Prior to delving into a somber earnings call outlining challenges including debt, lawsuits, and loss of exclusivity on key drugs that would impact restructuring plans, Bayer’s CEO, Bill Anderson, began by recounting a rather grim anecdote of breaking his leg while skateboarding in 2021.

“I experienced a freak accident, resulting in breaking my right femur in four places,” shared Anderson of the injuries sustained from a hobby he’s enjoyed for four decades.

“Lying in the street alone, my leg bent nearly 90 degrees, I teetered on the brink of unconsciousness due to the pain,” Anderson added, underscoring his ability to continue working despite the profound impact on other aspects of his life.

The purpose of this dramatic account? Anderson draws parallels between his physical injury and the current state of the $25 billion German company.

Anderson, who assumed leadership of Bayer in June the previous year, used the metaphor of his broken leg to appeal to investors for patience as he postponed plans to split the group into three separate entities for a potential duration of up to three years.

“While we are a high-impact, mission-driven life science company with three robust businesses, we find ourselves significantly fractured in four areas,” he stated.

Broken Bayer

Bayer, renowned for patenting Aspirin, finds itself at a critical juncture after enduring years of decline. The company’s value has dwindled to a mere quarter of its peak of $122 billion nine years ago, with its shares plummeting by over half in the past year alone.

According to the latest annual financial report, sales dropped by 7% last year to €47.6 billion ($51.7 billion). Earnings before interest, taxes, depreciation, and amortization (EBITDA) declined to €10.6 billion ($11.5 billion) and are expected to further decrease in 2024.

Since its acquisition of Monsanto for $63 billion in 2018, Bayer has been besieged by a barrage of litigation related to the controversial weedkiller Roundup, widely regarded as one of the most ill-fated acquisitions in history. The company has already faced multi-billion-dollar payouts to claimants alleging a link between Roundup and cancer, with numerous additional cases pending.

Although Bayer has recently experienced some legal victories, such as a significant reduction in a California fine and the dismissal of another lawsuit, it still grapples with the impending expiration of exclusivity rights on key drugs, which is anticipated to severely impact revenues.

Xarelto, Bayer’s top-selling medication, is scheduled to lose its exclusivity in 2026, a development expected to result in a substantial sales decline, as projected by Chief Financial Officer Wolfgang Nickl.

These challenges have contributed to Bayer accumulating a debt of €34.5 billion ($37.5 billion), nearly equivalent to its annual sales. Fitch Ratings downgraded Bayer’s outlook to “negative” in August amid the mounting obstacles.

Bayer has committed to reducing its debt in the coming years through enhanced profitability in core operations, coupled with a drastic reduction in dividends to the legal minimum over the next three years, amounting to a 95% reduction.

Anderson resists split

In the face of numerous challenges, investors have been advocating for Bayer to divide the company into three separate entities, each focusing on its pharmaceutical, consumer health, and crop science divisions, in hopes of revitalizing its fortunes.

However, unlike his mended femur, Anderson is pushing back against investor demands to split the pharmaceutical group into distinct entities, suggesting that it will require up to three years of stabilizing efforts before such a move can be considered.

“In essence, regarding structural changes, our response is not at present. But this should not be interpreted as a permanent dismissal,” Anderson stated.