Bayer Earnings: Glyphosate Pricing Weighs on Results, but Long-Term Outlook Remains Unchanged

Bayer BAYN reported first-quarter results with falling glyphosate pricing weighing on core earnings per share (down 16%). While we had largely already factored this into our long-term outlook and don’t expect any major fair value estimate changes, the headwinds are likely contributing to pressure on the stock. With increased production of lower-priced competitive glyphosate returning to the market, we expect 2023 to represent a more normalized base year for Bayer’s glyphosate-based herbicides (down 50% in the quarter).

Beyond the glyphosate headwinds, the remaining products posted mixed results, but we expect improvement as the year progresses. Pricing was relatively strong with non-glyphosate crop science products, a trend we expect to continue, but this is partly driven by cost inflation, so the benefits on margins are reduced. In the drug group, new drug launches (cancer drug Nubeqa, up 131%, and cardiovascular drug Kerendia, up 362%) are helping to offset declines in more mature drugs, a trend that is likely to continue over the next several years. Also, COVID-19 pressures in China weighed on drug sales, but we expect this to reverse later in the year as the pandemic likely recedes. Ophthalmology drug Eylea posted a 5% gain in the quarter despite increasing competition from Roche’s Vabysmo. While Bayer filed a high-dose version of Eylea that should have more competitive dosing with Vabysmo, we expect biosimilar pressures in 2026 to all forms of Eylea in most international markets.

On the pipeline, Bayer continues to make progress, but we expect acceleration of new product development under incoming CEO Bill Anderson based on his experience within the innovative culture at Roche. We continue to view Bayer’s innovative pipeline as strong enough to support its moat. We are most bullish on phase 3 cardiovascular drug asundexian and several mid-stage drugs targeting unmet medical needs that can move quickly through development if early studies are successful.