 Active Ingredients New Molecules Remaining Portfolio Bayer Investor Handout Q3'06 Slide 62

34 Best-in-Class Pipeline drives future Growth at Bayer CropScience Sales contribution of new active ingredients launched since 2000 (in million) ~ > proforma Target Peak sales potential 26 new active ingredients to be launched between 2000 and 2011 with a combined peak sales potential of about 2 billion Bayer Investor Handout Q3'06 Slide 63 Currently 10 Projects in late Development Phase for Launch from 2007 onwards Insecticides Flubendiamide* against lepidoptera Fungicides Isotianil* against rice blast Herbicides Pyrasulfotole* cereals Spirotetramat* Ketoenol # 3 2 Fungicides Tembotrione* corn 2 Herbicides 1 Safener Another 6 projects in the early Research and Development pipeline (to be launched after 2011) Early discovery pipeline strengthened through recent acquisition of rights to FMC s insecticides discovery pipeline Bayer Investor Handout Q3'06 Slide 64 * ISO-proposed common name

35 Innovation: Key to Success for our Crop Protection Business A high rate of innovation is the precondition for long-term value creation in our portfolio Active life-cycle management concentrating on new formulations and innovative mixtures will be of growing importance to our portfolio Unique technology platform strengthens our potential for innovation leadership in the industry Additional activities have been initiated in promising, novel research fields (e.g. plant health, diagnostics) Targeted sales development of patent-protected products (in % of total sales) (E) Patent protected Off-patent Includes patent protection of - innovative active substances - novel mixtures - new formulations etc. Bayer Investor Handout Q3'06 Slide 65 Successful Portfolio Optimization at Bayer CropScience Launch of innovative active ingredients Clothianidin Mesosulfuron Ethiprole Methoxyfenozide Fenamidone Propoxycarbazone Fentrazamide Prothioconazole Fluoxastrobin Spirodiclofen Fluopicolide Spiromesifen Foramsulfuron Thiacloprid Iodosulfuron Trifloxystrobin Iprovalicarb + 17 Bayer Investor Handout Q3'06 Slide 66 Portfolio optimization to drive value Topline impact 2006e (in bn) (E) ** Divestments / phase out of compounds Acetamiprid Monolinuron Amitraz Ofurace Asulam Omethoate Azocyclotin Oxydemethon Bifenox Phosalone Bromuconazole Phoxim Chlortoluron Propoxur Dichlofluanid Prothiofos Diuron Pyrazophos Fenobucarb Sulfotep Flurcarbazone Triticonazole IPU Trichlorfon Linuron Vamidothion Metamitron + 2 further substances in 2006* -29 * planned, subject to change ** based on sales in last year before divestment

36 Environmental Science: Innovation & strong Brands are the Basis for continued Market Success Capitalize on the backward integration with Crop Protection and powerful pipeline of new active ingredients Focus on proximity innovation to meet user and consumer requirements Build on strong brands Bayer Advanced and Bayer Garden Concentrate on higher margin products and markets by streamlining product portfolio Maintain and expand high profitability of Environmental Science business Building on our strong competitive position we aim to grow our Environmental Science business above market and gain market shares Bayer Investor Handout Q3'06 Slide 67 Strong Growth of the Commercial Seeds Market Expected development of global commercial seeds market (field crops & vegetable, in billion) CAGR + 3 % 18.0 Soybean 12 % Vegetable 18 % 13.4 Canola 5 % Corn 32 % Cotton 3 % Rice 10 % (E) Wheat 4 % Barley 2 % Others 6 % Sugar beet 2 % Potato 4 % Sunflower 2 % Bayer CropScience focus crops are expected to represent more than 35% of the global commercial seeds market in 2015 Bayer Investor Handout Q3'06 Slide 68

37 Seeds & Traits Strategy Accelerated growth in our core crops (vegetables, rice, cotton and canola) through Regional expansion to exploit new markets Selected acquisitions, to broaden access in certain market segments and enlarge our technology base Intensified development of our key technologies and traits Further crops in the segments oilseeds, food/feed crops and industrial crops identified to supplement our existing seed business Positioning of proprietary traits outside our key crops Build up our position in seeds and strengthen the development and use of our traits Leverage the growth potential in the seed market by means of tailor-made crop protection products and seed dressings Bayer Investor Handout Q3'06 Slide 69 Moving Downstream From the Farm Forward integration into the fast growing nutrition specialties market Link up with reputed partners to establish a new business Leverage nutrition R&D portfolio in carbohydrates and oils Build up of new crop businesses offering value capture beyond the farm gate Addressing unmet market needs in the fields of renewable resources and specialties Leverage trait and crop protection portfolios Bayer CropScience intends to use existing and new assets to develop downstream businesses Bayer Investor Handout Q3'06 Slide 70

38 Long-term R&D Expenditure more aligned towards Seeds, Traits and Downstream Areas Expansion of budget in the areas of seeds, traits and downstream solutions to more than 200 million by 2015 Slight reduction in R&D expenses in Crop Protection to about 500 million p.a. within the same timeframe Overall planned increase of annual R&D spending to approx. 750 million by 2015 Planned development of global R&D expenditures (in million ) ~ % (E) Seeds, Seeds, Traits Traits & New & Businesses New Businesses Environmental Environmental Science Science Crop Crop Protection Protection Bayer Investor Handout Q3'06 Slide 71 Envisaged Portfolio Shift at Bayer CropScience Expected business development by business groups 12 % 6 % 13 % 15 % 82 % Environmental Science BioScience Crop Protection 72 % (E) Crop Protection will remain the main pillar of our global business Focus of the future strategy will be on growth from seed business and environmental science as well as on opportunities in new business areas Bayer Investor Handout Q3'06 Slide 72

39 We remain committed to sustainable Profitability Improvement Our medium-term objectives: Increase the share of new active ingredients in our crop protection portfolio and thus continue the shift toward higher-margin products Strict cost discipline Realization of above-market growth in the high-profit Environmental Science business Expansion of our Seeds & Traits business and approach to margins as in the agrochemicals segment EBIT before special items (in million) EBITDA margin before special items (in %) * We want to achieve an EBIDTA margin, before special items, of 25 % by 2009 * as reported Bayer Investor Handout Q3'06 Slide CropScience: Key Deliverables 2005 Sales almost maintained at 5.9bn, down 1 % Underlying EBIT improved by + 163m or 31.2 % Further improvement in underlying EBITDA margin achieved (+ 70 basis points to 21.6 %) Strong net cash flow development (+16.2 %) Savings contributed ~ 100m to our EBIT Strong performance of our new active ingredients, with 885m (+26 %) ahead of target Successful launch of 2 new active ingredients (Spiromesifen & Ethiprole) Divestment of non-core, lower-margin products on track Bayer Investor Handout Q3'06 Slide 74

40 CropScience: Key Financials 2005 In million FY 2005 FY 2004 Sales 5,896 5, % EBITDA underlying 1,273 1, % EBIT underlying % Net cash flow % CapEx % Operating free cash flow % R&D % Capital invested 8,849 8, % CFRoI 11.2 % 10.9 % pp Bayer Investor Handout Q3'06 Slide 75 CropScience: Q3'06 Financials In million 9M 2006 y-o-y 9M 2005 y-o-y Sales 1, % 4, % EBITDA underlying % 1, % EBITDA Margin (underlying) 13.6% 24.1% EBIT underlying % % EBIT Margin (underlying) 0.3% 14.6% Gross cash flow % % Net cash flow R&D spending % % approx. 750m by 2015 (increase of 13% compared to 2005); thereof > 200m in BioScience Bayer Investor Handout Q3'06 Slide 76

41 CropScience: Outlook 2006 In million 9M M 2005 Sales and underlying EBITDA margin below previous year Negative market environment for the global crop protection industry anticipated Market situation in Brazil remains difficult Impact of adverse weather conditions in Q3 in North America, Australia, Southern Europe Bayer Investor Handout Q3'06 Slide 77 Bayer MaterialScience Bayer Investor Handout Q3'06 Slide 78

42 MaterialScience: Strategic Priorities Maintain or expand market leadership positions Focus is on polycarbonates and polyurethane raw materials Maximise benefits from process and technology leadership positions of global production network Maintain strong growth momentum and exceed GDP growth in all segments Develop new growth opportunities through expansion into Asia and new applications for our materials Develop smart raw-material sourcing strategy Targeting to generate value throughout the cycle Bayer MaterialScience is executing a clear strategy to deliver against these objectives Bayer Investor Handout Q3'06 Slide 79 Focused on Polycarbonate and Polyurethanes Polyurethanes MDI TDI Polyols Total sales 9.446m 28% Polycarbonates 51% 14% 2% 4% Inorganic Basic Chemicals Thermoplastic Polyurethanes Coatings, Adhesives, Sealants Bayer MaterialScience Pro forma sales FY 2005 without H.C. Starck and Wolff Walsrode (to be divested) Bayer Investor Handout Q3'06 Slide 80

43 Serving Key Industry Sectors Chemicals ~ 9 % Automotive ~ 16 % Others (sports, leisure, medical, footwear etc.) ~ 23 % Electro/ Electronics ~ 16 % Furniture / Wood ~ 16 % Construction ~ 20 % Bayer Investor Handout Q3'06 Slide Bayer MaterialScience sales by industry Major Products Outpace GDP Growth Long-term Trend Intact Across The Cycle Major product sales growth Polyurethanes and Polycarbonates +11% CAGR Historic growth rate of major products at Bayer MaterialScience % CAGR Global GDP Index (real) Index 1992 = 100 Major long-term growth drivers: Construction > Energy saving > Heat insulation Automotive > New polymeric applications Innovation > Films/surfaces and nanotechnology CAGR Total net sales include Lyondell Polyols acquisition in 2000 Bayer Investor Handout Q3'06 Slide 82

44 Growth Opportunities Through Market Leader Positions Polyurethanes Global Market Positions Bayer #1 (ms 26%) Volume growth CAGR e World Global + ~5% Polycarbonates* #1 (ms 30%) Global + ~8% Thermoplastic Polyurethanes #1 (ms 20%) Global + ~4% Coating Raw Materials** #1 (ms > 40%) Global + ~5% * Including blends ** Arom. and aliph. isocyanates Exploiting market opportunities as a producer of choice for our customers Bayer Investor Handout Q3'06 Slide 83 China Outpaces Global Growth in Our Major Businesses PUR and PCS Polyurethanes consumption In 1000 tons Polycarbonates consumption e e + 5% CAGR + 8% CAGR 10,500 13,400 Global 2,700 3, % CAGR + 18% CAGR 1,900 2,800 Greater China 650 1,500 Bayer estimates, PCS incl. Blends China is set to become the world's largest PUR market by 2015 Bayer Investor Handout Q3'06 Slide 84 Greater China: PR China, Taiwan, Hongkong China already is the world's largest PCS market today

45 Focused Capital Investment in China CapEx on fixed assets in million 800 >800 >800 30% 30% 25% 25% 35% 40% 10% 5% 30% 20% 45% < 5% 2006e 2007e 2008e Europe North America Greater China ROW All figures are approximations based on the 2006 budget Competitive CapEx funding to secure long-term volume growth in line with market dynamics Investment focus of US$ 1.8bn in China (in ) demonstrates commitment to participate in future growth of this region 2.5bn total budget in e - 1.6bn for strategic growth projects - 0.9bn for maintenance and efficiency projects Greater China: PR China, Taiwan, Hongkong Bayer MaterialScience capital expenditures efficiently deployed Bayer Investor Handout Q3'06 Slide 85 Exploiting Growth Opportunities of Our Businesses Strengthen our regional competitiveness through local production in China Shanghai PUR PCS CAS PUR: Polyurethanes PCS: Polycarbonates CAS: Coatings, Adhesives, Sealants MDI 80kt in 2006 (crude MDI splitter) 350 kt in 2008* TDI 160 kt in 2009** *under construction **planned PCS 40 kt in 2005 (PC compounding) PCS 100 kt in kt in 2008* Desmodur N 12 kt in 2003 Desmodur L 11 kt in 2004 HDI 30 kt in kt thereafter** All numbers are name plate capacities Dates for HDI refer to mechanical completion Bayer Investor Handout Q3'06 Slide 86

46 Capitalizing on World Scale in PCS Cost Reduction Through Economies of Scale 100 Effect of capacity increase on conversion costs Peer group average kt polycarbonate lines allow significant cost optimizations through economies of scale Conversion cost index Bayer average 2005 Bayer average 2008e Bayer world scale 2002 Map Ta Phut, Thailand (First 100kt line worldwide) 2003 Uerdingen, Germany 2006 Caojing, China e Caojing ll, China Capacity in kt p.a. per production line Bayer MaterialScience currently the only PC producer running 100kt lines Bayer Investor Handout Q3'06 Slide 87 Driving the PCS World Scale Definition Bayer's Process Technology Sets Global Standards S p ecific investm ent index 1,2 1 0,8 0,6 0, Antwerp Effect of capacity increase on investment costs 1999 Map Ta Phut (1) new production lines Capacity in kt p.a. per production line 2002 Map Ta Phut (2) Challenges for new world scale lines Fast implementation of new process technologies Simultaneous process development of the entire Polycarbonate process chain Up-scaling capabilities Engineering and chemical know-how Maintaining or even improving product quality while up-scaling Bayer Investor Handout Q3'06 Slide 88

47 MDI Process Innovation Pays Off High Efficiency Phosgenation Delivers Returns Specific reactor capacity >+150% Specific capacity solvent distillation Energy costs +100% +40% +60% Index = % -40% * Potential Proprietary process Bayer Investor Handout Q3'06 Slide 89 * Status achieved in existing MDI plants Bayer s high efficiency phosgenation offers an increase in reactor capacity and savings in energy costs at a very low investment level Prerequisite to construct world s largest single-train MDI complex in China by 2008 Increasing TDI Efficiency Successful site consolidation program completed Name plate capacities New Martinsville Brunsbüttel Dormagen Leverkusen Brunsbüttel Baytown Niihama Baytown Dormagen Coatzacoalcos Number of plants 7 Capacity kt Number of plants 3 Capacity kt Average plant capacity doubled: 60kt (2002) 130kt (2005) Bayer Investor Handout Q3'06 Slide 90

48 Broad Diversity of Innovations Waterborne 2K-PUR coatings Meeting ecological requirements Printable aliphatic Desmopan films for improved mechanical properties and light stability Aspartates for innovative corrosion protection Multitec Short Fiber Spraying fast and efficient process New Makroblend product lines for use in automotive exterior parts high toughness even at low temperatures Flame resistant Bayblend grades with Eco-label compliance New scratch-resistant Makrolon grades for automotive glazing ETICS External thermal insulation composite system Bayflex Lightweight Density reduction, excellent dynamic compression set performance Baytron conductive polymer for capacitors, electrodes and antistatics Bayer Investor Handout Q3'06 Slide 91 R&D Resources Efficiently Deployed Solid IP Position and Share of New Products Customer Advisory R&D Budget m 250m R&D Competitive R&D funding, approximately 3% of sales NPV-based project evaluation R&D expenses split between 'process innovation' and 'growth opportunities in new applications' 'Customer advisory' involves customers at early stage of R&D to adapt projects to specific customer needs >10% of R&D invested in New Business More than 20% of sales come from new products (launched since 2000) More than 40% of 2005 sales were generated by patented products Bayer Investor Handout Q3'06 Slide 92

49 Moving Further Along the Value Chain Expanding the Scope, Integrating Forward Polyurethanes BaySystems (umbrella brand) >20 local PUR systems providers worldwide Fast growing franchise through - Minor acquisitions (e.g. Polythane Systems, USA) - JVs (e.g. Pearl Insulations, UAE) - Greenfield investments (e.g. India, Thailand) Polycarbonates Global compounding network at 6 sites worldwide Semi-Finished Products Business Segment, PCS Sheets and Films - Bayer Sheet businesses in USA, Australia, Europe, China, South Korea Major example of businesses considered as forward-integrated Exploiting existing, highly versatile polymer portfolio Offering tailor-made solutions, meeting specific customer needs Transformational growth within key strategic innovation areas: - Films and surfaces - Nanotechnology Expanding the scope of business by driving innovation in multiple applications Continue to increase our portion of the value chain Forward integrated business lines of Bayer MaterialScience generated sales of close to 1bn in 2005 Bayer Investor Handout Q3'06 Slide Demonstrates Our Potential to Generate Significant Value bn CFRoI (as reported) 9.6% 9.4% 9.9% Capital invested Gross cash flow Operating FCF % Value Generation in 2005 CVA of 681m generated Target return including asset reproduction well exceeded CFRoI is the ratio of gross cash flow to capital invested ( 8.5bn) CFRoI-hurdle (8.4%) as minimum requirement covers cost of capital and reproduction of depletable assets Subgroup WACC at 6.0% Bayer Investor Handout Q3'06 Slide 94

50 Positive ofcf and CFRoI above Hurdle Strong Performance Across the Cycle Capacity expansions follow long-term market growth, independently of cycle Constantly evaluating opportunities for plant and site consolidation while concentrating on world-scale production Competitive advantage through economies of scale Reducing specific conversion costs through process innovation Commitment to further optimizing G&A costs Significant positive cash contribution (ofcf) across the cycle Earn a premium on the BMS cost of capital throughout the cycle Bayer Investor Handout Q3'06 Slide 95 MaterialScience: Key Financials 2005 In million FY 2005 FY 2004 Sales 10,695 8, % EBITDA underlying 1,949 1, % EBIT underlying 1, % Net cash flow 1, % CapEx % Operating free cash flow % R&D % Capital invested 9,116 7, % CFRoI 16.4 % 10.3 % pp Bayer Investor Handout Q3'06 Slide 96

51 MaterialScience: Q3'06 Financials In million Q y-o-y 9M 2006 y-o-y Sales 2, % 8, % EBITDA underlying % 1,501-1% EBITDA Margin (underlying) 14.6% 17.4% EBIT underlying % 1,097-1% EBIT Margin (underlying) 10.0% 12.7% Gross cash flow % % Net cash flow % % CapEx 98-50% % Bayer Investor Handout Q3'06 Slide 97 FY 2006: Committed to Continue Growth and Excellent Earnings Performance Performance Outlook EBITDA margin (underlying) EBIT (underlying) ,404 Positive general market environment Assumptions Increased global production capacities Significantly increased raw material costs Sales Continued growth Underlying EBIT and EBITDA On a par with excellent 2005 level Some risks from higher raw material cost and recent production shortfalls Bayer Investor Handout Q3'06 Slide 98

52 Appendix Bayer Investor Handout Q3'06 Slide 99 Financing and Accounting Considerations related to the Schering Acquisition Bayer Investor Handout Q3'06 Slide 100

53 Financing & Refinancing Structure Consideration Structure Underwriting Final Take Out Total Refinancing Ex. Cash 3.0bn New Equity 3.5bn Equity ABB 1.2bn MCB 2.3bn Cash 16.9bn Bridge 13.9bn Bonds 3.0bn Loans Cash & Debt Disposals 1) Disposals 1) Diagnostics Disposal 3.6bn 2) Diagnostics Disposal 3.6bn 2) Bayer Investor Handout Q3'06 Slide 101 (1) Disposals of H.C. Starck, Wolff Walsrode (pending) and GE Bayer Silicones (2) After-tax proceeds Acquisition of Schering - Indicative Purchase Price Allocation* In million 10,411 (100) (4,381) 16,237 6,225 10,418 10,012 3,409 (364) Schering Assets and liabilities as of June 23, 2006 Existing goodwill Inventories Tangible assets Intangible assets 11.8bn difference between book value and fair value estimation others Deferred taxes Fair value of 100 percent of net assets after deferred taxes Acquired net assets (96.1% **) at fair value Purchase price (for 96.1% of Schering shares) Goodwill * All figures are indicative as the purchase price allocation is still provisional. Figures may change during the finalization of the process. ** as of September 30, 2006 Bayer controlled 96.1% of issued and outstanding Schering shares Bayer Investor Handout Q3'06 Slide 102

54 Acquisition of Schering - Indicative Impact of Additional Amortization* In million, figures rounded Q3 2006a Q4 2006e FY 2006e FY 2007e FY 2008e FY 2009e Work-down of inventory step-up Amortization of intangibles & tangibles, excl. trademarks > Of which capitalized as part of inventory Expensed amortization capitalized in previous period Amortization of trademarks Amortization EBIT impact EBIT special items Underlying EBIT impact , EBITDA impact EBITDA special items Underlying EBITDA impact * Status: November 27, 2006 All figures are indicative as the purchase price allocation is still provisional. Assumptions subject to change. Figures may change during the finalization of the process. Bayer Investor Handout Q3'06 Slide 103 Calendar & Contacts