Bayer's growth-driving quintet? Better make it a trio, thanks to Stivarga and Xofigo stall

Bayer blamed a strong euro for some obvious weak spots in its first-quarter numbers, but that explanation just doesn't fly for its consumer health stall—or for the low turnout from cancer meds Xofigo and Stivarga.

Overall, Bayer’s first-quarter pharma sales did meet industry watchers’ expectations for the first time in several quarters. The German drugmaker reported €4.08 billion ($4.88 billion) in pharma revenue, and the "Big Five" consortium of crucial new meds—blood thinner Xarelto, eye med Eylea, pulmonary arterial hypertension drug Adempas, as well as Xofigo and Stivarga—collectively ginned up €1.66 billion, easily meeting analyst projections.

Not all five of the drugs lived up to individual expectations, though. Xofigo and Stivarga lost ground compared with the same period last year, and their €92 million and €70 million in sales fell short of estimates by double-digit margins.

Bayer argues that if it weren't for a strong euro—which took a 7.1% toll on its pharma sales this quarter—Xofigo and Stivarga would have had better numbers to report, said the company. But even in adjusted currencies, the pair's decline in the U.S. was obvious. Stivarga only registered €29 million in U.S. sales, plummeting by more than 12% year over year after the forex adjustment, and that’s with an FDA liver cancer nod it didn’t win till last April.

The consumer health business—once mooted as a growth engine—is now proving to be a long-term headache. Its reported sales slipped all over the world, and all together fell short of consensus at €1.41 billion. Its contribution to earnings was down more than 20% year over year, too.

Again, the U.S. operation was hit hardest. CEO Werner Baumann recently admitted his OTC business is hurting as consumers turn to online shopping. Supply issues, stemming from an FDA warning letter to a key plant in Germany, and ongoing fallout from China's decision to make two sunscreen products prescription only, didn't help.

On Thursday's earnings call, the new unit chief described its Q1 performance as "flattish" if the manufacturing and China factors were taken out.

Bayer hopes its new recruit to head up the unit—Heiko Schipper, who came from Nestlé—can turn things around. Though he waved off some of the Q1 concerns, saying the numbers would have been "flattish" without the supply problems and Chinese sunscreen changes, he also said the unit is undergoing an "in-depth strategic review" and pledged better numbers for the second half of 2018.

As it moves forward with the Monsanto acquisition, the company confirmed its currency-adjusted forecast for 2018 but dialed down the actual reported sales number out of concerns for unfavorable exchange rates. It's expecting overall sales and EBITDA to both decrease by low-single-digit margins rather than matching 2017 levels. It previously estimated €16.5 billion of sales from pharmaceuticals and €5.5 billion from consumer health.

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