When Bill Anderson, the US-born chief executive of Germany’s Bayer, last year set out what he called a “radical new operating model” for the conglomerate, he embarked on a wholesale cull of management layers. The drive to introduce the new “dynamic shared ownership” management model is due to cost the jobs of around half of managers at the company, which employs about 94,000 people.
Yet a year after Anderson set out the plan for Bayer — whose products range from over-the-counter painkillers to industrial chemicals — its share price has not recovered. The shares on Monday were changing hands for €23.96, less than half the €52.61 on the day that Anderson took over in June 2023.
The company is due to set out progress on the reorganisation on Wednesday, alongside its annual results.
But Anderson has still, according to investors, to demonstrate that he can tackle a range of challenges. They include legal battles in the US costing billions of euros over claims — which Bayer denies — that the pesticide ingredient glyphosate can cause cancer. It is also suffering from the loss of patent protection on some drugs in its pharmaceutical division and weak demand for its agricultural products.
Ingo Speich, head of sustainability and corporate governance at Deka Investment, said Anderson had not yet been able to present any “groundbreaking successes”.
While Speich said the executive was “still firmly in the saddle”, he issued a warning.
“The next 12 months will be crucial,” Speich said.
Recent years have been humbling for Bayer, which as recently as 2015 was one of Germany’s most valuable listed companies, with a market capitalisation of more than €120bn. That figure has fallen more than 80 per cent and stood at less than €24bn on Monday.
The company has been transformed by its ill-fated $63bn acquisition of the US’s Monsanto in 2018 and a series of spin-offs. The process has left it with three divisions — pharmaceuticals, crop science and consumer health.
Bayer insists that the management reform is progressing better than expected. In a staff survey this quarter, 76 per cent of staff said they were working within the new management structure, according to figures seen by the Financial Times. That compares with just 12 per cent in the second quarter of 2024.
Anderson said in his last update in November that Bayer had cut 5,500 jobs from a previous total of about 100,000 through the reorganisation, mainly shedding management positions. The transformation has happened largely without public resistance from the trade unions.
As well as leaving 95 per cent of decisions to lower-level employees, dynamic shared ownership seeks to accelerate decision-making by evaluating progress on projects every 90 days. Anderson announced the plan at a time that some investors were demanding Bayer break itself up into three separate companies based on the main divisions.
However, the proposal has divided investors.
One fund manager, Union Investment’s Markus Manns, said he supported the focus on the reform because of the anticipated cost savings, expected to amount to €2bn annually by 2026.
Manns said Bayer “urgently” needed to reduce its net financial debt. The consensus forecast from analysts is that, despite a radical dividend cut in 2024, debt declined by only €1.2bn to €33.3bn at the end of 2024. The actual figure will be published as part of Wednesday’s results.
Manns said he had shelved his previous demand for a spin-off of the consumer health division until the reform was complete. However, he said he would put it back on the agenda if Bayer’s share price had not improved by then.
Anderson has ruled out splitting up Bayer until he has made sufficient progress on his four priorities: his management reform, the pipeline of new pharmaceutical products, the litigation situation, and debt levels. All of this might still take at least a year.
“It is very unsatisfactory that the company cannot show any growth,” Manns said. Analysts expect Bayer’s revenues — which were €47.6bn in 2023 — to fall to €46.1bn for 2025. They expect adjusted earnings before interest, taxes, depreciation and amortisation, which were €11.7bn in 2023, to fall to €9.4bn for 2025.
Deka Investment’s Speich, meanwhile, said Anderson should have tackled the other issues facing the company before embarking on a revamp of the entire organisation.
Among those are the difficulties at the pharmaceutical division, where Bayer is struggling to replace Xarelto, a blood thinner that once accounted for more than 10 per cent of the division’s revenues. The product’s patent expired last year and cheaper generic versions are taking over the market. Even though sales of prostate cancer drug Nubeqa and chronic kidney disease medicine Kerendia are picking up, they are not as profitable as Xarelto.
The crop science division is suffering from cheaper competition in plant protection as well as weak demand, especially in Latin America. Bayer also still has €6bn in provisions set aside for litigation in the US over the effects of glyphosate in its Roundup weedkiller. Litigants have claimed the ingredient can cause cancer, which it is disputing.
Bayer is lobbying the administration of Donald Trump and state governments to legislate to protect it from further claims. It is also hoping that the US Supreme Court will admit an appeal in the next few months and will rule that federal authorities’ approval of the product protect it from claims in individual states.
On top of the glyphosate litigation, Bayer is facing claims that polychlorinated biphenyls, a Monsanto product used in building materials, caused illness in staff and students at a school in the Seattle area. While Bayer has not so far taken any provisions over that issue, analysts have warned that a ruling in favour of the claimants by the Washington state Supreme Court could produce billions of dollars in additional lawsuits.
Analysts predict that an unfavourable ruling could put further pressure on Bayer’s cash flow and share price, forcing it to sell assets.
However, analysts and Speich hope that, if the litigation is resolved through settlements or another avenue, both Bayer’s share price and Anderson’s hold on his job could benefit.
“His fate stands and falls with the stock price,” Speich said.
