Friday - April 29, 2016

Annual Stockholders’ Meeting 2016:

Address by Dr. Marijn Dekkers

Chairman of the Board of Management

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Ladies and gentlemen,
stockholders of Bayer AG,

When I stood here for the first time six years ago, it was a very exciting moment for me. I’d been brought in from outside to lead Bayer. Some things still felt strange. Today, it’s a bit like a home game – which isn’t something a Dutchman in Germany experiences that often and I very much appreciate it.

I appreciate even more the fact that you support the work of the entire Board of Management – with a critical eye and in some cases also with critical questions. Together with the Supervisory Board, you have supported our strategy in recent years. This has made our work easier. It has encouraged us to stay the course. The right course for Bayer. I would like to sincerely thank you for this. And on behalf of the entire Board of Management, I would also like to welcome you to our Annual Stockholders’ Meeting.

I’d like to start with a look back at the past fiscal year. After that I’ll talk about Bayer’s transformation and how we’ve strengthened our business operations at the same time. Then I’ll give an outlook for 2016 following a successful first quarter. I’ll close with a few remarks about innovation in Germany. Innovation through science has always been close to my heart and it has always been at the heart of what Bayer is and does.

2015 was a very successful year for Bayer. This applies, on the one hand, to our strategic alignment. We have undertaken all the necessary steps to transform Bayer into a pure Life Science company. We successfully floated our plastics activities on the stock market in a difficult market environment. The Life Sciences are now our core business.

At the same time, 2015 was another record year for Bayer in operational terms.


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Sales of the Bayer Group advanced to EUR 46.3 billion. Adjusted for exchange rate shifts and portfolio changes, the increase was 2.7 percent. All the changes I refer to with regard to sales will be currency- and portfolio-adjusted.

Please note that the figures for the full Bayer Group include the sales and earnings of Covestro, as we still hold a 64-percent interest in that company. Covestro is therefore fully consolidated in our financial statements.

Bayer did not just achieve record sales in 2015. Earnings development was particularly encouraging. As you know, we have a couple of different key indicators here: EBIT and EBITDA. I will also state these figures before special items to facilitate comparison with the previous year. You can find details of these indicators in our Annual Report, which also contains all the data for our individual businesses.

EBIT of the full Bayer Group climbed to EUR 6.3 billion last year. This represented an increase of just under 16 percent. Clean EBITDA rose even more substantially to EUR 10.3 billion, a gain of more than 18 percent. And core earnings per share advanced to EUR 6.83. This also represents a substantial increase of 16 percent. We actually exceeded our forecast for clean EBITDA and core earnings per share.

2015 was therefore very successful in operational terms. We are a very profitable company, with a clean EBITDA margin of 22.2 percent in 2015. That, too, is an all-time record for Bayer. These figures demonstrate that Bayer is growing on a very solid foundation. Above all, we are growing organically.

To make sure it stays that way, we have further increased our investment in the future. In 2015, we spent more than EUR 4.3 billion on research and development. That’s EUR 740 million more than in the previous year. In this way we are expanding our innovation strength – and thus safeguarding the basis for future growth.

Our recently launched pharmaceutical products were the strongest growth drivers again in 2015.


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Sales at Pharmaceuticals totaled EUR 13.7 billion. Established products accounted for EUR 9.5 billion of this figure. Sales of the recently launched products came to EUR 4.2 billion overall, reflecting very strong currency-adjusted growth of 42 percent. This shows that we are successfully taking our inventions out of the laboratory to our customers.

I already talked last year about our five recently launched products. In the graphic you can see how their sales developed in 2015. Here, too, the changes are currency-adjusted. All of the recently launched products are strong growth drivers, with growth rates of between 25 and 89 percent. And we want to further increase their share of sales in the years ahead.


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We also increased sales at Consumer Care, where business expanded to EUR 6.1 billion. After adjusting for currency and portfolio effects, sales were up by 6.1 percent. On a reported basis, sales grew by an even more substantial 43 percent. This was attributable above all to the products acquired from Merck & Co. Yet we are also achieving growth with products that have been part of Bayer’s portfolio for a longer time. Canesten and Bepanthen are examples you’re all familiar with, and sales of those brands also increased in 2015.

When we say “Science For A Better Life,” we’re not just talking about human health. It’s also about the health of animals and plants. Innovative crop protection and seeds have a special role here. You may remember that we showed you a film about wheat last year. This documented how our researchers are developing new wheat varieties that deliver high yields even in difficult conditions. That’s because climate change is making farming increasingly difficult in many parts of the world.

Today we’ll look at this issue from the perspective of someone who is actually affected. You’ll recognize his face from our Annual Report. He really exists. And now he’s going to tell his story.

As you can see, we support farmers so they can successfully work their land even under difficult conditions. In this way, we are helping to feed the growing world population.

In 2015, we increased sales of our Crop Science products as well. Business expanded by 1.7 percent to EUR 10.4 billion on a currency- and portfolio-adjusted basis. We thus grew faster on average than our most important competitors in a difficult market environment. Clean EBITDA improved by 2.4 percent to EUR 2.4 billion.

Ladies and gentlemen,

2015 – another record year for Bayer with higher sales and higher earnings. We’re not the only ones who are pleased about this. We want you to be pleased as well.


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We would like you to appropriately participate in the company’s success. The Board of Management has therefore proposed to the Supervisory Board that the dividend be increased. We intend to pay EUR 2.50 per share, after EUR 2.25 last year, which corresponds to an increase of 11 percent. The total payout would thus rise to more than EUR 2 billion. Together with the Supervisory Board, we are asking that you approve this proposal today.

The company’s success also benefits our employees, whose bonuses for the past fiscal year totaled around EUR 1.1 billion. That is also a new record for Bayer. And many of our employees are stockholders themselves.


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We are very proud that most of our workforce stays with the company for a very long time. Last year we were once again honored as “Germany’s best employer” in our industry. And we are among the ten best companies across all industry sectors.

We have to be an outstanding employer worldwide if we are to attract the best minds to our company, not just in our laboratories, but also in production and sales. It is our employees who invent new molecules. It is they who manufacture our new products. And it is they who attract new customers. They make our success possible in the first place. I would like to sincerely thank our employees for their commitment.

Incidentally, we are making good progress toward increasing the proportion of women in leadership positions. In 2010, it was 21 percent. In our Life Sciences businesses, the figure has already reached 30 percent. And we are aiming to increase this proportion to 35 percent by 2020. There has been progress at the very top of our company, too. In Erica Mann, we have a woman on the Board of Management of Bayer AG for the first time.

Ladies and gentlemen,

You are sure to be familiar with media reports about the skills shortage. It is a growing problem in our industry, too. We are well prepared for this at Bayer. For many years, vocational training has played a big part in our company. In Germany alone, more than 900 young people embarked on a vocational training course at Bayer in 2015. We also provided some 2,900 internships to students worldwide.

We train more young people than we need to meet our own requirements, which we consider to be an expression of our social responsibility. Good education and vocational training are the foundation for a fulfilled working life. And they are the foundation of a flourishing economy. Bayer AG makes its contribution here.


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One of the major challenges of our time is the large number of refugees from crisis areas and war-torn regions. It is a situation requiring a response from society as a whole. We feel that our company, too, has a responsibility in this regard.

For example, we support the medical care of refugees in Austria, Greece and Turkey. In this connection, we last year donated medicines with a total value of nearly EUR 1.5 million. Here in Germany, we focus on giving young refugees a perspective for the future. We offer career preparation courses at our sites in Leverkusen and Berlin. And together with several partners, our foundation is supporting an innovative project for refugee children.

You will find further examples of our not-for-profit projects in our Annual Report. Last year Bayer once again aided victims of natural disasters. You probably remember the devastating earthquakes in Nepal. We provided immediate aid by donating medicines and money.

Yet it isn’t only when others are in need that one has to step up to the mark. In everything we do, we aim to combine economic growth with social and ecological responsibility.

We are therefore pleased that Bayer has been honored time and again for its sustainable development. We have been included in the Dow Jones Sustainability World Index for the 16th time in succession. This is one of the world’s most important sustainability indices and very few companies have been represented there as consistently as we have.

We see this as confirmation of our efforts and an incentive to work on. We will maintain our successful course as a responsible company.


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Ladies and gentlemen,

Bayer is now a Life Science company. But what does that mean?

We develop solutions for the major challenges facing society worldwide. We help to fight diseases. We contribute to feeding the world's population. We enable people to sustain a high quality of life even at an advanced age. In this way, we are putting our mission at the center of our activities. “Bayer: Science For A Better Life.”

This next film shows us the quality of life that can be achieved in old age. However, this doesn’t happen by itself. It requires some effort – a lot of exercise, a good diet and the right medicines. The ladies and gentlemen in our film have done really well.

Demographic change is confronting our society with many challenges. These include the diseases that affect the elderly. We are pleased that in many cases, our products can improve the quality of life of elderly people.

As a Life Science company, we are focusing on what has always been our strength. We invent and create new molecules. And we successfully market them as innovative products. This has always been Bayer’s core business.

In 1863, the founders of our company started out using their own kitchen as a laboratory. They produced dyestuffs from tar. One of these dyestuffs was fuchsine. Bayer and Weskott figured out how to manufacture it on an industrial scale. Carl Duisberg, whom we know as a great entrepreneur, also started out as a chemist in a laboratory. The company even gave him a share in the proceeds of his inventions. Another Bayer researcher found out how to produce pure acetylsalicylic acid. You all know this substance as Aspirin. And Gerhard Domagk received the Nobel Prize for his discoveries in the field of antibiotics. This is characteristic of Bayer’s entire history. We invent molecules and use them to create innovative products. Yesterday and today. That’s why Bayer is appreciated all over the world for its innovation strength.

One example: The Boston Consulting Group produces a study each year. Who are the most innovative companies, worldwide and across all industries? Apple and Google once again topped the list for 2015. But Bayer is now in 11th place, which is a tremendous testament to our innovation strength.

I would like to make special mention of one achievement. Last year, a Bayer team received the German Future Prize, awarded by the President of Germany for outstanding innovation. In 2015, it went to two Bayer researchers: Professor Johannes-Peter Stasch and Dr. Reiner Frey, together with Professor Ardeschir Ghofrani from the University of Giessen, Germany. Professor Stasch and Dr. Frey are here with us today. Congratulations, and let’s have a round of applause for our Bayer researchers!

The team received the award for a new drug product to treat pulmonary hypertension. The active substance is called riociguat, but you will know it better as Adempas. It is one of our five recently launched pharmaceutical products.

In 2015, to further enhance our innovation strength, we established the Bayer Lifescience Center with the aim of discovering, promoting and accessing new technologies. It is our first strategic unit specially for cross-species research targeting humans, animals and plants.

To this end, we collaborate with first-class young companies. The first of these collaborations is a joint venture with CRISPR Therapeutics AG, which specializes in a new gene editing technology. This is a groundbreaking approach for treating hereditary diseases. We will be investing at least US$300 million in this joint venture. And we plan to expand the Bayer Lifescience Center and enter into further partnerships. It will help us to even more quickly utilize scientific findings for the development of new products.

From my visits to our laboratories around the world, I know that our researchers are eager to see their research utilized. They want their work to help people live a better life.

The following film shows an example of how modern medicine can change life for the better again.

After watching a film like this, you can understand what drives us at Bayer. And as a Life Science company, we can even better fulfill our mission. We invent molecules that can influence biochemical processes in living organisms. And we use these to develop innovative products and solutions for improving the health of humans, animals and plants. Many biochemical processes are similar in humans, animals and plants. That’s why research findings can often be applied across different species. Not one-to-one, but the research doesn’t always have to start from scratch.

We on the Board of Management wondered how we could adapt our corporate structure to maximize our success as a Life Science company.

This resulted in a new structure comprising three divisions.


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This new organization for our core business took effect at the beginning of this year. Our business is now managed by three divisions: Pharmaceuticals, Consumer Health and Crop Science.

They cover:
- Our prescription products
- Nonprescription medicines, dietary supplements and self-care products
- Agricultural inputs including particularly crop protection and seed products

All three divisions occupy leading positions in their markets. Thanks to our acquisitions in the area of nonprescription medicines, Consumer Health now has the critical mass to operate as a separate division. Together, our divisions make up a strong and balanced portfolio that is resistant to fluctuations in demand and to potential risks.

I’d like to emphasize another aspect of the new corporate structure. We previously had a strategic holding company with operating subgroups. That was helpful in mastering the significant changes to our portfolio over the past 15 years.

This structure is being replaced with an integrated organization. The heads of the divisions now also serve on the Board of Management, which is thus more involved in business operations. At the same time, the divisions now hold more responsibility for Bayer overall. Bayer’s umbrella brand will become more important in the future, both inside and outside the company.

Ladies and gentlemen,

We have achieved our strategic targets. And at the same time, we have strengthened our business operations. In the past five years, all key indicators have developed very positively.


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This slide shows a number of indicators. I don’t want to go into detail about the individual figures. However, we have improved sales from EUR 37 billion to EUR 46 billion since 2011. EBITDA before special items has climbed by 35 percent. The operating margin has grown accordingly, from 20.8 to 22.2 percent. And core earnings per share have climbed by 41 percent.

This is impressive evidence of Bayer’s sustained success. Our strategy has ensured steady growth and increasing earning power.

In my view, however, the last graphic (bottom right) is almost more important. It depicts our research and development spending, which we have increased by 46 percent since 2011 – in other words, by nearly half. The other graphics show our success so far. Yet research and development represents the future. It’s an investment for tomorrow. Research and development generates new molecules, new products, new solutions. And growth for tomorrow.


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The price of our stock has also developed very positively since 2011. Here you can see our performance compared with the DAX and the EuroStoxx 50. Our excellent position on the capital market is rooted in this positive value development. At the end of March, we had the highest market capitalization of all DAX companies, as defined by the German stock exchange. This results from our successful growth course. We aim to sustain this performance with good business results.


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We anticipate a further increase in both sales and earnings in 2016.

In the middle you can see our forecast for our core business, the Life Sciences. Here we expect to achieve sales of approximately EUR 35 billion. Adjusted for currency and portfolio effects, this corresponds to a mid-single-digit percentage increase. We also assume that EBITDA before special items will move forward by a mid-single-digit percentage.

The column on the right shows the forecast for the entire company. It includes Covestro owing to our majority interest in that company. We expect to raise sales to more than EUR 47 billion. We assume that EBITDA before special items will move forward by a mid-single-digit percentage, as will core earnings per share.


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On Tuesday we published our figures for the first quarter. We got off to a successful start in the new fiscal year. The Bayer Group increased sales to EUR 11.9 billion. This corresponds to a currency- and portfolio-adjusted increase of 3.2 percent. Clean EBITDA advanced by 15.7 percent to EUR 3.4 billion. All Life Science segments succeeded in improving their operating performance. We have confirmed our outlook in view of this successful start.

Ladies and gentlemen,

I am convinced that Bayer has a good future ahead of it. My successor Werner Baumann was appointed to the Board of Management at the same time as I was. He knows Bayer very, very well. And he has a strong team. Werner, I would like to thank you for our good collaboration in the past six years. I wish you every success in your new office.

As a Life Science company, Bayer can continue to leverage its major strength – its innovation strength.

What worries me, however, is the environment in which we operate. Do we in Germany and Europe really do enough for innovation? Do we have the right framework conditions? Do we recognize the opportunities presented by new technologies? Or do we just see the risks?

Innovation is the future of Bayer. We therefore do everything we can to foster it. However, innovation is also the future of Germany and Europe. Employment, growth and affluence depend on it. Only by innovating can we prevail in the global arena. Are politicians doing enough to foster innovation? Or are we allowing certain groups to block progress?

I’m convinced that politicians could do more. What if we were to introduce an innovation principle at the European level, a sort of innovation inspection service that would examine whether a regulation would promote or hinder innovation?

We need further measures at national level as well. Let me give you three examples.

First, we need sensible regulations in the health care system. New medicines must be financially attractive for pharmaceutical companies. Otherwise, we will no longer be able to afford the rising costs of research and development. Then there would be no more innovation.

Second, nearly all industrialized countries offer tax breaks for research and development. Why doesn’t this happen yet in Germany?

And third: We need more incentives for venture capital to give start-ups a perspective. This would help Bayer as well. We would then have more opportunities to cooperate with young companies in Germany and it would promote the environment necessary for innovation.

Such an environment is vital for an innovative company. We need a culture of innovation. That’s why, during my tenure at Bayer, I have always sought dialogue. I have made the case to politicians that innovation must be supported. I have made our positions clear in the media. I have attempted to convince our critics, although this is often difficult because some critics don’t want to listen to reasoned argument. Yet any discussion of opportunities and risks must be based on fact.

We must actively pursue this dialogue and be tenacious. This takes time and energy. But it is essential if we are to turn science into innovation. It is essential if our inventions are to help a lot of people. And it is essential for Bayer to fulfill its mission: “Science For A Better Life.”

Ladies and gentlemen, stockholders of Bayer AG,

You, too, can help strengthen the culture of innovation in this country. Talk about it. Advocate it. Argue for greater curiosity, greater openness and greater courage to innovate. It will be good for Germany, good for Europe and good for Bayer.

I’m very grateful I had the opportunity to help shape this terrific company for a while. It has been a wonderful experience working with amazing people. I would like to thank Werner Wenning, his predecessor Manfred Schneider and the entire Supervisory Board for the confidence they placed in me. And I would like to thank everyone who has made our journey together so successful.

Bayer is now a Life Science company. It is now even more successful at using excellent science to make successful products. That is “Science For A Better Life.”

You, our stockholders, have also accompanied us on this journey. Thank you for your loyal support.

Please continue to place your confidence in Bayer.



Forward-Looking Statements
This release may contain forward-looking statements based on current assumptions and forecasts made by Bayer Group or subgroup management. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. These factors include those discussed in Bayer’s public reports which are available on the Bayer website at www.bayer.com. The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.

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Last updated: May 1, 2016 Copyright © Bayer AG