Bayer AG (BAYRY) (Q3 2026) Earnings Call Highlights: Raised Full-Year Outlook on Pharma ...

Negative Points

• Crop Science core crop protection sales declined due to portfolio exits, regulatory impacts, generic pressure, and adverse weather, with continued challenges expected in 2027.

• Consumer Health sales growth was only 2% year-to-date, with challenging market dynamics, particularly in North America, and softer allergy and cold season.

• Free cash flow was negative EUR3 billion for the first nine months due to litigation-related payments, though the full-year outlook was improved.

• Pharma faces headwinds from Xarelto and Eylea declines, and upcoming IRA negotiation impact on Nubeqa starting in 2027, with potential pricing pressure.

• Bayer AG ( BAYRY ) anticipates a tougher year-on-year comparison in 2027 for Crop Science due to the absence of licensing resolution income and continued market uncertainties.

Q & A Highlights

Q: Will Bayer consider splitting off Crop Science, and what has been learned from the Corteva/Viler separation? A: CEO William Anderson said it is too early to draw conclusions from the separation, which is only one month old. He stressed that Bayer remains focused on executing its five priorities and rolling out AI across the company, arguing that major structural moves would carry a high opportunity cost given the progress already made, including removing almost 70% of management layers over the past three years. Crop Science head Rodrigo Santos added that the division's priority is performance, innovation and margin expansion under its five-year framework.

Q: What is the outlook for the glyphosate class settlement, including timing of the judge's ruling and the level of opt-outs? A: CEO William Anderson said a ruling is expected within the next several weeks, before Christmas. He noted that the opt-out deadline was in early June, before three favorable developments: the Supreme Court ruling, the fairness hearing and the unanimous defense verdict in the Aretino trial. He said many plaintiffs who opted out are now seeking to rejoin the class, subject to approval by class counsel, Bayer and the judge, so the reported opt-out number will likely be a moving figure that continues to decline.

Q: What are the growth prospects for Nubeqa, including the impact of Xtandi generics and IRA negotiation? A: Pharma head Stefan Oelrich said Bayer is optimistic as it expands coverage from about 60% to 80% of eligible patients, supporting volume share gains. He acknowledged pricing headwinds from Xtandi generics but said the growing base should support continued growth. On the IRA, he said negotiations are expected to begin in 2027, with the sales impact starting in 2029, and that Bayer will seek to negotiate price levels similar to competitors; this remains a clear headwind.

Q: What is the launch trajectory for asundexian, including the US label outlook and Medicare/commercial mix? A: Stefan Oelrich said the Chinese approval label is solid with no significant restrictions, but it is too early to say whether the US label will match it as FDA discussions continue ahead of the PDUFA date. He expects a heavily protocolized indication, with patients leaving hospital on a one-month supply, which should pressure payers to continue prescriptions. Medicare will be important but has promotional limitations, while Bayer will support commercial patients early in treatment. He declined to speculate on milvexian but noted Bayer likely has about a one-year advantage over the follow-on competitor.

Q: What are the drivers of the upgraded group outlook for 2026? A: CFO Judith Hartmann said Bayer now expects adjusted EBITDA of EUR9.8 billion to EUR10.3 billion at constant currencies, up from EUR9.6 billion to EUR10.1 billion, driven by strong Pharma performance. Free cash flow guidance was raised by EUR1 billion to minus EUR1.5 billion to minus EUR0.5 billion, and net financial debt is now expected at EUR28 billion to EUR29 billion, versus EUR29 billion to EUR30 billion previously. Core EPS guidance was reiterated.

Q: How should investors think about Pharma margins given the upcoming asundexian launch investment? A: Stefan Oelrich said the strong Q3 margin of 27.6% was flattered by divestitures and should be adjusted down by about 20 basis points operationally. He warned that additional selling expenses for the Sunharbo (asundexian) launch, starting in the US and China from the first quarter, will weigh on margins. Bayer still expects a stable to slightly pressured margin next year, followed by gradual improvement toward 30% by 2030.

Q: What is the outlook for Crop Science margins and top-line in 2027? A: Rodrigo Santos said 2027 will face challenging market conditions, including El Nino, geopolitical volatility, pressured farmer economics and a likely reduction in US corn area toward historical levels. Reported sales and margins will also moderate because licensing resolution income in corn and soy will not recur. However, the underlying business remains on track under the five-year framework, with expected above-market performance, strong Seeds and Traits momentum and new crop protection launches such as Plenexos in the US and Brazil.

Q: What is driving the Kerendia growth outlook of around 60% for the full year? A: Stefan Oelrich said percentage growth will moderate in Q4 as the base grows, despite positive momentum across indications. He noted Bayer is predominantly a non-Europe play due to low European pricing, and some rebate considerations also factor into the 60% full-year expectation.

Q: How is the North American corn order book shaping up for 2027, and what drove the weaker Crop Protection results? A: Rodrigo Santos said US corn area could decline toward historical levels next year, though Bayer's order book is strong thanks to new-generation hybrids. He attributed the Q3 Crop Protection weakness mainly to weather, particularly hot, dry conditions in Europe and Asia that hurt fungicide and herbicide applications, rather than to a structural deterioration. He expects a strong Latin America performance in Q4 led by fungicides such as Fox Supra and Fox Ultra and insecticides including Vayego Prime.

Q: How is Bayer thinking about the dividend and capital allocation for 2026 and 2027? A: Judith Hartmann said it is too early to discuss 2027 specifically but outlined her philosophy: higher cash generation over the coming years from Crop Science's five-year plan, Pharma's success and Consumer Health's roughly EUR1 billion cash flow base, plus lower litigation outflows as containment progresses. She said this should allow Bayer to materially increase investment, pay down debt and, over time, start paying a higher dividend again.

Q: What is happening with gross-to-net spreads and rebates in Crop Protection? A: Rodrigo Santos said Bayer has managed sell-out, pricing, channel inventories and gross-to-net with high discipline for years, using different strategies by product and region. He said there is no significant change in gross-to-net right now beyond adjustments needed because of generics, and that raw material costs are being managed through sourcing and contract renegotiations.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .