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Bayer Posts in Line Q4, but Litigation Concerns and Expected Xarelto Patent Loss Weigh on Valuation

Damien Conover, CFA Sector Director

Analyst Note

| Damien Conover, CFA |

Bayer reported fourth-quarter results largely in line with our expectations, and we don’t expect any major changes to our fair value estimate. We continue to view Bayer as undervalued with the market likely ascribing too much valuation pressure from the ongoing glyphosate litigation and the upcoming patent loss on cardiovascular drug Xarelto. We expect the proposed settlement of close to $10 billion will largely address the glyphosate cases, but we continue to assign the firm a high uncertainty rating, partly due to wider potential litigation outcomes. Also, while the 2023 Xarelto patent loss will likely create growth challenges following generic launches, an increasingly strong new line up of drugs should mitigate pressure and support our wide moat rating.

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Company Profile

Business Description

Bayer is a German healthcare and agriculture conglomerate. Healthcare provides just over half of the company's sales and includes pharmaceutical drugs as well as vitamins. The company has a crop science business that includes seeds, pesticides, herbicides, and fungicides, which was expanded through the acquisition of Monsanto.

Kaiser-Wilhelm-Allee 1
Leverkusen, 51368, Germany
T +49 214301
Sector Healthcare
Industry Drug Manufacturers - General
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type
Employees 100,618