Bayer sees healthcare business driving growth

German chemicals and drugs group Bayer expects higher profit margins and sales at its healthcare division over the next three years, where product launches are set to boost prescription drug sales by 16 percent.

The healthcare division, which also makes non-prescription and animal health drugs, contrast agents and blood glucose meters, is aiming for sales of roughly 20 billion euros ($26.2 billion) in 2014, up from 17.2 billion euros last year, Germany’s largest drugmaker said on Wednesday.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) at the unit should reach at least 28 percent of sales by the same date, up from 27.4 percent in 2011, it added.

Bayer shares were indicated up 1 percent in pre-market trade, with Germany’s DAX index seen up 0.4 percent.

Bayer is pinning its hopes on new drug launches to lift earnings in the coming years, while its plastics division struggles with high raw materials costs.

The company has said its four most promising drugs, led by newly-launched anti-clotting pill Xarelto, have the potential to rack up combined annual sales of as much as 5 billion euros, although little of that will be seen this year.

Market research has shown Xarelto got off to a slow start compared with rival pill Pradaxa from Boehringer Ingelheim.

Both pills compete in the mass market for stroke prevention in patients with a common heart rhythm disorder and will likely face an even stronger rival in Eliquis from Bristol-Myers Squibb and Pfizer, expected to get U.S. approval in late June.

Bayer said on Wednesday prescription drug sales were set to rise to about 11.5 billion euros by 2014, up 16 percent from 2011.

At its plastics unit, called MaterialScience, Bayer said only that it expected sales volumes to rise at a higher rate than global economic growth.

Bayer’s pesticides and plant biotech unit CropScience, meanwhile, is aiming for more than 8 billion euros in 2014 sales, up from 7.3 billion last year.

The unit’s underlying EBITDA margin would rise to about 24 percent from 22.8 percent last year, Bayer added.

Bayer last month posted a 9 percent drop in fourth-quarter profit as price rises failed to offset soaring oil-derived raw materials costs at its plastics division, which is the world’s No.1 maker of foam chemicals and transparent plastics for car lights and sports goggles.

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By Ludwig Burger