Find below a description of the strategic alignment of the different subgroups
(as published in the Annual Report 2007):
Bayer HealthCare’s goal remains to grow with or above the market in all divisions.
Our biggest HealthCare segment, Pharmaceuticals, comprises both Specialty Care and Primary Care activities. We aim to position our Pharmaceuticals segment as a strong supplier of products for medical specialists, while at the same time seizing opportunities in the primary care arena. We also want to focus more closely on indications in which there is major potential for improving diagnosis and therapy.
The acquisition of Schering AG, Berlin, Germany, in 2006 was a key step in this direction. Our promising Specialty Care portfolio in the fields of hemophilia (Kogenate®), cardiology (Xarelto®, currently in registration) and oncology (Nexavar®) was significantly expanded and strengthened by the acquisition-related addition of leading products in the fields of gynecology (YAZ®/Yasmin®), diagnostic imaging (Magnevist®) and multiple sclerosis (Betaferon®/Betaseron®).
Our Primary Care business offers products for general practitioners. We are well represented in the primary care market with our established brands Avalox®/Avelox®, Levitra®, Adalat®, Glucobay® and Ciprobay®/Cipro®. In the United States, these products are marketed through the existing alliance with Schering-Plough. (Please note that Schering-Plough Corporation, New Jersey, and the company acquired by Bayer in June 2006, i.e. Bayer Schering Pharma AG (formerly named Schering AG), Berlin, Germany, are unaffiliated companies that have been entirely independent of each other for many years.) Since 2007, we have also been co-marketing Schering-Plough’s cholesterol-lowering drug Zetia® in Japan following its registration there, further strengthening our Primary Care business in this region.
Research and development is an important growth driver for our Pharmaceuticals business, which is why this segment accounts for the biggest proportion of R&D spending within the HealthCare subgroup. Life cycle management, inlicensing and cooperation agreements are important elements of our strategy, as such business development activities supplement our own research efforts and are designed to strengthen our portfolio.
Our Consumer Health segment is comprised of the Consumer Care, Diabetes Care and Animal Health divisions.
The goal of our Consumer Care Division is to build a leading position in the global over-the-counter (OTC) medicines market. Our strategy is primarily aimed at fully leveraging the growth potential of proven brands such as Aspirin®, Aleve®, Canesten®, Bepanthen®, One-A-Day®, Rennie® and Alka-Seltzer®. We are pursuing a clear course of expansion in fast-growing regions such as eastern Europe and Asia/Pacific, and we aim to further develop our business in new growth segments. We also intend to seize external growth opportunities through acquisitions and inlicensing. An example of this is the acquisition of Citracal® in 2007.
Our Diabetes Care Division aims to enhance its competitive position in the area of blood glucose measurement and diabetes management. To this end, we are expanding our product range by developing new measurement systems and test strips to facilitate even more user-friendly blood glucose monitoring for diabetics. We also aim to expand our portfolio by investing in additional business areas. We intend to enhance our competitiveness by continuously improving our products, as well as through cost-containment measures and the more efficient use of our resources. Our strategy also includes supplementing our own strengths through strategic partnerships in specific fields of expertise.
In the Animal Health Division, we aim to achieve global leadership positions in the livestock and companion animal markets and to become a preferred supplier and partner. Our strategy is directed at achieving organic growth by focusing on attractive countries and markets, as well as through the successful life cycle management of existing core brands.
Bayer CropScience is aligning its corporate planning to the long-term trends in agricultural markets. As a leading innovation-driven enterprise comprising the Crop Protection, Environmental Science and BioScience business units, its aim is to provide products and integrated solutions that contribute to the production of high-quality food, animal feed, energy crops and natural fibers. Against the background of limited acreages and a steadily increasing world population that places growing demands on the quality of food and clothing and consumes more energy, it is essential to safeguard and further increase agricultural yields. We seek to maintain mutually beneficial, long-lasting and dependable partnerships with our customers and all other interest groups. We manage our business responsibly in keeping with our commitment to sustainable development and in order to achieve profitable long-term growth.
Innovation forms the basis for the company to create value in the future. The development of new active ingredients and formulations along with high-quality seed enables us to replace older products and technologies with innovative products that have an improved performance spectrum, offer better environmental compatibility and user safety, and increase value-added for our customers. These new products also help us to boost sales and are an important prerequisite for meeting our profitability targets. Our strict cost management is making a further significant contribution. To optimize our cost structures, we introduced a program of measures in August 2006 that should be largely implemented by 2009, leading to annual savings of about €300 million by 2010. We thus aim to make Bayer CropScience even more efficient in all areas.
In the Crop Protection segment, Bayer CropScience aims to defend and further expand its leading market positions in insecticides, fungicides, herbicides and seed treatment by maintaining a broad regional presence and offering a balanced portfolio of innovative and highly effective products.
We endeavor to achieve this strategic goal by steadily enhancing our product mix. This not only means regularly launching new products from our research and development pipeline and successfully managing product life cycles, but also carrying out research in new growth areas. Examples include projects aimed at making plants healthier and increasing yields by improving nutrient uptake and stress tolerance.
Environmental Science makes use of the development and production capacities of Crop Protection and its new active ingredient developments. In terms of sales, it is one of the world’s leading suppliers of products for non-agricultural use. Our strategy is to further expand this position by developing and marketing high-quality products for consumers and professional users. The focus here is on the development of innovative, customer-oriented products and solutions that are easy to use, safe to handle and satisfy society’s increasing demands with regard to health, hygiene, growing and greening.
BioScience comprises the research, development and marketing of commercial seeds and solutions based on plant biotechnology and modern breeding methods. We aim to create integrated offerings for farmers through a combination of seeds, new plant traits and crop protection products. BioScience subsidiary Nunhems is a leading developer and supplier of high-quality vegetable seed. With regard to agricultural applications, we focus our activities on three core crops – cotton, canola and rice. We aim to market the technologies we develop not just in our own seed products, but also - with the help of our partners – for other crops such as corn and soybeans. We strengthened our cotton activities in 2007 through the acquisition of U.S. cotton seed producer Stoneville. Bayer CropScience is stepping up its commitment to the seed and plant biotechnology segment in the future with the aim of expanding BioScience sales to approximately €1 billion within the next ten years.
MaterialScience aims to defend its leading market position in the future. Here we are relying in particular on our technological know-how, new applications for our products in the Materials and Systems segments and the targeted expansion of our presence in the growth markets of Asia. Our recently completed capital expenditure projects in Asia therefore represent an important step in the expansion of our business activities in this fast-growing region. We also intend to enhance this segment’s performance in all areas by continuously improving its cost structures.
The “New Business” section identifies and evaluates market and technology trends for all MaterialScience business units, translating business ideas into projects for the development of new products and applications beyond the company’s existing core business.
In the Materials segment, the acquisition of the Ure-Tech group of Taiwan has greatly strengthened the market position of our Thermoplastic Polyurethanes business unit, boosted our market share in Asia and given us global market leadership in this field. Thermoplastic Polyurethanes will further enhance its focus on high-margin, fast-growing products with the aim of achieving and maintaining higher profitability.
The commissioning of the first phase of our world-scale production facility for polycarbonates in Caojing, China, has helped to raise cost efficiency. If demand rises sufficiently, we aim to bring the second phase on stream at the end of 2008, enabling us to supply the Chinese polycarbonate market from local production to a large extent. Furthermore, we intend to make available sufficient resources for product and applications development in growth areas of this market. In addition to our current expansion course in China, we aim to constantly evaluate business potential in other regions with a view to expanding our market coverage. We plan to strengthen our compounds business through targeted investment and expand it geographically. In the case of semi-finished products such as polycarbonate sheet and film, we continue to aim for higher returns by optimizing our product portfolio.
We are endeavoring to strengthen the world market position of our Systems segment, too, by exploiting growth potential. Here again, we have recently completed a number of capital expenditure projects in Asia. Our world-scale production facility in Asia should make our Polyurethanes business unit more efficient and allows us to deploy the latest technologies in this growth region. We are focusing primarily on quality, product innovation and process improvements in order to capture further market share in the fast-growing Asian markets. Our aim is to meet globally increasing demand for our products by further expanding our MDI capacities. We are striving to improve the performance of the Polyurethanes business unit by increasing the efficiency of our research and development and steadily improving our cost structures. Portfolio management activities are planned in some market segments to achieve a shift toward higher-performance products, thereby improving profitability. We continue to work toward strengthening our market position in the polyurethane systems business.
The Coatings, Adhesives, Sealants business unit is seeking to defend the market position of its basic and modified isocyanates segment and plans to meet increasing demand in the growth regions by expanding production capacities. We aim to achieve higher profitability in our resins activities by increasing the use of leading-edge technologies and optimizing our product portfolio. In addition, leaner distribution structures at our newly established company Viverso, based in Bitterfeld, Germany, should contribute to increased profitability in this business unit.
In the newly formed Industrial Operations unit, we plan to use modern technologies to produce raw materials such as chlorine and sodium hydroxide for the Polyurethanes; Coatings, Adhesives, Sealants; and Polycarbonates business units, as well as for sale to third parties. We also plan to tap additional synergy potential for MaterialScience by bundling procurement activities and our trading activities regarding by-products.
