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Stock Strategist

Drug Launches, Diversity Support Bayer's Steady Gains

The company has established a strong presence in fast-growing emerging markets.

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Largely on the basis of the strong competitive advantages of its healthcare group and to a lesser extent its crop science business, we believe  Bayer (BAYRY)/(BAYN) has created a narrow economic moat despite the lack of competitive positioning of its material science business.

In the healthcare division, which provides close to 50% of sales, Bayer’s strong lineup of recently launched drugs and solid exposure to biologics should support steady long-term growth. Two of Bayer’s top-selling drugs are biologics: Betaferon for multiple sclerosis and Kogenate for hemophilia. While competition is increasing in both areas, the manufacturing complexity of these drugs deters generics from entering the market. Further, strong demand for cardiovascular drug Xarelto and ophthalmology drug Eylea should continue to drive growth.

Damien Conover does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.