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Bayer started the agro season strongly as well as the flu season, whereas Pharma’s dynamics stalled slightly due to the Chinese tender business. Nevertheless, the beat to consensus was too meaningful (revenues: +6.0%; adjusted EBITDA: +13.1%; net profit: +38.7%) to be ignored by management. We wonder why it did not release preliminary figures like other companies would have done with such a deviation.
Companies: Bayer AG
Bayer had a better ending than expected at the beginning of 2021. Crop Science especially was better off, benefiting from the greater glyphosate shortage and the strong position in corn and soybeans. Pharma was once again driven by its drag horses, but management warned of some tougher times in 2022. Consumer Health continued to perform well.
Bayer reported a strong beat to the consensus FY net income line (+75.4%); we had been too cautious at many levels.
… after all the disappointment Bayer has caused in recent quarters. Consensus was beaten by +7.3% at the top line and by +7.5% on an adjusted EBITDA level. This came after Crop Science’s strong pick-up in the Americas allowing the division to make a positive contribution. Pharmaceuticals and Consumer Health reported a mixed set of figures, but were acceptable. The lifted guidance supported our positive view, despite a small miss to our estimates.
Bayer looks a bit shy about announcing the first success in the glyphosate-related battles. Or realistic? We do not know why the company has not made more out of it. From our point of view, the recent case is too different to be seen as a trend reversal. Only a positive outcome of the Supreme Court’s final decision could wipe all unsettled as well as future cases from the table.
Bayer’s timing was perfect to make more than one announcement to deflect one’s full attention. Using a busy day is another option.
Basically, Bayer’s adjusted operating figures were not that bad. Crop Science reported some volatility in its margin, whereas the other divisions did quite well despite some miss of our estimates, especially on the profitability level.
Consensus was beaten at the top-line (+6.9%), whereas the adjusted EBITDA was missed by -7.1%. Likewise, ours was also beaten.
… but we see the count-down on Mr Baumann remaining tenure at closer to ‘… three’ rather to ‘ten … nine …’.
Bayer’s management has tried to ‘sell’ the rejection of the settlement mechanism for future glyphosate-related cases by Judge Chhabria as opening up new opportunities but basically the issues and risks are unchanged. While the Supreme Court ruling might be of some help on future liability risks, it is unlikely to prevent a pickup in the stream of new plaintiffs.
The planned hearing for the preliminary approval on 19 May 2021 (rescheduled from 12 May 2021) could mark the turn of the tide as the mechanism for the settlement of future glyphosate-related plaintiffs is not yet agreed. The judge has an additional 30 days to render his option.
Bayer reported a good start into the year, beating the street by +4% (top line) and +9% at the profitability level. However, the group’s operating performance made us not too enthusiastic.
Bayer really needs a kind of breakthrough or a brilliant idea to change the sentiment on the name. We understand glyphosate-related issues and the related payments continue to weigh on CF, but the 2021 guidance seems to be quite reachable, especially in Crop Science.
Nevertheless, our 2020 estimates were missed as we had factored in some additional provisions in Crop Science and did not envisage any potential reversals of impairments in other divisions. Consensus was met.
As argued in earlier reports, the Monsanto acquisition was not a good idea and, in our view, there will be additional provisions for the settlement of the claims.
We had been already quite cautious regarding the Q3 numbers, but Crop Science’s unexpectedly weak contribution led to a miss. The figures were also below consensus as there were more negative one-offs than expected, which may have been attributable to the unclear guidance.
The acquisition of Asklepios BioPharmaceutical (AskBio), while not a bargain, is a great move into the really hot topic of gene therapy. Based on the leading vector platform currently and pushed by numerous venture capital (VC) financing rounds, AskBio had built a broad and diversified R&D pipeline with three candidates in phase 1/2 trials. We see this as a major step towards better backward integration.
Companies: Bayer AG (BAYN:ETR)Allergy Therapeutics plc (AGY:LON)
Bayer’s announcement that it is to take an impairment on its agro business looks to us like a reality check: highly-hyped Monsanto was far too expensive.
Fortunately, the CEO’s term was prolonged for three years just some days ago. A correlation between the two events might be a contingency, but the announced additional cost-cutting measures should deliver by 2024.
It looks to us as if Bayer’s management has come to a conclusion for settling the line-up of different plaintiffs across the product portfolio. Compared to the partly settled glyphosate-related claims, those on Essure look a bit less expensive and will not burden the Q3 figures too much. Management is trying to ‘pack’ all the nasty issues into the ‘coronavirus year’.
In the light of the settlement of the majority of glyphosate-related plaintiffs, Bayer took €12,050m legal costs into account (also for dicamba and PCB). Regarding future litigation, there is currently no agreement in place.
Bayer’s operational performance was less pronounced in Q2, despite Crop Science’s stronger one. Pharmaceuticals and Consumer Health reported weaker than expected figures. Management now expects a stronger negative impact from the pandemic and has adjusted the guidance acco
Following our headline ’Settled!?’ on 25/06/2020, our new headline looks a bit revanchist as we had expected that Bayer ‘just’ wanted to manage expectations by pointing to the fact the mechanism has to be approved by the judge. The judge’s doubts on the planned mechanism for the glyphosate-related cases might sweep current management away. Or the company gets a different name.
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Weekly round-up of AIM-listed healthcare news.
Venture Life Group, GENinCode, Kromek, Alliance Pharma, Polarean Imaging, Benchmark Holdings, Ondine Biomedical, Verici Dx, Faron Pharmaceuticals, Avacta Group, Abingdon Health, Open Orphan, Belluscura, Hutchmed (China), Oxford Biodynamics
Companies: ANIC RUA CREO GENI HEIQ IHC IXI IUG OPTI SBTX VAL VLG
Companies: Futura Medical plc
Full-year results were in line with the preliminary guidance issued in early 2022. Feraccru revenues in Europe increased with a 60% increase in volumes and the US commercialisation of Accrufer continues, with broader insurance coverage (100m lives covered). As with many small cap companies, access to growth capital is currently difficult; however, the group has raised a $10m loan from a major shareholder providing a cash runway till end-2022. Our assumption is that further funding comes from deb
Companies: Shield Therapeutics Plc
Companies: Warpaint London PLC
Trading continues to track ahead of expectations, which have been upgraded twice so far YTD. There is clear evidence the growth strategy is bearing fruit. Distribution gains are increasing brand reach both in the UK and overseas. This appears to be an ideal time for its on-trend value-for-money proposition to gain traction, potentially with counter-cyclical characteristics as consumers start trading down. After the recent pull-back, valuation is undemanding for a 3-yr EPS CAGR of 13% with risk p
Singer Capital Markets
OptiBiotix has reported final results for the year to December 2021, with revenues growing 45% to £2.2m and the EBITDA loss increasing to £1.0m, reflecting the increased investment in the business. Post-period end, OptiBiotix has continued to return value to shareholders through the successful spin-out and listing of its ProBiotix Health division. Future growth of the company is supported by commercial agreements with large partners and a substantial pipeline of opportunities through its 2nd gen
Companies: OptiBiotix Health PLC
Companies: ORPH STX TSTL
Belluscura has announced the launch of the next generation X-PLOR portable oxygen concentrator and expanded distribution through a D2C offering and partnership distribution plan for smaller DMEs.
Companies: Belluscura PLC
Dish of the day
Visum Technologies has joined the AQSE Growth Market. The Company's business is to own and operate an "on-ride" video and photographic camera system that it sells and/or licenses to customers (being theme parks, ride manufacturers, souvenir imaging providers, and other leisure operators).
No Leavers Today.
What’s cooking in the IPO kitchen?
Immediate acquisitions (IME.L) is to re-join AIM via a Reverse Takeover of Fiinu Holdings Limited. Once complete the Compan
Companies: VAST TSTL 7DIG AHT CMX JADE
Companies: Oxford BioDynamics PLC
No Joiners Today.
Tungsten Corp and Sensyne Health have both left AIM. Hibernia REIT has left the Main Market.
What’s cooking in the IPO kitchen?
Visum Technologies seeking admission to The AQSE Growth Market. The Company's business is to own and operate an "on-ride" video and photographic camera system that it sells and/or licenses to customers (being theme parks, ride manufacturers, souvenir imaging providers, and other leisure operators). Due 30 June.
LifeSafe Holdings, a fi
Companies: SOLI REDX POS UFO GML PHC
An update from CVS this morning covering conclusion of the CMA process, a further acquisition and update on trading. The CMA investigation into the acquisition of Quality Pet Care (QPC) is now complete, thereby bringing to an end a 9 month process. As part of the undertaking, CVS yesterday completed the sale of QPC for cash proceeds of c.£9m, implying a c.£12m impairment. Whilst the CMA episode has clearly been a setback, it does not seem to have fundamentally impaired ongoing M&A ambitions give
Companies: CVS Group plc
The strong momentum from Q4-21 has continued into H1-22, with revenues expected to be up by more than 22% YoY. The outlook remains positive supported by strong industry demand and market share gains in the UK, where the group’s sustainability and affordability credentials are increasingly resonating. Whilst some macro pressures remain, these look to be manageable. We therefore make no change to our forecasts at this stage, but are highly encouraged by current trends and remain optimistic for the
Companies: Surgical Innovations Group plc
Companies: SourceBio International Plc
A positive AGM update confirms strong revenue growth has continued YTD and further margin improvement means management again expect EBITDA to be materially ahead of expectations. The business model is now settled, with additional distributors appointed in the US which should help drive further penetration into the Primary Care market there. China revenues were strong and with no sign yet of any slowdown, despite being cognisant of renewed lockdowns there. Gross margins have remained robust on po
Companies: Circassia Group PLC