Friday - May 25, 2018
Annual Stockholders' Meeting

Address by Werner Baumann

Chairman of the Board of Management

(Please check against delivery)

Ladies and gentlemen,

Good morning to you all from me as well. On behalf of the entire Board of Management, I would like to warmly welcome you to our Annual Stockholders’ Meeting. We’re pleased so many of you were able to make it here today.

It will not have escaped your notice that our Annual Stockholders’ Meeting this year is four weeks later than in past years. This provides us with the opportunity to update you on the now well-advanced status of the Monsanto acquisition. After almost two years of very diligent work, we have received nearly all the crucial approvals. We anticipate being able to close the acquisition of Monsanto in the near future.

Before I go into detail about this, and as is usual at this point in my address, I would like to report on our current work and developments at Bayer.

First of all, though, I’d like to express my very special gratitude to our employees. No matter where they are in the world, their commitment, expertise and dedication are what makes Bayer. I would therefore like to start by thanking them all for their tremendous work throughout the last year.

You, our stockholders, also benefit from this work. This year – for the eighth time in succession – we have proposed a further increase to the dividend to 2.80 euros per share, ensuring that you once more participate appropriately in the success of your and our company. I’m delighted with this development.

I would also like to thank you for the trust you have placed in the members of the Supervisory Board and Board of Management and in me personally. Your trust is an affirmation of our work and we will continue to do everything we can to live up to it.

I’d now like to look back at our business performance in the past fiscal year and in the first quarter of this year.


Operationally, 2017 was a year of ups and downs. We saw gratifying advances in many areas but we also had to contend with negative developments, which meant we had to adjust our guidance during the year. Overall, sales and earnings in 2017 remained on a par with 2016.

Let me now discuss the business data in detail. Sales of the Bayer Group came in at 35 billion euros in 2017, up by 1.5 percent against the prior year. Please note that all the sales variations I mention are adjusted for currency and portfolio effects.

EBITDA before special items of the Group was level year on year at 9.3 billion euros. By contrast, EBIT rose by 2.9 percent to 5.9 billion euros after special charges of 1.2 billion euros. Core earnings per share rose by 7 cents to 6.74 euros. The mandatory convertible notes we issued in November 2016 had an effect here because the number of shares included in the calculation rose considerably as a result. Without this effect, core earnings per share would have risen by 37 cents.

We thus achieved our operational targets for sales – based on our adjusted Group forecast. By contrast, EBITDA before special items came in slightly below expectations. We exceeded our expectations for core earnings per share. In addition to this, negative currency effects impacted us – like all export-driven companies in Europe – a development that has also persisted in the first quarter of 2018.


I would now like to give you an overview of what our divisions achieved. 2017 was another record year for Pharmaceuticals. Our business with prescription products posted sales of 16.8 billion euros, which corresponds to an increase of 4.3 percent.

Once again, performance was driven by our key growth products Xarelto™, Eylea™, Xofigo™, Stivarga™ and Adempas™, which posted an increase in combined sales of more than 16 percent to above 6 billion euros. This is a very encouraging development.

Xarelto™ is our best-selling product and registered growth of 14 percent to 3.3 billion euros. This was due particularly to higher volumes in Europe, Japan and China. We also saw further sales growth in the United States, where Xarelto™ is marketed by a subsidiary of Johnson & Johnson.

Pharmaceuticals recorded an encouraging increase in earnings as well. EBITDA before special items increased by nearly 9 percent to 5.7 billion euros. If the negative currency effects are disregarded, earnings rose even more substantially, by approximately 11 percent.
We continued to evolve our Pharmaceuticals business strategically as well in 2017. We strengthened our existing oncology portfolio by inlicensing two development candidates from biotech company Loxo Oncology. Thus, we have kept our word because we have always emphasized that the acquisition of Monsanto would not lead to us neglecting investment in Pharmaceuticals.

We would now like to show a short film demonstrating what investments like these in research actually mean to people’s lives. It tells the story of Siegfried Stark, which you may have already seen in our Annual Report. Action!

Ladies and gentlemen:
It’s individual stories like these which drive us to seek improved therapeutic options – and one day perhaps also cures – for diseases like cancer. Each of these individual stories reminds us just how important our colleagues’ work is to people’s lives.

Let’s now look at our Consumer Health Division.


In 2017, our nonprescription medicines business saw a slight decline in sales compared with the previous year. Sales fell by 1.7 percent to 5.9 billion euros due to, on the one hand, persistently weak business development in the United States and, on the other hand, to a decision by the Chinese authorities that changed the legal status of two of our brands from OTC to prescription.

EBITDA before special items of Consumer Health was 1.2 billion euros in 2017, down substantially by approximately 13 percent against the previous year. This decline was largely due to lower volumes, a higher cost of goods sold and higher selling expenses. Earnings were also held back by currency effects.

A glance at the individual products shows widely divergent developments. Business with our best-selling Consumer Health product, the antihistamine Claritin™, developed positively in China but faced intensified competition in the United States and Japan. Overall, sales of Claritin™ moved back by 2.4 percent to 585 million euros.

By contrast, we continued to expand the business with Aspirin™. Including business with Aspirin™ Cardio, which is reported under Pharmaceuticals, sales came in at over 1 billion euros. Our Aspirin™ products thus posted combined sales growth of 6.5 percent compared with the previous year.

Business with our Bepanthen™ / Bepanthol™ wound and skin care products expanded by a similar magnitude.

It is particularly these tradition-rich brands from our Consumer Health portfolio that have often been used by our customers – especially families – for generations. We’d like to illustrate that in a short film.

Ladies and gentlemen:
The enormous trust people have in our brands is one reason why we are optimistic about the future at Consumer Health. We continue to see attractive growth opportunities for our business in light of demographic change and the global trend toward self-care, which is being further strengthened by individualization and digitalization. And, of course, we wish every success to our new Board member, Heiko Schipper, and his team.


Let’s now look at our Crop Science Division, where business development in 2017 ran counter to our expectations. The main reason for this was the difficult market situation in Brazil, where several factors led to unexpectedly high inventories of crop protection products. This meant that we had to establish provisions and adjust our full-year business guidance in the second quarter of 2017.

We analyzed in detail how this situation arose. At the same time, we immediately initiated a number of measures, which have resulted in a normalization of the situation in the subsequent quarters. Among other things, we reduced the high inventory levels through product returns and additional sales.

In 2017, sales of our Crop Science Division were down 2.2 percent year on year. Excluding Brazil, global sales advanced by 3 percent. Business developed positively in the North America region, where sales improved by nearly 6 percent. Sales rose by 2 percent in Asia / Pacific.

EBITDA before special items of Crop Science declined by about 16 percent in 2017, to 2 billion euros. This, too, was due primarily to the situation in Brazil.


Business at our Animal Health segment developed well, with sales growing by 2 percent. Clean EBITDA, which also benefited from the Cydectin™ acquisition, increased by 9.2 percent. Business in the Asia / Pacific region developed particularly well, and North America also registered sales growth. On the product side, the strong growth of the Seresto™ flea and tick collar continued in 2017, posting a 25-percent increase in sales.


As I indicated at the start, let me now say a few words about our current business performance. We published the figures for the first quarter of 2018 at the start of May. This quarter was characterized above all by the impact of negative currency effects on operational development. Adjusted for currency and portfolio effects, sales were increased in the first quarter. On a currency-adjusted basis, earnings before special items matched the level of the strong first quarter in 2017.

For this reason, we have confirmed the currency-adjusted outlook for fiscal 2018. We continue to anticipate a low- to mid-single-digit percentage increase in sales. We still expect to increase EBITDA before special items by a mid-teens percentage after adjusting for currency effects. The same applies to core earnings per share.

Ladies and gentlemen:
Let me now address further developments at our company in which we were able to make important progress in the past months.

They include, for example, the commitment of Temasek, the Singaporean sovereign wealth fund, which in April 2018 acquired a total of 31 million Bayer shares for a price of three billion euros and now holds around four percent of our company’s shares. Temasek is a long-term investor whose substantial interest will support the strategic alignment of our company. And they also include Bayer’s holding in Covestro. Since the stock market listing in 2015, we have pursued a gradual separation from Covestro. We successfully concluded the sale process at the start of this month.

Through the sale of Covestro shares, Bayer has generated proceeds totaling more than nine billion euros. The exchangeable bond issued in June 2017 raised an additional one billion euros. Overall, including the debt transferred in the course of the stock market listing, Bayer generated proceeds of more than 15 billion euros through the separation from Covestro. That is substantially more than expected and it was achieved sooner than planned. We took advantage of the prevailing conditions to generate significant value for our stockholders. We are also very pleased that Covestro is so successful, enabling its promotion to the DAX this year. This is a tremendous success, on which we congratulate Patrick Thomas and his team – and we wish his successor, Markus Steilemann, all the best for the future.


Ladies and gentlemen:
As I said at the start, I would now like to report on the current status of our major strategic project: the acquisition of Monsanto.

Since May 2016, exactly two years ago, when we made our first offer to acquire Monsanto, many of our efforts have been focused on concluding this acquisition. We needed a great deal of stamina. We always said it would be a marathon and not a sprint and we’ve demonstrated the necessary stamina.

This was especially true in respect of the global merger control process. Just to give you an idea of the dimension of this task, we’ve calculated how many documents Bayer has submitted to the European and U.S. antitrust authorities. We estimate that around 40 million A4 pages were sent just to these two bodies. Printed out and stacked, they would create a mountain of paper some 25 times taller than the towers of Cologne Cathedral.

However, the marathon is not yet over. We haven’t quite reached the finish line yet. Nevertheless, we expect to receive the last few outstanding approvals in the near future. Over the past almost two years, many of our colleagues have been working very hard on this. I would therefore like to take this opportunity to thank them most particularly for their tireless efforts.

One thing is clear, however: The real work will start when the acquisition is closed. We’ve been diligently preparing for the integration that lies ahead and look forward to putting our plans into action.

So what will Bayer look like following the acquisition of Monsanto?


This is shown by Bayer’s pro forma sales for 2017. Including Monsanto, our health and nutrition businesses would have been roughly equal in size. Total sales would have come to around 45 billion euros, with 20 billion of that accounted for the combined Crop Science business. This already takes into account the intended divestments to BASF with sales of some 2.2 billion euros, which were necessary in order to obtain regulatory approval for the transaction.

On the other hand, we are acquiring new and very attractive businesses that will take us forward to become a leading agriculture company. The acquisition is as attractive today as we assessed it to be two years ago and, ladies and gentlemen, I have been involved in a lot of acquisitions during my career. Viewed from various aspects and overall, I’m convinced that this acquisition has very great potential for creating value for our company, our shareholders and our customers.

We expect a positive contribution to core earnings per share starting in 2019, with a double-digit percentage from 2021 onward. Moreover, adjusted for divestments, we expect synergies to deliver annual contributions of 1.2 billion U.S. dollars to clean EBITDA from 2022 onward.


I would also like to give you an idea of how the acquisition of Monsanto will benefit the farmers worldwide who are our customers. In the future, we will be better placed to help them produce healthy, safe and affordable food in a sustainable manner.

To address this complex task, we will then be able to offer them an outstanding portfolio comprising seeds and plant traits; chemical and biological crop protection; digital technologies, information and consulting. Our offering will thus include many different options that reflect the diverse nature of agriculture worldwide: for organic farmers and conventional growers, small-scale farmers in Asia and large commercial operations in the United States. Our third short film demonstrates these various realities.

Ladies and gentlemen:
These farmers are our customers. In the years and decades ahead, they will have the central task of producing food in sufficient quantity and quality for the some ten billion people who will populate the earth in 2050, according to United Nations estimates.

This is an enormous challenge but, to be honest, it’s nothing new. If we look back at the last decades and centuries, it was always farmers who used new processes, new varieties and new technologies to feed a growing population. It’s the same situation now – especially against the backdrop of the growing threat to harvests from extreme weather conditions and climate change. We won’t be able to use yesterday’s solutions to address tomorrow’s problems. In the search for innovations, we aim to be a partner to agriculture.

Without question, the acquisition of Monsanto has extended our position in the agricultural sector – and with it our responsibility: to farmers and consumers, to society and to the environment. We will do everything we can to meet this responsibility.

Sustainability and responsibility are deeply anchored in our corporate culture. Bayer has a reputation for the highest ethical, environmental and social standards, which we will consistently continue to apply in the future.

Ladies and gentlemen:
We live in an era in which we are seemingly confronted by a growing number of issues, all competing for our attention. In my view, there is a risk that certain issues could go ignored in this race. Let me explain a bit more.

One of the risks I see is that we could miss out on opportunities through being overcautious. Those of us with a responsibility to society – whether in government, industry or other areas – should not just look at the issues that satisfy today’s ideals and opinions, but must especially address those issues that could ensure social progress and economic prosperity in the future.

Please don’t get me wrong. I have every understanding for people who are worried about change. However, we as a society and an economy must be willing to weigh up opportunities and risks and take conscious decisions that favor long-term development.

This is what businesses – small and large – do every day. It is a core element of entrepreneurial responsibility and evading risk simply isn’t an option. This is an approach we all need to adopt.

Another risk I see is that public debate in this country is strongly influenced by opinion rather than by facts. All of us will have seen or heard discussions about facts. “Fake news” has been a frequently cited term in such discussions. In Germany, “alternative facts” was even deemed to be the worst expression of 2017, in my view rightly so because it gives the disastrous impression that there is indeed an alternative to facts. There isn’t. Everyone has a right to their own opinion but no one has a right to their own facts.

Facts are the basis for decision-making in society and business. They ensure predictability rather than ambiguity. We must take a more unequivocal line here and convey more clearly if we are exchanging opinions and arguments, at what point facts arise and why these are important.

Our business model is based on scientific fact. We are searching for new solutions to satisfy people’s basic requirements, for new answers to open questions, and for therapies to treat unmet medical need. In short, we are looking for innovations. Research and progress are coupled with uncertainty and require both resources and stamina – and companies willing to commit and take the responsibility. That’s what Bayer has been doing for 155 years.


Ladies and gentlemen:
The pending acquisition of Monsanto is a very important and logical step in the evolution of Bayer. Over the past few years, we’ve focused our portfolio on building leading businesses in health and nutrition.

Many of the most urgent challenges of our time are in the areas of health care and nutrition: for a global population that is growing and aging at the same time; for a global community that must overcome the challenges of climate change while at the same time shaping digitalization.

Health care and nutrition are among the Sustainable Development Goals of the United Nations, which also underscores their relevance.

We firmly believe that we can make a contribution in these areas, thus helping to overcome the enormous challenges facing us all. We intend to commit our combined expertise, passion and innovative capability to achieving this.

We are optimistic because we believe in our strengths:

- innovation powered by science;
- our commitment to sustainability and responsibility;
- our focus on delivering a strong performance based on financial strength and efficient processes;
- our portfolio management approach that creates long-term value for you, our stockholders;
- and our strong Bayer brand, a global icon for quality and integrity.

All these points will be critical to the continued success of our company.

Ladies and gentlemen:
Let me close with a few personal words. I joined Bayer almost exactly 30 years ago and have served the company in many roles and countries. During these 30 years, a great deal has changed and is still changing now. I can assure you, however, that nothing has changed as far as the company’s fundamental principles, values and beliefs are concerned.

Bayer still holds the same values and beliefs that made it great. We are committed to these values and beliefs – and this is something that won’t change. I can assure you of this and we will prove it to you in the months and years ahead.

You can take my word for it: Bayer will remain Bayer. Thank you very much.

Cautionary Statements Regarding Forward-Looking Information
Certain statements contained in this communication may constitute “forward-looking statements.” Actual results could differ materially from those projected or forecast in the forward-looking statements. The factors that could cause actual results to differ materially include the following: uncertainties as to the timing of the transaction; the possibility that the parties may be unable to achieve expected synergies and operating efficiencies in the merger within the expected time-frames or at all and to successfully integrate Monsanto’s operations into those of Bayer; such integration may be more difficult, time-consuming or costly than expected; revenues following the transaction may be lower than expected; operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers) may be greater than expected following the announcement of the transaction; the retention of certain key employees at Monsanto; risks associated with the disruption of management’s attention from ongoing business operations due to the transaction; the conditions to the completion of the transaction may not be satisfied, or the regulatory approvals required for the transaction may not be obtained on the terms expected or on the anticipated schedule; the parties’ ability to meet expectations regarding the timing, completion and accounting and tax treatments of the merger; the impact of the refinancing of the loans taken out for the transaction, the impact of indebtedness incurred by Bayer in connection with the transaction and the potential impact on the rating of indebtedness of Bayer; the effects of the business combination of Bayer and Monsanto, including the combined company’s future financial condition, operating results, strategy and plans; other factors detailed in Monsanto’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended Thursday, August 31, 2017 and Monsanto’s other filings with the SEC, which are available at and on Monsanto’s website at; and other factors discussed in Bayer’s public reports which are available on the Bayer website at Bayer and Monsanto assume no obligation to update the information in this communication, except as otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date.

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