Shares of Bayer AG (BAYN, Financial), a German pharmaceutical and life sciences company, are down just 0.10% on Friday after a positive week in which the stock gained 2% in the period of May 14 to May 18.
The company's stock is down on the news that currency effects will harm its earnings by as much as $191.5 million, with the euro appreciation against other currencies costing $250 million. Earnings before tax and depreciation will also be lowered by €70 million.
Overseas markets are a major driver of revenue for Bayer and are fueling the company's vulnerability to foreign market exchanges. The company's 2017 earnings show that over 60% of the company's sales came from outside of Europe. North America made up €10.14 billion of the company's sales in 2017, or 29% of total sales. Europe accounted for 39% of the company's sales, or €13.38 billion in total sales.
Slower earnings growth is hitting several European companies.
Bayer's CFO, Johannes Dietsch, announced that the company's synergies from Monsanto will be lower than the initially reported $1.5 billion. The lower synergies are due to anti-trust divestments. The company had aimed for a synergy goal of $1.5 billion in savings in three years, and the savings excluded divestment impacts.
Dietsch also stated that the company will provide an update on the synergies, but he did not state when an update will be provided.
Bayer's takeover of Monsanto resulted in regulatory hurdles that caused the company to sell its crop science businesses to BASF in order to win regulatory approval. Bayer will also increase capital, but he wouldn't speculate on the size of the capital that will be provided.
Capital hikes are not expected before May 25 and will happen close to the final closing of the Monsanto deal.
AHA guidelines are also being revamped for the ACLS certification, in which Bayer's aspirin products are recommended. The guidelines for children with heart disease will be updated, according to an AHA release, which may call for lower aspirin dosages, impacting sales of Bayer's signature aspirin product.
A rise in generic drug usage may also negatively affect aspirin and other sales at Bayer. The aspirin market is expected to continue to grow through 2024.
Bayer's Xarelto trial failure is also causing the company to backtrack on its best-selling drug. Xarelto sold $3.4 billion a year, with the company telling analysts that the sales are expected to rise to $5.3 billion a year.
Lack of efficacy in the secondary prevention of stroke led to initial fears that the company's sales projections would be revised down. Bayer promised that the failed trial would not impact sales of Xarelto.
The company halted its Phase III study when the drug showed no efficacy improvements over that of aspirin. Bayer claims that the bleeding rates were lower, but that bleeding was increased when compared to low-dose aspirin.
Key growth products for the company continue on their growth trajectory, with overall sales growth of 3% in the first quarter of 2018.
Disclosure: The author does not own any stakes in the listed equities.
