Bayer AG

XETRA:BAYN

Earnings Call Transcript 2018-Q3

[Operator]

Ladies and gentlemen, welcome to Bayer AG's press call. This conference is being recorded. [Operator Instructions] I'd now like to hand over to Dr. Michael Preuss, who is Head of Corporate Communications at Bayer.

[Michael Preuss]

Ladies and gentlemen, good morning from me, too, and welcome to our press call for the figures on Q3 2018. Thank you for your interest and for attending. We have the CEO with us, Werner Baumann; together with Wolfgang Nickl, the CFO of Bayer AG. As usual, the CEO, Mr. Baumann, will be giving you the key figures for business development and then we will have the questions and answers. Before we begin, I'd like to give you some information on statements and legal information at the beginning of the presentation. And now I'd like to hand over to Werner Baumann.

[Werner Baumann, Chairman of the Board of Management & CEO]

Ladies and gentlemen, I would also like to welcome you to today's conference call on the third quarter of 2018. Seeing as we published our news release and interim report early this morning, I'd like to focus on the most important figures and topics. And then Wolfgang Nickl and I will answer your questions.Moving on to the third quarter. It was clearly marked by our acquisition in the agricultural industry. This is the first full quarter in which the acquired business is included in our figures. it contributed about EUR 2.2 billion to sales and roughly EUR 255 million to clean EBITDA. After adjusting for portfolio effects and the impact of exchange rates, group sales increased in the third quarter. EBITDA before special items was level year-on-year. As such, we can look back at a good business performance in an overall challenging environment during the third quarter. Pharmaceuticals saw encouraging performance and Crop Science registered a substantial increase in earnings due to the acquisition. As for Consumer Health, sales increased on a currency and portfolio-adjusted basis while earnings were held back by currency effects, however. We confirm our group outlook for the full year, which we had adjusted in the second quarter, while the forecast for Consumer Health and Animal Health are now increasingly ambitious. Another important event in the third quarter was undoubtedly the jury's verdict, an incorrect one in our eyes, in a California court of first instance in the Johnson case involving glyphosate. I will discuss the current status in a few moments. First, however, let me explain our business data in more detail. Please note that the sales variations I mentioned are adjusted for currency and portfolio effects. Group sales totaled EUR 9.9 billion in the third quarter of 2018. As mentioned at the outset, the acquired business is now included for a full quarter. The businesses divested to BASF are also included on a prorated basis. If these portfolio changes and currency effects are disregarded, sales rose by 1.9%. EBITDA before special items was level year-on-year at EUR 2.2 billion. Earnings were once again diminished by negative currency effects. This effect amounted to around EUR 160 million for the original Bayer business alone. EBIT of the Bayer Group climbed from EUR 1.4 billion in the prior year quarter to EUR 4.4 billion. This mainly included divestiture proceeds of EUR 3.9 billion before taxes from the divestments to BASF. Core earnings per share from continuing operations were below the prior year level as expected, at EUR 1.19. This was due to higher financing costs owing to the acquisition, which stood against the earnings contribution from the acquired business that was lower due to seasonal reasons. In addition, the number of Bayer shares increased significantly as a result of the equity measures undertaken during the first half of the year. Bayer's net financial debt as of September 30, 2018 amounted to EUR 36.5 billion and was, therefore, down by more than EUR 8 billion or over 18% from the end of the second quarter. This was mainly due to the proceeds from the divestment of Crop Science businesses to BASF. I would now like to turn to the business performance of the individual divisions. Let's start with Pharmaceuticals. Sales of our Pharmaceuticals business increased by an encouraging 4.8% in the third quarter to EUR 4.2 billion, with our key growth products continuing to make significant gains overall. These products achieved sales of EUR 1.7 billion, which was nearly 16% more than in the previous year. Our anticoagulant, Xarelto; the eye medicine, Eylea; and Adempas to treat pulmonary hypertension posted especially strong growth rates of between 18% and 22%. The cancer drug, Stivarga, registered a slight increase in sales, mainly in China. However, sales of our cancer drug, Xofigo, declined by a substantial 13% due particularly to lower volumes in the United States and Japan. EBITDA before special items of Pharmaceuticals rose by 4.1% to EUR 1.6 billion in the third quarter. If the negative currency effects are disregarded, earnings actually rose by 9%. This earnings growth was predominantly attributable to the very good development of business and to income of approximately EUR 190 million from a Xarelto development collaboration with Johnson Research and Development after U.S. approval was obtained in a new and highly promising indication. Third quarter earnings were held back above all by temporary supply disruptions for certain products and a higher cost of goods sold. Let's now look at Consumer Health. Sales of our self-care products totaled EUR 1.3 billion in the third quarter, corresponding to an increase of 3%. All regions contributed to this growth, but Asia Pacific delivered the strongest sales gains with an increase of over 9%. Our best-selling product, the antihistamine Claritin, registered a decline that was mainly attributable to the continuing weak season for this market segment in the United States. Sales of our analgesic Aspirin were also below the level of the prior year quarter, due mostly to anticipated temporary supply disruptions. By contrast, business with our Bepanthen and Bepanthol brand of wound and skincare products developed positively, especially in Europe. The prenatal vitamin, Elevit, even posted double-digit growth, driven by continuing strong demand, in Asia Pacific in particular. EBITDA before special items of Consumer Health in the third quarter declined by 9.5% to around EUR 250 million. A factor here was that earnings in the prior year period were buoyed by onetime gains from the sale of noncore brands. We also had to contend with negative currency effects. On the other hand, higher volumes, lower selling expenses and a decrease in general administration expenses had a positive impact on earnings. Our Crop Science division posted sales of EUR 3.7 billion in the third quarter. After adjusting for currency and portfolio effects, sales declined by 9.5%. Sales were impacted by the accounting measures taken in the prior year in Brazil, which had a positive effect on sales in the third quarter of 2017. Another factor that held back sales in this development of business in Europe were -- we registered declines as a result of exceptionally dry weather. By contrast, the newly acquired business drove an over 80% increase in sales on a reported basis. Among our Crop Science business units, we recorded positive performance at vegetable seeds and environmental science. EBITDA before special items of Crop Science increased by about 26% to EUR 386 million in the third quarter. This was mainly due to the earnings contribution from newly acquired business. Now let's look at our Animal Health business unit. As expected, third quarter sales were down following a very strong second quarter, falling by 13.5% to around EUR 300 million. Business declined particularly in North America as some of demand -- some of the demand for our Advantage family of flea, tick and worm control products had shifted from the third quarter into the first half of the year. On the other hand, our Seresto flea and tick collar registered a slight increase in sales. EBITDA before special items of Animal Health declined by 46% to EUR 44 million in the third quarter, due mainly to lower sales. Ladies and gentlemen, that concludes our look at our third quarter business performance. I'd now like to give you a brief overview of our innovation activities. With regard to our late-stage pharmaceutical pipeline, we have registered encouraging progress as of late. In August, we submitted a registration application for larotrectinib to the European Medicines Agency. Larotrectinib is a novel active substance to fight cancer that we are jointly operating with U.S. company, Loxo Oncology. The registration application is also being processed by the regulatory authority, FDA, in the United States. We expect a decision by the end of this month. We also took a big step forward with darolutamid, a novel substance for the oral treatment of prostate cancer. A Phase III trial found that it significantly extended metastasis-free survival. Of course, we are also continuing to develop the products that are already on the market. For example, just over a month ago, we received marketing authorization for Xarelto in the United States in another indication, treatment of coronary artery disease and peripheral artery disease, a condition where blood flow to the legs is reduced. This means that Xarelto is the only oral anticoagulant approved for this indication, offering substantial therapeutic benefit for patients and high sales potential. At Crop Science, the focus after the acquisition has been on integrating our R&D activities. Combining the 2 companies gives rise to great opportunities, particularly in the areas of research and digital farming. Now I'd like to briefly address the current status of the litigation related to glyphosate, as I mentioned earlier. Glyphosate is an essential active ingredient in modern agriculture. It's safe to use, highly effective and efficient in terms of resources. It has a positive impact on carbon emissions and helps reduce soil erosion. As of October 30, 2018, we have been served with lawsuits from about 9,300 plaintiffs in the United States. Additional lawsuits are anticipated. We are convinced, as before, that we have meritorious defenses and intend to defend ourselves vigorously in all of these lawsuits. As regards the Johnson case, the verdict is a single judgment by a court of first instance and is not a finding for the other lawsuits. We consider this verdict to be incorrect and will file an appeal before the California Court of Appeal. Glyphosate is safe when used as directed, as confirmed by more than 800 scientific studies, decades of practical experience with glyphosate and the assessments of regulatory authorities around the world. The agricultural health study commissioned by the U.S. government arrived at the same conclusion. Over 50,000 agricultural workers took part in this extensive study over a period of more than 20 years. Ladies and gentlemen, I'd like to finish by talking about our financial targets. As I mentioned at the outset, we have confirmed our adjusted group outlook for the full year. This means that we continue to expect sales of the Bayer Group to come in at more than EUR 39 billion in 2018. This corresponds to a mid-single-digit percentage increase on a currency and portfolio-adjusted basis. We see EBITDA before special items rising by a low to mid-single-digit percentage. On a currency-adjusted basis, this corresponds to an increase by a high single-digit percentage. We expect to generate core earnings per share of between EUR 5.70 and EUR 5.90, which corresponds to a decrease by a high single-digit percentage on a currency-adjusted basis. As before, we aim to pay out a dividend per share for 2018 that is at least at the same level as in the prior year. This demonstrates our optimism moving forward, while at the same time underlining the success we expect the combined business to achieve. And you can rest assured, ladies and gentlemen, that we will not cease in our efforts to drive innovation while also keeping an eye on profitability. We will provide further details, including specific medium-term targets, at our Capital Markets Day on December 5. You can follow the event live online. And now I would welcome your questions.

[Unknown Executive]

Thank you very much, Werner Baumann. Ladies and gentlemen, you can now ask your questions.

[Operator]

[Operator Instructions] The first question is [ Ms. Hunik ] from [ Nerveinershur post ].

[Unknown Attendee]

I have 3 questions. First of all, Aspirin. How much did it decline in terms of the delivery interruptions? And other questions in Leverkusen and the FDA letter. What about that? Have the problems there been eliminated? And what about EUR 300 million in reduction in earnings? What about the Super Bowl, where you want to look and see what can happen there in the pharmaceutical area when it comes to improvements in research?

[Werner Baumann, Chairman of the Board of Management & CEO]

Thank you, [ Ms. Hoerning ]. Thank you very much for your questions. We will break the -- we do not break down the sales effects into individual units, but you can see that Consumer Health as a whole in Q3 did very well overall, and we continue to expect an effect on earnings and sales of EUR 300 million for 2018 as a whole. And what you mentioned, the problem you mentioned in Leverkusen, in other words, dealing with all of the issues that were shown in the warning letter, is something that is ongoing. We're on schedule, and we expect this to be completed by the end of the year. And then at the beginning of the year, at the beginning of 2019, we expect to have a reinspection by the FDA so that we can then return to the good manufacturing standards and be compliant, and that this will be officially determined. The Super Bowl, well, we already said that since the middle of this year, we have a new R&D management team in place in Pharmaceuticals, and we will see how our innovations can be increased and the process is ongoing within project activities. Here, too, we are on schedule. And as I said in my introduction, we will be talking about all of the issues and we'll be developing strategy portfolios and innovations. And we will be announcing our medium-term targets on the 5th of December.

[Operator]

The next question is [ Ms. Becker ] from [ the Bersenseide ].

[Unknown Attendee]

I'd be interested in the write-offs on intangibles, EUR 580 million, I believe, was the figure she mentioned.

[Wolfgang U. Nickl, CFO & Member of Management Board]

[ Ms. Becker ], Wolfgang Nickl is my name. We're talking here about adjustments as part of the accounting for the acquisition. And this is a question here of the assessment of the inventories at Monsanto at fair market value, and this is something that is carried out throughout the different quarters. And this was about EUR 500 million for this quarter.

[Unknown Attendee]

Well, I think there's a misunderstanding. We're talking about the expenses for the reassessment of the inventories, but you have write-offs on intangibles as well. That was EUR 578 million. And of course, we also have write-offs for the intangibles which were capitalized as part of the accounting procedures. But the question, is this normal? Or...

[Wolfgang U. Nickl, CFO & Member of Management Board]

Well, we have about EUR 27 billion in intangible assets, which are in the balance sheet now. And then over the next 10 to 12 years is when they will be paid off. And then we will see that for every year, we will have about EUR 1.6 billion to EUR 2 billion in addition each year.

[Operator]

The next question is from Mr. [ Frontoff ] from Handelsblatt.

[Unknown Attendee]

I also have a question with regard to the Super Bowl, but you've already answered it. Maybe we can come back to the business cycle in agriculture -- in agrochemicals. Were the earnings contributed by Monsanto good? I think they were. That demonstrates that the agrochemicals sector is doing well in terms of its business cycle. There were other indications.

[Werner Baumann, Chairman of the Board of Management & CEO]

Well, sir, this is a question that we could elaborate upon at great length because in our business, we are affected by a number of different effects, and this has actually happened over the last 9 months. The crop business cycle is also affected by a number of different factors. Let me mention one thing. Our reported figures, of course, are not of great informational value because we have the portfolio effects. But on a pro forma basis, if you look back at the 9 months and if you were to combine the merged business over that period, the sales growth would be to the tune of 1%. And this growth would be against the backdrop of a market environment which continues to move at a very low level of growth. At the beginning of the year, we had expected a stronger recovery of the business cycle. But due to the geopolitical tensions, in particular the trade wars before the United States and China over the course of the year, this went down considerably. Therefore, the environment is weaker and it reflects on the commodity prices. All told, we expect the industry to post slight growth this year. We have given a certain growth in our guidance that takes account of the portfolio, but it doesn't represent the underlyings correctly. Now reaching the end of the year, we should look forward and we expect that inventories will normalize. And the crop industry, it is the stock to use ratios of the larger crops. And the only crop where we have high inventories compared to the previous year is soy. But if you look at corn and the other crops, you can see that we have a very good point of departure for the following year.

[Operator]

The next question comes from [ Mrs. Bender ] from The Wall Street Journal.

[Ruth Bender]

I wanted to ask something. Now, you've pointed out that the forecast for Consumer and Animal Health is increasingly ambitious. Could you give us some more details with respect to the strategic significance of the Animal Health division? Does that change anything to your analysis of the group structure being the correct one? The second question is directed to the glyphosate lawsuit. You repeatedly refer to the scientific studies that opposed the decisions, but nevertheless, your share price hasn't recovered yet. Are you confident that this message will get across to both investors and the public at large, which are viewing the situation more critically differently from the United States? In France, for example, are you going to do anything different to polish the image of Monsanto in this respect?

[Werner Baumann, Chairman of the Board of Management & CEO]

Well, Mrs. Bender, thank you so much for both questions. Moving on to Animal Health and Consumer Health. Let's take those first. We initially communicated that the goals that we have set ourselves for the company as a whole will be achieved. This is something we've confirmed. In this connection, given that we aren't giving guidance at the level of the subsegments, we also specified that from our current point of view, achieving the goals for Animal Health and Consumer Health in operating terms, we're talking about the last 3 months of the year, appears to be increasingly ambitious. But this is not connected to any kind of strategic considerations. This is a purely operational topic. Quarterly results shouldn't and couldn't be put in a strategic context. That's what we have to say on that point. This is merely a qualification of the composition, if you will, of the group's earnings, which we expect by the end of the year. And once again, earnings for this year will be achieved as set out in our guidance. Now with respect to glyphosate, I would like to thank you for the question, first and foremost, because it gives me an opportunity to place the entire issue in a different light. As I mentioned earlier, we are and remain convinced that glyphosate when used as directed is extremely safe and effective. If you take a look at the study landscape, especially after the WHO suborganization IAC reached its risk assessment that was done in 2015, I think it is worthwhile looking back to that and then to look at what has happened since then. All of the major regulatory units the world over have taken this as an occasion to take another extremely close look at glyphosate and to evaluate it in terms of its risk profile. You can look at the European regulatory authorities, the Japanese, the Australians, the Koreans, any, just pick one. If you take the EPA as an example thereupon, the EPA commissioned more than 121 additional studies and looked at them and reviewed them in order to see if there were any indications of cancer risks. And once again, they reached the conclusion, as all of the other regulatory authorities did, by the way, that when used as directed, there are absolutely no risks. And the IAC study under the WHO, is directive based on a generic risk, unlike all of the other WHO studies without putting that into correlation with the actual exposure. It is important to understand that in that context. And against the backdrop of the overwhelming scientific and regulatory evidence and our own analysis that was conducted in-house both in our predecessor company and in the current company, we are fully behind these statements. We maintain them wholeheartedly. What would help us in addition to our conviction would be some support from the media, and you, in the singular and plural, are very important multipliers for us. Should you convey an actual picture of the information that is available to us and that at the end of the day is also available to you and in this context, I would like to make some commentary on some issues that have been flying around the press, some of them controlled by plaintiffs' counsels in the United States. A lot of what we do is taken out of context, and I can only implore that you put all of these things in the right context.

[Operator]

Now we have the next question, Ms. Weiss from Reuters.

[Patricia Weiss]

I would, first of all, be interested in the question of glyphosate. Mr. Condon was quoted, and he said by 2021 at the latest, all of the litigation in the U.S.A. will have been completed. And can you confirm this? And could you also put a figure on it? How much have you in -- placed in provisions for defense? I'd also be interested to hear what the analysts have talked about. They talk about expanding your pipeline. Is this something where you could -- can we expect more pipeline deals in the years to come? So explicitly, I'm talking about the Loxo deal. This -- do you expect a similar deal in the future? And my final question, Animal Health, I'd also like to ask here as well. You said that strategic decisions are not to be seen with relationship to quarterly results. But irrespective of that, perhaps you could give us a commitment to Animal Health or not?

[Werner Baumann, Chairman of the Board of Management & CEO]

Ms. Weiss, thank you very much. The first question or the first 2 questions you asked on glyphosate, the situation is as follows. In the first instance case, here, we plan to lodge an appeal. We are about to submit the appeal to the court in California, and we're preparing that letter now. And we can assume that the appeal instance will take 1, 1.5 or even 2 years. So when you see this case, then you will see that with this 1 appeal case from a first instance case, this means probably around the end of 2019 or early 2020 or even longer. There are all sorts of additional cases, which will be dealt with. And as far as we know, the current status is that the next cases will be dealt with in the middle of the first quarter in the United States, and the whole complex will certainly be something we will deal with beyond 2021. That was the estimate that we had for all of these court cases, and that was the Johnson case. So when it comes to product liability and with our acquired business, we have a normal amount of insurance. I can't give you any additional details. I cannot make this information public, unfortunately. But this is with respect to the plaintiffs that would not be productive, to put it cautiously. So we have already set up provisions for defense, and this is in the second quarter, provisions in the amount of the defense for glyphosate. And here, we do not want to give you any of the figures on this for the same reason. As far as the pipeline goes, we are working very hard on this. We're looking for possibilities as are all other pharmaceutical companies around the world. In addition to internal innovation, we're also looking for attractive pipeline products externally, either to acquire them and to get licenses for them. Loxo is a very good example. This is a highly differentiated cancer product, and this can be used for a whole number of different types of tumors. And as I said before, we expect approval of this. It was about a year ago that we acquired the licenses for this. And this is important for your colleagues on the phone, this is about $1.5 billion and this is also the milestone payments that will be due. These are orders of magnitude that we will be continuing in the future with highly differentiated pipeline products, amounts that we're willing to pay. But of course, even in our earlier stage pipeline, we want to add more to our pipeline so that we can have a stronger pipeline in the years to come in the pipeline. I've said everything I can say on Animal Health. I'm sure you will understand that commitment, when it comes to press calls and press releases, this is something that we certainly cannot give you. We do not comment on portfolio speculations and discussions until we have a decision in one direction or the other. Now our business and our strategic statements, you are familiar what we've said already, and there's no more that I can say on that at this point in time.

[Operator]

That brings us to the next question. [ Mr. Borger ] from Reuters.

[Unknown Attendee]

My name is [ Borger ] from Reuters. I have a quick follow-up question on the FDA. Of the EUR 300 million in charges, how much of this was in the third quarter? And what will the remaining charges be in the fourth quarter and perhaps also for next year?

[Werner Baumann, Chairman of the Board of Management & CEO]

Thank you, Mr. Borger. Let's do this on a 6-month basis. In the first half year, there was only a small effect. In the second half of the year, it will be from product losses as well as the costs from carrying out different matters. So in the first quarter -- in the third quarter, you can consider a double-digit million figure.

[Operator]

The next question is from [ Mr. Cogan ] from [ Script ] from the English Conference.

[Unknown Attendee]

I was just looking for a comment on the discontinued projects in the pharma on the pipeline, particularly what Anetumab is going to be studied in? And can we expect more discontinuations as the review of the R&D pipeline goes on? And just another question is about Xofigo is having -- struggling in the U.S. Can you give me a comment as why that is happening?

[Werner Baumann, Chairman of the Board of Management & CEO]

Yes, [ Fiandanc ], thank you for your question on the discontinued pipeline projects. With respect to your first question as to whether there will be further pipeline projects which will be discontinued, well, Pharmaceuticals -- the Pharmaceuticals business is extremely risky. This means that in particular, in the early and middle stages of the pipeline, the probability is quite high. Therefore, the discontinuation of projects which failed to reach their determined endpoints or which have a security profile which is not reasonable, is something that is faced by every single pharmaceutical company around the world. And the situation is no different in our company. If we look at the studies for Xarelto, the primary endpoints weren't reached, but we still have enough safety and tolerance for the product. So this is an effectiveness problem that we have seen in the study, and therefore, we discontinued. There is also Neladenoson, which did not meet the primary endpoints either. That is for the treatment of cardiac arrest. And we had [ Lotamet ], that's positive news. We had progress with respect to approval for larotrectinib. So basically, it is safe to say that this, on balance, has been a quarter that has been extremely positive in terms of the pipeline. With respect to Xofigo and the development of sales for that product, well, we recorded a decline of approximately 13% relative to the previous year, strongly due to the United States and driven by other markets as well. The backdrop to this is that last year, we had a study, which was a combination study involving Xofigo and abiraterone. We had to discontinue that because the side effect profile was becoming increasingly negative. This led to corresponding declines in sales. But since then, we have clarified with the regulatory authorities that the security profile and the risk-benefit profile of Xofigo in monotherapy remains unchanged. We also see a recovery in prescriptions, if you look at the year as a whole. And this is why year-on-year, relative to last year, we recorded a decline in sales for Xofigo.

[Operator]

We have a further question from [ Mrs. Hunig ] from [ Reinership post ].

[Unknown Attendee]

Yes. I would like to ask another question with respect to glyphosate. Now you had 6,000 plaintiffs filing a lawsuit -- 600 plaintiffs filing a lawsuit. Has that number increased? And can you give us a rundown on the structure? What types of cancer are we talking about there?

[Werner Baumann, Chairman of the Board of Management & CEO]

[ Mrs. Hoenig ], thank you very much for your follow-on question. With respect to the number of mass tort litigations, I cannot give you any information on the structure of the suits that have been filed. But I can say that the lion's share of the alleged health problems are non-Hodgkin's lymphoma. This is what's being -- is what is being declared and we could only find this in individual dosages in individual cases. The extent to which this is related to certain types of NHL or other diseases is something that we haven't determined yet. We are currently preparing ourselves for the first cases, which will be tried from the beginning of next year.

[Unknown Attendee]

And for these lawsuits, you said that you would probably have litigation going beyond 2021. Is that correct?

[Werner Baumann, Chairman of the Board of Management & CEO]

Yes. Thank you for that question as well. Let me clarify. My statement in relation to 2021 should be understood as following -- as follows. We have received a decision by a court of first instance in the Johnson case against which we will appeal before the California Court of Appeal. This appeal proceedings can take anywhere between 1 to 2 years to reach conclusion, to make it simple. So starting from the end of 2018, with respect to this first instance ruling, and this is the first case that was tried at all, you would come pretty close to 2021 if you reached the upper end of the range that I mentioned. And with respect to all of the glyphosate lawsuits, 2021 is not a reference year.

[Operator]

We have another question, [ Mr. Frontoff ] from the [ Handelsblad ].

[Unknown Attendee]

I have a question on Consumer Health. You said things had calmed down. Could you tell us how you are going to proceed? What has been agreed? What type of countermeasures are being taken? But it seems, what is Bayer doing in order to stabilize things there?

[Werner Baumann, Chairman of the Board of Management & CEO]

[ Mr. Frontoff ], thank you very much for your follow-up question. We have an issue in the industry with our major competitors, they're growing slower than the [ mark ] is. So we are in good company. And as I said elsewhere as well, we had some issues that need to be addressed. Heiko Schipper has already mentioned this, and this is before he entered into his position, he was involved in this before starting up. And that means just after he took his position in our company, he was very quick in leading this project. And he took over from Erica Mann about 6 months ago. He took over the direction of Consumer Health. So what is being done now is that our product portfolio is being looked at. We're taking a look at what markets we can serve and make strong investments in, and we want to promote this. We're also looking into our structural position and business models and all sorts of other things. Here, too, we will be looking into how we can get back to the performance we had in the years in the past at Consumer Health, how can we arrive there once again. And at the Capital Markets Day on the 5th of December, we will also be giving you more details on that. We'll explain what our plans are, also our medium-term targets for this business as well.

[Operator]

The next question is [ Mr. Tenisman ] from [ Deet Zeit ].

[Unknown Attendee]

I have one question on glyphosate. You keep saying that Bayer is going to defend itself in all of these cases. I'd like to know if there have been any negotiations for a settlement. Have you settled with any of the plaintiffs or groups of plaintiffs? Or are you ruling out a settlement completely? And I just read recently that there are some plans to consider extending the acreage where glyphosate is being applied. Can you confirm that?

[Werner Baumann, Chairman of the Board of Management & CEO]

[ Mr. Tenisman ], thank you for your question. All I can confirm is that we will defend ourselves with all the means at our disposal because glyphosate is a safe and a good product if it is used as directed. And to talk about or consider individual settlements is something that we cannot do. As I said somewhere else, some of your colleagues were in St. Louis and they went on a trip there where we got together. And at dinner there, I said that in terms of the amounts involved and if we would consider small amounts and to, in other words, let me stress this, this is small amounts, we would certainly be able to come to an agreement for the overall complex. But this is something which is very far down the line. And one thing you have to look at is, consider what the ongoing legal and defense costs are if we were to continue this process compared to a small amount, which we would then be able to completely terminate this whole complex. So in this context, my comment back then was meant to say the following, and thank you for letting me answer this once again. Here, again, I wanted to clarify this point. Now the second point -- the second question on plans for the acreage. Let me just say very clearly, there is a lot of politics going on, and also this goes against the agreement that was reached between the ministries at the beginning of this year. And here, we see new creative ideas in an attempt to attract certain voters by the parties involved, and these are the ones who are leading the ministries in question. And the second point that I'd like to raise now is that you have to really stop and think about it. Think about what's happening in some cases. We see that there is a link or that they're making a link between the use of glyphosate as a herbicide on the one hand and the negative effects on biodiversity on the other hand, in addition to the fact that there is -- there are very high preconditions that have to be met by all products before they're approved. Let me just say one thing, as soon as there are weeds in a field and these weeds then are used to protect the farmers' crops and these weeds need to be removed, now whether this is done with chemical, biological or mechanical means, this doesn't matter. All of these links are what I consider to be questionable when it comes to the use of herbicides. The whole question of biodiversity and the question of what this is all due to and why have we seen a decline in insects in Germany in the last 20 years, this is something which has not been determined yet. We should wait and see what the results are. We support these analyses because we, too, are interested in having clarity on these issues and also to increase biodiversity with the use of our products.

[Operator]

The next question is from [ Mr. Lowe ] from Bloomberg.

[Unknown Attendee]

I have two questions. First of all, after a first full quarter with Monsanto, I can hear certain investors still doubting the synergies between agrochemicals and Pharmaceuticals. After the first combined quarter, what is your take on that? What are the synergies at present from your point of view?

[Werner Baumann, Chairman of the Board of Management & CEO]

Hello, and thank you very much for your question. Now addressing the synergies first, which are being leveraged through the acquisition of Monsanto. Of course, by and large, these are synergies in agriculture. We communicated this at the very beginning of our undertaking. And over the course of the past few years and just recently again, we confirmed that overall cost synergies will be to the tune of $1 billion in the fourth year from the acquisition and EUR 200 million of additional earnings would be generated from additional sales opportunities arising from the combined business. This is where the big chunk of the added value stems from. In addition to the fact that, by far, we will be the best and leading agrochemical company in the world, if not already today. And with everything that belongs to it, including our innovative prowess, we will continue to expand this position. Our portfolio in the last couple of years has developed very strongly in the direction of a life-cycle portfolio. Our intention is to conduct businesses that are active in attractive growth markets in life sciences, and this is the strategy of the company which we are pursuing. Over the last 15 years, we have had very strong health care operations, which we have built and expanded, and we want to maintain them.

[Unknown Attendee]

Now does this also apply to Pharmaceuticals?

[Werner Baumann, Chairman of the Board of Management & CEO]

Well, Pharmaceuticals is an integral component of our portfolio. It contributes, if you look at the figures for this year, EUR 16.5 billion, that's about 40% or 35% of total sales. It's extremely profitable. We have significantly outgrown the market in recent years. And in the next years, due to Eylea and Xarelto, the growth drivers, and due to a very strong position in emerging markets, we will continue to conduct this business profitably as it grows. And as I said earlier, we will continue to invest into strengthening our pipeline there.

[Operator]

The next question is from [ Mr. Cading ] from Leverkusener Anzeiger.

[Unknown Attendee]

I would like to have some information on your plans with respect to the remaining stake in Currenta that you have, because I ask myself, against the backdrop of the low or small production options that you have in those plants, why you still have a chemical park operator in your portfolio. Is there anything new?

[Werner Baumann, Chairman of the Board of Management & CEO]

[ Mr. Cading ], thank you very much for your question. The brief answer is no, there's no news. The more lengthy response is that, as with other issues that have been touched upon during this conference call, with respect to the rumors that we have heard, I mean we also read the newspaper, there's absolutely nothing that we have to comment on as a company. So our general policy is no comment. I ask of your understanding here as well then. Thank you.

[Operator]

The next question is from [ Mr. Geisler ] from [ Kernastat Anzeige ].

[Unknown Attendee]

Mr. Baumann, now when speaking about glyphosate, you have repeatedly stated that the proper use does not lead to cancer. Recently, when you traveled to St. Louis, Bayer and legacy Monsanto employees repeatedly mentioned that glyphosate can never cause cancer no matter what the dosage is. But you have been emphasizing the use as directed. Do you agree that it can never cause cancer? Or does it indeed depend on the dose?

[Werner Baumann, Chairman of the Board of Management & CEO]

Well, [ Mr. Geisler ], thank you very much for your question, and good day to you as well. We've said and I believe that this is what is behind the statements of our colleagues made in St. Louis, that glyphosate is safe. And as all products, the proper use is what this statement should be qualified by glyphosate in terms of its chemical makeup, is an extremely safe product, otherwise it wouldn't have been used over the last 40 years repeatedly despite the increasingly tight regulatory requirements. It would have never been approved. Its mechanism with the enzyme, which takes an effect on photosynthesis, is something that makes the product very safe for both humans and animals because it only impacts plants. And against this backdrop -- this is the backdrop against which you should take these statements and comments. Thank you.

[Operator]

There are no further questions. So I would now like to hand the floor back to Mr. Preuss.

[Michael Preuss]

Okay. Thank you very much, ladies and gentlemen, for your interest for attending the conference call and for your questions. We wish you a remaining -- a wonderful remaining rest of the day, and see you next time.