Bayer: Pharmaceutical Research and Development Day Highlights Key Long-Term Drivers

Bayer hosted a pharmaceutical research and development presentation that did not impact our fair value estimate but provided more details around earlier-stage assets that will be important in fortifying the company’s wide moat. Additionally, the company largely reiterated peak annual sales potential for recently launched drugs and late-stage assets, including cancer drug Nubeqa (EUR 3 billion-plus), chronic kidney disease drug Kerendia (EUR 3 billion-plus), vasomotor treatment elinzanetant (EUR 1 billion-plus), and cardiometabolic drug asundexian (EUR 5 billion-plus). With the exception of the very well positioned Nubeqa, we remain skeptical of Bayer's peak sales expectations, but even at lower expectations, we still view the company as undervalued. If key additional studies report positively for these drugs, we see upside to our sales projections and Bayer’s fair value. We are also encouraged by Kerendia tracking at a similar initial growth trajectory as Novartis’ older drug Entresto, which now generates close to $5 billion annually.