Science For A Better Life UniCredit German Investment Conference Dr. Alexander Rosar Head of Investor Relations September 24 2008 V Sept08 Me
Important Information This presentation may contain forward-looking statements based on current assumptions and forecasts made by Bayer Group or subgroup 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 Bayer s public reports which are available on the Bayer website at www.bayer.com. The company assumes no liability whatsoever to update these forwardlooking statements or to conform them to future events or developments.
Consistent strong performance Strategic investment focus is on HealthCare Innovation pipeline progresses dynamically Optimistic about future developments Strategy for growth in emerging markets in place UniCredit German Investment Conference September 24, 2008 Page 1 Bayer Has Clearly Defined Its Aspirations Focus portfolio on growth and innovation driven businesses All businesses are growing at or above market and are capable of achieving benchmark performance Strengthen HealthCare and become one of the world s leading diversified HealthCare companies Develop new growth opportunities and safeguard the sustainability of the business Maintain / regain credit ratios which support a single A-rating Grow profitably and generate underlying EBITDA-margin of >22% by 2009 (19% by 2006) Bayer follows a clear strategy to deliver against these aspirations UniCredit German Investment Conference September 24, 2008 Page 2
The New Bayer A Leader in its Markets Pharmaceuticals 10.3bn Rx pharmaceuticals, global # 6 in specialties with leading position in key categories 34% 33% 18% 19% 33% CropScience 5.8bn agrochemicals and seeds business, global # 1 in agrochemicals Consumer Health 4.5bn OTC pharmaceuticals, blood glucose meters and veterinary medicines, global # 2-4 14% 15% 34% Group 32.4bn 2007 sales Material Science 10.4bn polyurethanes and polycarbonate business, global # 1 Break-down excluding reconciliation sales UniCredit German Investment Conference September 24, 2008 Page 3 Bayer s Transformation A Period of Significant Progress In 2002 2002 Sales Sales 29.6bn 29.6bn EBIT 823m EBIT* underlying 828m EBITDA 12% margin* 12% 2007 32.4bn 4,287m 21% 5-fold higher underlying EBIT Margin up by 9 percentage points Attractive returns over cost of capital Achieved all group targets CFROI 8% 8% 12% *pre special items UniCredit German Investment Conference September 24, 2008 Page 4
Mid-term Financial Targets Underlying EBITDA margin Bayer HealthCare Bayer CropScience Bayer MaterialScience around 28% in 2009 (previously: 27%) approximately 25% in 2009 (now expected in 2008 already) >18% under favorable economic conditions Group to exceed 22% in 2009 UniCredit German Investment Conference September 24, 2008 Page 5 Bayer is Well Positioned And Investing For Growth M&A Portfolio Management Strategic investment focus is on HealthCare R&D Organic Growth Innovation Pipeline progresses dynamically BRIC Emerging Markets Market leading positions in strongly growing markets UniCredit German Investment Conference September 24, 2008 Page 6
Six Years of Increasing Focus for Growth Transaction Volume > 42bn since 2002 2001 Sales 30.3bn 2007 Sales 32.4bn HealthCare CropProtection Polymers H.C. Starck Wolff Walsrode Diagnostics Plasma Bayer generics Household insecticides PolymerLatex divested divested Divestitures 14bn Acquisitions 28bn Schering AG + Roche OTC + Possis Medical + TopSun + Sagmel + Aventis CropScience + Stoneville Cotton Seeds + Gustafson Seed Treatment + HealthCare CropScience Lanxess spun-off Haarmann & Reimer divested Agfa stake divested GE Bayer Silicones divested Real estate divested UniCredit German Investment Conference September 24, 2008 Page 7 Major examples only MaterialScience Headcount 116,900 Transaction volume Headcount 106,200 Improved Portfolio and Higher Margins in All Businesses In million Sales EBIT underlying EBITDA margin reported*/ underlying 14,807 14,079 3,304 Chemicals 10,435 9,372 716 2,492 4,697 UniCredit German Investment Conference September 24, 2008 Page 8 5,826 14* 26 11* 23 12* 15-175 786 578 1,117 2002 2007 2002 2007 2002 2007 HealthCare CropScience Industrials Material Science 10,775 Polymers
Bayer s Strategic Investment Focus Is on HealthCare Focus Rationale Historic examples Global Pharma / Consumer Product purchases / pipeline / technologies HealthCare adjacencies Strengthen HealthCare Round-up portfolio Leverage expertise, capabilities and platforms into new business areas Schering Roche OTC Citracal Amikacin Inhaled Recothrom VEGF Trap-Eye Maxygen Hematology Direvo Biotech Possis Medical Emerging markets Exploit above-average growth opportunities Sagmel TopSun UniCredit German Investment Conference September 24, 2008 Page 9 Powerful Portfolio Management Aiming at Generating Value Execution Track record of managing large scale transactions successfully Integrated Aventis CropScience, Roche OTC and Schering Pharma without business disruptions Timelines and synergy targets have been met Demonstrated financial discipline Financing Balanced mix of debt, equity and portfolio if needed Maintaining single A credit rating target Probable Timing Constant monitoring and active approach Due to the excellent positions we have built, however, we feel no pressure and can wait for the right opportunity to arise at the right price UniCredit German Investment Conference September 24, 2008 Page 10
Bayer is Well Positioned And Investing For Growth M&A Portfolio Management Strategic investment focus is on HealthCare R&D Organic Growth Innovation Pipeline progresses dynamically BRIC Emerging Markets Market leading positions in strongly growing markets UniCredit German Investment Conference September 24, 2008 Page 11 Pharma Pipeline Promises Accelerated Growth After 2009 Launch Nexavar Xarelto A franchise building opportunity Potentially transformational Late-stage Recothrom VEGF Trap-Eye Alemtuzumab Approved for surgical hemostasis in US, submitted in EU Phase III in wet AMD underway Phase III in multiple sclerosis sgc* Stimulator Phase II in pulmonary hypertension Amikacin Inhale UniCredit German Investment Conference September 24, 2008 Page 12 Phase II in pneumonia, innovative delivery technology *soluble Guanylate Cyclase
Nexavar A Franchise Building Opportunity Sales in million +108%* First targeted therapy in kidney cancer (RCC) 209 Only approved drug with overall survival benefit in primary liver cancer (HCC) 107 63m 44m 145m 64m ROW U.S. Fast track designation for HCC approval in Japan Peak sales potential: approx. 500m in approved indications (NA, EU, J) >200 clinical trials underway to explore the potential 1H 07 1H 08 *Currency adjusted UniCredit German Investment Conference September 24, 2008 Page 13 Xarelto Consistently Demonstrated Superior Efficacy Compared to Enoxaparin Total VTE RRR* 70% RECORD 1 (THR) Major bleeding RECORD 2 (THR) Total VTE RRR* 79% Major bleeding 3.7% 1.1% 0.1% 0.3% 9.3% 2.0% 0.1% 0.1% p < 0.001 p = 0.18 p < 0.0001 p = 0.98 RECORD 3 (TKR) RECORD 4 (TKR) Total VTE Total VTE RRR* 49% RRR* 31% Major bleeding Major bleeding 0.5% 0.6% 0.7% 0.3% 18.9% 9.6% 10.1% 6.9% p < 0.001 p = 0.774 p = 0.012 p = 0.11 Enoxaparin Xarelto UniCredit German Investment Conference September 24, 2008 Page 14 *RRR: Risk Reduction Rate
Comprehensive Late-Stage Development Program for Xarelto in Place Market Study Facts Phase II Phase III Filing Acute Indications >12,000 patients vs. standard therapy (enoxaparin) VTE prevention after orthopedic surgery ~8,000 patients vs. standard therapy (enoxaparin) VTE prevention in medically ill patients 2011e Chronic Indications ~7,500 patients vs. standard therapy (enoxaparin & warfarin) VTE treatment and secondary prevention 2010e ~14,000 patients noninferiority vs. standard therapy (warfarin) Stroke prevention in atrial fibrillation 2010e Phase II: ~3,500 patients in addition to standard therapy Secondary prevention ACS t.b.d. UniCredit German Investment Conference September 24, 2008 Page 15 An Emerging New Class of Assets in the Field of Cardiovascular Diseases Pioneering research in the field of soluble Guanylate Cyclase (sgc) targeting a broad range of cardiovascular diseases sgc stimulator RIOCIGUAT PH II in Pulmonary hypertension sgc activator CINACIGUAT PH II in acute heart failure sgc stimulator BAY 60-4552 PH II in acute heart failure First data will be presented at ERS, Berlin, in October 2008 Riociguat expected to enter phase III clinical trials in Q4 2008 UniCredit German Investment Conference September 24, 2008 Page 16
Women s HealthCare Pipeline: Life Cycle Management at its Best (I) Valette Plus OC YAZ Flex OC Qlaira (DUB-OC) Dysfunctional uterine bleeding OC-DHEA OC Mirena Menorrhagia (US) YAZ Dysmenorrhea E2-DRSP OC LCS Contraception YAZ / Yasmin Plus OC Qlaira (DUB-OC) OC (EU) FC-Patch Contraception Visanne Endometriosis Angeliq low-low (HRT) E2/LNG (HRT; Japan) Valette, Meliane etc. Phase II Phase III Submitted Launched UniCredit German Investment Conference September 24, 2008 Page 17 OC: oral contraception LCS: intrauterine levonogestrel releasing contraceptive system HRT: hormon replacement therapy Upcoming Pipeline Newsflow Xarelto ATLAS-results (phase II in ACS) To be presented at AHA, Nov 10, 2008 Xarelto Acute coronary syndrome Phase III initiation end 2008 Nexavar Phase III results melanoma study (ECOG) End of 2008/ early 2009 Amikacin inhale Gram-neg. pneumonia in intubated patients Phase III initiation 2H 08 Riociguat (sgc Stimulator) Pulmonary hypertension Phase III initiation 2H 08 Presentation of phase II data in PH at ERS, October 2008 Sagopilone (ZK-EPO) Cinaciguat (sgc Activator) Solid tumors Phase III initiation 1H 09 Acute decompensated heart failure Phase III initiation 2H 09 UniCredit German Investment Conference September 24, 2008 Page 18
CropScience Strong Track Record of Innovation Sales of new active ingredients launched since 2000 Excellent momentum with 2-3 new molecules launched p.a. on average Sales objective of 2 billion expected to be reached 2 years earlier than targeted, with 23 A.I.s launched by then 1H 08 new product sales up 45% 2.0 1.5 1.0 0.5 2000 2001 2002 2003 2004 2005 2006 2007 2008E 2009E UniCredit German Investment Conference September 24, 2008 Page 19 bn We Intend to Grow BioScience Sales to About 1bn by 2015 Accelerate Growth CAGR 2002*-2007 in million ~ 1 bn BioScience overall 10 % CAGR 10% CAGR 12% Rice 42 % 240 271 311 328 342 382 Cotton 18 % Canola 22 % Vegetables 6 % 2002* 2003 2004 2005 2006 2007 2015 Target * 2002 sales pro-forma combined sales of Bayer and Aventis CropScience UniCredit German Investment Conference September 24, 2008 Page 20
Capitalize on Global Market Trends and Spur Future Growth Scarce resources Energy savings Lightweight construction Climate change Energy efficiency Fuel efficiency Mobility Lightweight transportation Growing wealth Increasing living standards Demand for entertainment MaterialScience contributions Building insulation Insulation along the cold chain Lightweight roofing Materials for solar modules Lightweight materials for cars Waterborne Coatings Automotive glazing Foam mattresses Blends for electro/electronic housing PCS sheets in large-frame screens Major product examples only UniCredit German Investment Conference September 24, 2008 Page 21 Bayer is Well Positioned And Investing For Growth Portfolio Management M&A Strategic investment focus is on HealthCare Organic Growth R&D Innovation Pipeline progresses dynamically Emerging Markets BRIC Market leading positions in strongly growing markets UniCredit German Investment Conference September 24, 2008 Page 22
BRIC Countries Bayer is Well Positioned And Capturing Significant Growth 2007 Sales by market; % Fx adj. RUSSIA Sales: 0.4bn +49% BRAZIL Sales: 1.1bn + 24% INDIA Sales: 0.4bn +32% CHINA* Sales: 1.8bn +30% *includes PR China, Hongkong, Macau and Taiwan UniCredit German Investment Conference September 24, 2008 Page 23 Within Only a Couple of Years China Has Become Our 3rd Biggest Market Business well positioned #1 international Healthcare company growing 45% in 2007 Market leader in CropScience gaining share (+19% in 2007) MaterialScience is one of the majors, growing 31% All growth rates are Fx adj. Sales 2007* 1.8bn +30% *includes PR China, Hongkong, Macau and Taiwan Significant investment commitment Bayer s largest fully integrated polymer site TopSun acquisition of domestic OTC business Infrastructure investments incl. marketing & sales to now >6,500 employees UniCredit German Investment Conference September 24, 2008 Page 24
Construction of Bayer s Largest, Fully Integrated Polymer Site Under Way Strengthen our regional competitiveness through local production in China Shanghai Sales 2007 1.3bn +18% PUR MDI 80 kt in 2006 (crude MDI splitter) 350 kt in 2008* +50 kt thereafter** TDI 250 kt in 2010* +50 kt thereafter** *under construction **planned All numbers are name plate capacities Dates refer to availability on stream PCS PCS 40 kt in 2005 (PC compounding) PCS 100 kt in 2006 +100 kt in 2009* CAS HDI 30 kt in 2006 +20 kt thereafter** Desmodur N 17 kt in 2003/08 25 kt in 2009* Desmodur L/IL 25 kt in 2004/08 20 kt PUD in 2008 BMS sales include PR China, Hongkong, Macau and Taiwan UniCredit German Investment Conference September 24, 2008 Page 25 Q2 08 Upward trend continued unabated UniCredit German Investment Conference September 24, 2008 Page 26
Q2 2008 Upward Trend Unabated 22nd Consecutive Quarter with YOY Improvement Key Figures Underlying EBITDA by Subgroup In million, Δ% y-o-y Sales 8,511 EBITDA* 1,896 EBIT* 1,248 Core EPS 1.18 Material Science 20% HealthCare Δ% + 4% + 5% ² + 5% Δ% Adj. ** + 10% + 15% CropScience 26% 2% Reconciliation 52% * Before special items ** Currency & portfolio adjusted UniCredit German Investment Conference September 24, 2008 Page 27 Margin Progression Impacted by Launch Preparations and Emerging Markets Investments Q2 08 Sales Earnings In million, Δ% y-o-y Consumer Health +1% (+8%) Pharma 0% (+6%) Underlying EBITDA 969 994 +3% Underlying EBIT 1,150 711 744 +5% 640 639 0% 2,584 416 425 +2% 258 250-3% 224 214-4% HealthCare 3,734m; +0.5% (+7%) Q2 07 Q2 08 Q2 07 Q2 08 ( ) Currency & portfolio adjusted UniCredit German Investment Conference September 24, 2008 Page 28
Outstanding Performance Allows Further Upgrade of Financial Outlook Q2 08 Sales Earnings In million, Δ% y-o-y Bio Science +13% (+14%) Environmental Science 113-18% (-11%) 165 Crop Protection +21% (+29%) Underlying EBITDA 396 501 +27% Underlying EBIT 375 +43% 1,526 310 435 +40% 262 196 329 +68% CropScience 1,804m; +15.5% (+23%) 86 66-23% Q2 07 Q2 08 66 46-30% Q2 07 Q2 08 ( ) Currency & portfolio adjusted UniCredit German Investment Conference September 24, 2008 Page 29 Overall Mixed Picture But Systems Fairly Robust Q2 08 Sales Earnings In million, Δ% y-o-y Systems +4% (+8%) 1,935 687 Materials -9% (-2%) Underlying EBITDA 409 372-9% 71 35-51% 338 337 0% Underlying EBIT 290 29 261 258 253-13% -1% -5 MaterialScience 2,622m; 0% (+5%) Q2 07 Q2 08 Q2 07 Q2 08 ( ) Currency & portfolio adjusted UniCredit German Investment Conference September 24, 2008 Page 30
2008 Outlook 2008 sales and earnings expectations and beyond Group Fx adj. sales increase > 5% Increase in underlying EBITDA and margin* Guidance is based on end Q2 Fx-rates HealthCare Fx adj. growth in all divisions at or above market Margin* increase toward 27% CropScience Fx adj. growth by well over 10% Margin* increase to approx. 25% MaterialScience Higher volumes and good, value-creating earnings level, but below 2007. Q3 08 underlying EBITDA below Q2 08 level. UniCredit German Investment Conference September 24, 2008 Page 31 Group >22% margin* by 2009 HealthCare ~28% margin* by 2009 CropScience ~25% margin* by 2009 now expected in 2008 MaterialScience Attractive premium over capital and asset reproduction costs even in difficult market environment. Margin* in excess of 18% under favorable economic conditions. * Underlying EBITDA margin The New Bayer Clear Strategy, Clear Targets, Focus is on Execution Active portfolio management: transaction volume > 42bn Strategic investment focus on HealthCare: 20bn to grow the business to almost 50% of group sales Increased underlying EBIT from 828m in 2002 to 4.3bn in 2007 Delivered on commitments and achieved financial targets Total shareholder return* 26 percent p.a. during last 5 years (July 1st, 2003 June 30, 2008) Intend to pay-out 30 40% of Core EPS as dividend 2008 outlook targets further growth and higher margins *Performance of Bayer stock assuming reinvestment of dividends UniCredit German Investment Conference September 24, 2008 Page 32
Reporting Events and AGM Date Event Publication Wednesday, October 29, 2008 Tuesday, March 3, 2009 Wednesday, April 29, 2009 Tuesday, May 12, 2009 Wednesday, July 29, 2009 Tuesday, October 27, 2009 Investor Conference Call Investor Conference Call Investor Conference Call Annual General Meeting Investor Conference Call Investor Conference Call Third Quarter Results Stockholders Newsletter 2008 Annual Report First Quarter Results Stockholders Newsletter Second Quarter Results Stockholders Newsletter Third Quarter Results Stockholders Newsletter UniCredit German Investment Conference September 24, 2008 Page 33 Investor Relations Contacts Dr. Alexander Rosar Head of Investor Relations Phone: +49-214-30-81013 E-mail: alexander.rosar@bayer-ag.de Dr. Jürgen Beunink Phone: +49-214-30-65742 E-mail: juergen.beunink@bayer-ag.de Ilia Kürten Phone: +49-214-30-35426 E-mail: ilia.kuerten@bayer-ag.de Judith Nestmann Phone: +49-214-30-66836 E-mail: judith.nestmann@bayer-ag.de Peter Dahlhoff Phone: +49-214-30-33022 E-mail: peter.dahlhoff@bayer-ag.de Ute Menke Phone: +49-214-30-33021 E-mail: ute.menke@bayer-ag.de Dr. Olaf Weber Phone: +49-214-30-33567 E-mail: olaf.weber@bayer-ag.de UniCredit German Investment Conference September 24, 2008 Page 34