Bayer’s Pipeline Is Looking Increasingly Well Positioned to Offset Long-Term Generic Pressures

After reviewing Bayer’s pipeline and changes to exchange rates, we are increasing our fair value estimate of Bayer’s local shares to EUR 83 from EUR 76 per share (to $22.50 from $20 on the ADR). Cardiovascular drug asundexian is partly driving the improving outlook for the firm’s pipeline. The drug recently started phase 3 development with data likely in 2025. The drug is still a higher-risk asset, as the phase 2 data was encouraging but didn’t fully de-risk the drug. Nevertheless, the timing of the phase 3 data may give Bayer a first-mover advantage for the next generation factor XI drugs. Also, Bayer is not partnering development of the drug with another firm (as was the case with older cardiovascular drug Xarelto) so the firm will retain all the upside if the drug is successful. The drug holds the potential to offset the likely generic competition for Xarelto that could begin in 2026. Bayer’s ability to develop the next generation of drugs to offset generic competition increases our conviction in the firm’s wide moat.