On July 27, 2016 Amgen (NASDAQ:AMGN) reported financial results for the second quarter of 2016 (Press release, Amgen, JUL 27, 2016, View Source [SID:1234514077]).

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Key results include:

Revenues increased 6 percent versus the second quarter of 2015 to $5.7 billion.

Product sales grew 5 percent driven by Enbrel (etanercept), Prolia (denosumab), KYPROLIS (carfilzomib) and XGEVA (denosumab).

GAAP earnings per share (EPS) increased 15 percent to $2.47 driven by higher revenues and higher operating margins.

GAAP operating income increased 15 percent to $2,380 million and GAAP operating margin improved by 3.8 percentage points to 43.5 percent.

Non-GAAP EPS increased 11 percent to $2.84 driven by higher revenues and higher operating margins.

Non-GAAP operating income increased 10 percent to $2,812 million and non-GAAP operating margin improved by 2.6 percentage points to 51.4 percent.

2016 total revenues guidance increased to $22.5-$22.8 billion; EPS guidance increased to $9.55-$9.90 on a GAAP basis and $11.10-$11.40 on a non-GAAP basis.

The Company generated $2.5 billion of free cash flow.

"We delivered another strong quarter and are on track to meet or exceed our long-term objectives," said Robert A. Bradway, chairman and chief executive officer. "We are in the early stages of a new product launch cycle and have several additional pipeline opportunities rapidly nearing regulatory milestones."


$Millions, except EPS and percentages

Q2’16

Q2’15

YOY Δ


Total Revenues

$ 5,688

$ 5,370

6%


GAAP Operating Income

$ 2,380

$ 2,076

15%


GAAP Net Income

$ 1,870

$ 1,653

13%


GAAP EPS

$ 2.47

$ 2.15

15%


Non-GAAP Operating Income

$ 2,812

$ 2,551

10%


Non-GAAP Net Income

$ 2,146

$ 1,977

9%


Non-GAAP EPS

$ 2.84

$ 2.57

11%


References in this release to "non-GAAP" measures, measures presented "on a non-GAAP basis" and to "free cash flow" (computed by subtracting capital expenditures from operating cash flow) refer to non-GAAP financial measures. Adjustments to the most directly comparable GAAP financial measures and other items are presented on the attached reconciliations.


Product Sales Performance

Total product sales increased 5 percent for the second quarter of 2016 versus the second quarter of 2015. The increase was driven by ENBREL, Prolia, KYPROLIS and XGEVA.

ENBREL sales increased 10 percent driven by net selling price, offset partially by the impact of competition.

Neulasta (pegfilgrastim) sales decreased 1 percent driven by lower unit demand, offset partially by net selling price in the United States (U.S.).

Aranesp (darbepoetin alfa) sales increased 5 percent. Unit demand grew due to a shift by some U.S. dialysis customers from

EPOGEN (epoetin alfa) to Aranesp. Unit demand growth was offset partially by unfavorable changes in inventory and net selling price.

Prolia sales increased 30 percent driven by higher unit demand.

Sensipar/Mimpara (cinacalcet) sales increased 13 percent driven by net selling price and higher unit demand.

XGEVA sales increased 15 percent driven mainly by higher unit demand and, to a lesser extent, net selling price.

EPOGEN sales decreased 33 percent driven by the impact of competition and, to a lesser extent, a shift by some U.S. dialysis customers to Aranesp.

NEUPOGEN (filgrastim) sales decreased 23 percent driven by the impact of competition in the U.S.

KYPROLIS sales increased 45 percent driven by higher unit demand.

Vectibix (panitumumab) sales were flat.

Nplate (romiplostim) sales increased 14 percent driven by higher unit demand.

BLINCYTO (blinatumomab) sales increased 76 percent driven by higher unit demand.


PRODUCT SALES DETAIL BY PRODUCT AND GEOGRAPHIC REGION

$Millions, except percentages

Q2’16
Q2’15
YOY Δ

US
ROW
TOTAL

TOTAL

TOTAL


Enbrel

$1,423
$61
$1,484

$1,348

10%


Neulasta

962
187
1,149

1,158

(1%)


Aranesp

260
244
504

479

5%


Prolia

286
155
441

340

30%


Sensipar / Mimpara

303
86
389

344

13%


XGEVA

275
106
381

331

15%


EPOGEN

331
0
331

491

(33%)


NEUPOGEN

141
55
196

256

(23%)


KYPROLIS

142
30
172

119

45%


Vectibix

52
108
160

160

0%


Nplate

84
58
142

125

14%


BLINCYTO
21
9
30

17

76%


Repatha
20
7
27

0

*

Other**

17
51
68

57

19%


Total product sales

$4,317
$1,157
$5,474

$5,225

5%

* Not meaningful

** Other includes MN Pharma, Bergamo, IMLYGICand Corlanor

Operating Expense, Operating Margin and Tax Rate Analysis

On a GAAP basis:

Cost of Sales margin improved by 1.6 percentage points driven primarily by manufacturing efficiencies and higher net selling price. Research & Development (R&D) expenses decreased 7 percent driven primarily by transformation and process improvement efforts and lower spending required to support certain later-stage clinical programs. Selling, General & Administrative (SG&A) expenses increased 11 percent driven primarily by investments in new product launches. Total Operating Expenses were flat year-over-year, with all expense categories reflecting savings from our transformation and process improvement efforts.

Operating Margin improved by 3.8 percentage points to 43.5 percent.

Tax Rate decreased by 2.0 percentage points, reflecting discrete benefits associated with tax incentives and the adoption of Accounting Standards Update 2016-09, Improvements to Employee Share-Based Payment Accounting (ASU 2016-09), offset partially by unfavorable changes in the geographic mix of earnings.
On a non-GAAP basis:

Cost of Sales margin improved by 1.6 percentage points driven primarily by manufacturing efficiencies and higher net selling price. R&D expenses decreased 4 percent driven primarily by transformation and process improvement efforts and lower spending required to support certain later-stage clinical programs. SG&A expenses increased 13 percent driven primarily by investments in new product launches. Total Operating Expenses increased 2 percent, with all expense categories reflecting savings from our transformation and process improvement efforts.

Operating Margin improved by 2.6 percentage points to 51.4 percent.

Tax Rate decreased by 1.4 percentage points, reflecting discrete benefits associated with tax incentives and the adoption of ASU 2016-09, offset partially by unfavorable changes in the geographic mix of earnings.


$Millions, except percentages

GAAP


Non-GAAP


Q2’16
Q2’15
YOY Δ

Q2’16
Q2’15
YOY Δ


Cost of Sales
$1,050
$1,089
(4%)


$738
$789
(6%)


% of product sales
19.2%
20.8%
(1.6) pts


13.5%
15.1%
(1.6) pts

Research & Development
$900
$964
(7%)

$878
$918
(4%)


% of product sales
16.4%
18.4%
(2.0) pts


16.0%
17.6%
(1.6) pts


Selling, General & Administrative
$1,292
$1,160
11%

$1,260
$1,112
13%


% of product sales
23.6%
22.2%
1.4 pts


23.0%
21.3%
1.7 pts


Other
$66
$81
(19%)


$0
$0
0%

TOTAL Operating Expenses
$3,308
$3,294
0%


$2,876
$2,819
2%


Operating Margin

operating income as a % of product sales
43.5%
39.7%
3.8 pts


51.4%
48.8%
2.6 pts


Tax Rate
15.2%
17.2%
(2.0) pts


18.6%
20.0%
(1.4) pts


pts: percentage points


Cash Flow and Balance Sheet

The Company generated $2.5 billion of free cash flow in the second quarter of 2016 versus $3.2 billion in the second quarter of 2015. The decrease was driven by the timing of tax payments and the termination of foreign exchange forward contracts in the second quarter of 2015.

The Company’s third quarter 2016 dividend of $1.00 per share declared on July 22, 2016, will be paid on Sept. 8, 2016, to all stockholders of record as of Aug. 17, 2016.
During the second quarter, the Company repurchased 3.9 million shares of common stock at a total cost of $591 million. At the end of the second quarter, the Company had $3.6 billion remaining under its stock repurchase authorization.


$Billions, except shares

Q2’16
Q2’15
YOY Δ


Operating Cash Flow
$2.7
$3.3
($0.6)


Capital Expenditures
0.2
0.1
0.1


Free Cash Flow
2.5
3.2
(0.7)


Dividends Paid
0.8
0.6
0.2


Share Repurchase
0.6
0.5
0.1


Avg. Diluted Shares (millions)
756
768
(12)


Cash and Investments
35.0
30.0
5.0


Debt Outstanding
33.2
32.0
1.2


Stockholders’ Equity
30.1
27.5
2.6


Note: Numbers may not add due to rounding



2016 Guidance

For the full year 2016, the Company now expects:

Total revenues in the range of $22.5 billion to $22.8 billion.
Previously, the Company expected total revenues in the range of $22.2 billion to $22.6 billion.

On a GAAP basis, EPS in the range of $9.55 to $9.90 and a tax rate in the range of 16.5 percent to 17.5 percent.

Previously, the Company expected GAAP EPS in the range of $9.34 to $9.74. Tax rate guidance is unchanged.

On a non-GAAP basis, EPS in the range of $11.10 to $11.40 and a tax rate in the range of 19.0 percent to 20.0 percent.

Previously, the Company expected non-GAAP EPS in the range of $10.85 to $11.20. Tax rate guidance is unchanged.

Capital expenditures to be approximately $700 million.


SECOND QUARTER PRODUCT AND PIPELINE UPDATE
Key development milestones:

Clinical Program
Indication
Milestone

Repatha (evolocumab)
Hyperlipidemia
Phase 3 coronary imaging data expected H2 2016
Phase 3 CV outcomes data expected Q1 2017*

KYPROLIS
Newly diagnosed multiple myeloma
Phase 3 data expected H2 2016*

BLINCYTO
Pediatric Ph- R/R
B-cell precursor ALL
FDA priority review

Parsabiv (etelcalcetide)†
Secondary hyperparathyroidism
Global regulatory reviews

XGEVA
Prevention of SREs in multiple myeloma
Phase 3 data expected H2 2016*

Romosozumab
Postmenopausal osteoporosis
US regulatory review
Global regulatory submissions

Erenumab (AMG 334)
Migraine Prophylaxis
Phase 3 episodic migraine data expected H2 2016
ABP 215

(biosimilar bevacizumab)
Oncology
Global regulatory submissions
ABP 501

(biosimilar adalimumab)
Inflammatory diseases
Global regulatory reviews
ABP 980

(biosimilar trastuzumab)
Breast Cancer
Global regulatory submissions

*Event driven study; †Trade name provisionally approved by FDA; CV = cardiovascular; ALL = acute lymphoblastic leukemia


The Company provided the following updates on selected product and pipeline programs:


Repatha

In July, the U.S. Food and Drug Administration (FDA) approved the Repatha Pushtronex system (on-body infusor with prefilled cartridge) for monthly single-dose administration.

Data from a Phase 3 study evaluating the effects of Repatha on atherosclerotic disease as measured by intravascular ultrasound are expected in H2 2016.

Data from an event driven Phase 3 study evaluating the effects of Repatha on cardiovascular outcomes are expected in Q1 2017.


KYPROLIS

In June, the European Commission approved an expanded indication for KYPROLIS, to be used in combination with dexamethasone alone, for adult patients with multiple myeloma who have received at least one prior therapy, based on the ENDEAVOR data.

Data from the event driven Phase 3 CLARION study of KYPROLIS versus bortezomib in newly diagnosed, transplant ineligible multiple myeloma patients is expected in H2 2016.


BLINCYTO

In May, FDA accepted for priority review the supplemental Biologics License Application for BLINCYTO to include new data supporting the treatment of pediatric and adolescent patients with Philadelphia chromosome‑negative relapsed or refractory B-cell precursor acute lymphoblastic leukemia. The Prescription Drug User Fee Act target action date is Sept. 1, 2016.


Romosozumab

In July, a Biologics License Application for romosozumab for the treatment of osteoporosis in postmenopausal women at increased risk for fracture was submitted to FDA.


Erenumab

In June, a global Phase 2 study evaluating the efficacy and safety of erenumab in chronic migraine prevention met its primary endpoint.


ABP 980

In July, the primary analysis was completed for a Phase 3 study evaluating the efficacy and safety of ABP 980 compared with trastuzumab in patients with human epidermal growth factor receptor 2-positive early breast cancer.


Erenumab is developed in collaboration with Novartis
Romosozumab is developed in collaboration with UCB globally, as well as Astellas in Japan

Non-GAAP Financial Measures

In this news release, management has presented its operating results for the second quarters of 2016 and 2015 in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and on a non-GAAP basis. In addition, management has presented its full year 2016 EPS and tax rate guidance in accordance with GAAP and on a non-GAAP basis. These non-GAAP financial measures are computed by excluding certain items related to acquisitions, restructuring and certain other items from the related GAAP financial measures. Reconciliations for these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the news release. Management has also presented Free Cash Flow (FCF), which is a non-GAAP financial measure, for the second quarters of 2016 and 2015. FCF is computed by subtracting capital expenditures from operating cash flow, each as determined in accordance with GAAP.

The Company believes that its presentation of non-GAAP financial measures provides useful supplementary information to and facilitates additional analysis by investors. The Company uses certain non-GAAP financial measures to enhance an investor’s overall understanding of the financial performance and prospects for the future of the Company’s ongoing business activities by facilitating comparisons of results of ongoing business operations among current, past and future periods. The Company believes that FCF provides a further measure of the Company’s liquidity.

The Company uses the non-GAAP financial measures set forth in the news release in connection with its own budgeting and financial planning internally to evaluate the performance of the business, including to allocate resources and to evaluate results relative to incentive compensation targets. The non-GAAP financial measures are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

On July 27, 2016 Kite Pharma, Inc. (Nasdaq:KITE), a clinical-stage biopharmaceutical company focused on developing engineered autologous T-cell therapy (eACT) products for the treatment of cancer, reported that the Company has entered into an exclusive, worldwide license with the National Institutes of Health (NIH) for intellectual property related to a fully human anti-CD19 chimeric antigen receptor-based product candidate directed against B-cell malignancies (Press release, Kite Pharma, JUL 27, 2016, View Source [SID:1234514080]). The National Cancer Institute (NCI), with Dr. James N. Kochenderfer, M.D., an investigator in the Experimental Transplantation and Immunology Branch of the NCI, is currently conducting a Phase 1 clinical trial of the product candidate in patients with B-cell malignancies under an existing Cooperative Research and Development Agreement (CRADA) between Kite and the NCI.

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"The expansion of our CAR-T pipeline to include a fully human anti-CD19 chimeric antigen receptor supports our effort to maximize the potential benefit of CAR-T therapies for patients with advanced B-cell malignancies. As the field of T-cell therapy continues its rapid advancement, we remain committed to collaborating with the world’s most distinguished institutions and accessing the most significant enabling technologies to pioneer the next generation of T-cell therapies," said Arie Belldegrun, M.D., FACS, Chairman, President, and Chief Executive Officer.

On July 27, 2016 Onxeo S.A. (Euronext Paris, Nasdaq Copenhagen: ONXEO), an innovative company specialized in the development of orphan oncology therapeutics, reported it has entered into an exclusive license agreement with Pint Pharma for the commercialization of Beleodaq (belinostat), Onxeo’s pan-HDAC inhibitor for PTCL (peripheral T-cell lymphoma), in key South American countries (Press release, Onxeo, JUL 27, 2016, View Source [SID:1234514079]). Beleodaq is approved in the US, and has been marketed by Spectrum Pharmaceuticals since July 2014 as a 2nd-line treatment for PTCL.

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Pint Pharma is a private specialty pharma company well experienced in commercializing orphan drugs and highly specialized products in South American healthcare markets.

Under the terms of the agreement, Pint Pharma will register, commercialize, and promote Beleodaq in seven countries: Argentina, Brazil, Chile, Colombia, Ecuador, Peru, and Venezuela.

Onxeo will receive an upfront payment from Pint Pharma, regulatory and commercial milestone as well as double-digit royalties on the net sales of Beleodaq in these territories, representing a deal value of over USD 20 million.

"We are extremely pleased to announce this exclusive licensing agreement for Beleodaq, and to have Pint Pharma as a strategic partner in South America. This is the second Beleodaq licensing agreement, demonstrating our product’s commercial potential as well as its clinical value. We look forward to a close collaboration with Pint Pharma as we leverage their team’s strong expertise in this region to provide access to our treatment to a greater number of PTCL patients," commented Judith Greciet, CEO of Onxeo.

While initiating the regulatory procedures to obtain market approval, Pint Pharma also plans to make Beleodaq available to PTCL patients through Early Access Programs (EAPs) in eligible countries by the end of 2016.

"This collaboration agreement with Onxeo is a great opportunity for us to expand our hematology franchise and strengthen our leadership position in the South American oncology market. We are thrilled to be working with Onxeo, a company that shares our values and commitment to making innovative therapeutics available to patients suffering from rare diseases," commented David Muñoz, CEO of Pint Pharma.

On July 27, 2016 Laboratory Corporation of America Holdings (LabCorp) (NYSE:LH), the world’s leading healthcare diagnostics company, and Sequenom, Inc. (NASDAQ:SQNM), a pioneer in non-invasive prenatal testing (NIPT) for reproductive health, reported that they have entered into a definitive agreement and plan of merger under which LabCorp would acquire all of the outstanding shares of Sequenom in a cash tender offer for $2.40 per share, or an equity value of $302 million, which represents a total enterprise value of approximately $371 million, including net indebtedness (Press release, LabCorp, JUL 27, 2016, View Source [SID:1234514064]).

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"Sequenom’s market-leading NIPT and genetic testing capabilities will advance LabCorp’s strategy to deliver world-class diagnostic solutions," said David P. King, chairman and chief executive officer of LabCorp. "This is exactly the kind of strategic acquisition that LabCorp seeks: Sequenom was the first laboratory to offer a clinically validated NIPT test (MaterniT21) and has performed more than 500,000 tests to date. Sequenom’s proven best-in-class technology and strong research complement LabCorp’s extensive women’s health offering, providing patients and physicians with one source for the most complete range of testing options in women’s health, including NIPT and reproductive genetics."

King added, "Sequenom expands LabCorp’s geographic reach both domestically and internationally, offering services through licensing and commercial partnerships with an emphasis on the European Union and Asia Pacific. The addition of Sequenom to the LabCorp family meets our stated financial criteria, and creates a market leader in NIPT, women’s health and reproductive genetics, furthering our mission to improve health and improve lives around the globe."

"We are extremely excited to join LabCorp in its mission to deliver world-class diagnostic solutions," said Dirk van den Boom, Ph.D., president and CEO, Sequenom. "Strategically, this transaction makes sense. LabCorp is the world’s leading healthcare diagnostics company, providing comprehensive clinical laboratory and end-to-end drug development services. Sequenom is a pioneer in noninvasive prenatal testing for reproductive health. Over the last nine months, Sequenom has vastly enhanced its technology, operations, and business prospects. The opportunities this transaction presents are significant and important both for our reproductive health business as well as our liquid biopsy strategy. Becoming part of LabCorp helps Sequenom reach a much broader market for our innovative testing."

Under the terms of the agreement and plan of merger, LabCorp has formed an acquisition subsidiary, Savoy Acquisition Corp., that will commence a tender offer to purchase all outstanding shares of Sequenom for $2.40 per share. Following the completion of the tender offer, LabCorp expects to consummate a merger of Savoy Acquisition Corp. and Sequenom in which shares of Sequenom that have not been purchased in the tender offer will be converted into the right to receive the same cash price per share as paid in the tender offer. The tender offer and the merger are subject to customary closing conditions set forth in the merger agreement, including the acquisition by Savoy Acquisition Corp. of a majority of Sequenom’s outstanding shares at the time of the consummation of the tender offer and the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The closing of the acquisition is expected by year end.

The board of directors of Sequenom, having determined that the offer and the merger are advisable, fair to, and in the best interests of Sequenom and its stockholders, approved the agreement and plan of merger and the other transactions contemplated thereby, including the tender offer, and recommended that Sequenom’s stockholders accept the offer and tender their shares in the offer when it is made.

JP Morgan is acting as financial advisor to Sequenom in connection with the transaction, and Cooley LLP is providing legal advice. Barclays is acting as financial advisor to LabCorp, and Hogan Lovells is providing legal advice.

On July 27, 2016 The Bayer Group reported further growth in the second quarter of 2016 (Press release, Bayer, JUL 27, 2016, View Source [SID:1234514052]).

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“Our Life Science businesses recorded encouraging sales and earnings growth overall,” said CEO Werner Baumann when he presented the interim report for the second quarter on Wednesday. At Pharmaceuticals, Bayer benefited from the continued strong development of the recently launched products. Consumer Health increased sales, while EBITDA before special items receded. Sales of Crop Science held steady at the prior-year level despite a continuingly difficult market environment, while earnings decreased. EBITDA before special items at Animal Health declined despite sales growth. Covestro registered a substantial increase in EBITDA before special items, while sales fell as expected. “We remain confident about the year as a whole and are raising the Group forecast,” said Baumann.

Sales of the Bayer Group fell by 1.4 percent to EUR 11,833 million (Q2 2015: EUR 12,003 million) on a reported basis in the second quarter of 2016, but increased by 2.3 percent after adjusting for currency and portfolio effects (Fx & portfolio adj.). Despite negative currency effects of EUR 90 million, dissynergies from the Covestro IPO and the divestiture of Diabetes Care, Group EBITDA before special items improved by 5.7 percent to EUR 3,054 million (Q2 2015: EUR 2,888 million). EBIT advanced by 17.3 percent to EUR 2,138 million (Q2 2015: EUR 1,823 million) after special charges of EUR 104 million (Q2 2015: EUR 255 million). These mainly comprised expenditures for efficiency improvement measures, costs for the integration of acquired businesses and expenses in connection with the realignment of the Bayer Group. Net income rose by 18.6 percent to EUR 1,380 million (Q2 2015: EUR 1,164 million). Core earnings per share from continuing operations advanced by 4.0 percent to EUR 2.07 (Q2 2015: EUR 1.99).

Gross cash flow from continuing operations climbed by a substantial 9.3 percent to EUR 2,366 million (Q2 2015: EUR 2,165 million). Despite an increase in cash tied up in working capital, net cash flow (total) edged forward by 1.2 percent to EUR 1,982 million (Q2 2015: EUR 1,959 million). Net financial debt increased by EUR 1.5 billion compared with March 31, 2016, to EUR 17.8 billion on June 30, 2016, due mainly to the dividend payment.

Strong gains at Pharmaceuticals

Sales of prescription medicines (Pharmaceuticals) rose by 5.5 percent (Fx & portfolio adj. 8.4 percent) to EUR 4,104 million (Q2 2015: EUR 3,890 million). “This gratifying performance was driven by the continued strong development of our recently launched products,” explained Baumann. The oral anticoagulant Xarelto, the eye medicine Eylea, the cancer drugs Xofigo and Stivarga, and Adempas to treat pulmonary hypertension achieved total combined sales of EUR 1,332 million (Q2 2015: EUR 1,051 million), expanding by 28.8 percent on a currency-adjusted (Fx adj.) basis. Xarelto once again posted encouraging sales gains with growth of 30.1 percent (Fx adj.), due mainly to volume increases in Europe and Japan. Business with Xarelto also developed positively in the United States, where it is marketed by a subsidiary of Johnson & Johnson. Bayer considerably raised sales of Eylea (Fx adj. plus 40.9 percent) in all regions, particularly in Europe, Canada and Japan.

Among the leading established pharmaceutical products, sales of Aspirin Cardio for secondary prevention of heart attacks moved ahead by 16.4 percent (Fx adj.). This increase resulted mainly from gains in China, as did the 6.6 percent (Fx adj.) improvement in sales of the oral diabetes treatment Glucobay. Sales of the MRI contrast agent Gadavist/Gadovist rose by 28.8 percent (Fx adj.) thanks to substantial volume gains in the United States and Japan. As the result of advance orders from Bayer’s distributor in the first quarter, sales of the blood-clotting medicines Kogenate/ Kovaltry decreased by 5.6 percent (Fx adj.). Sales of the multiple sclerosis product Betaferon/Betaseron posted an overall decline of 8.7 percent (Fx adj.) that was attributable in part to weaker business performance in Europe. Overall, Bayer expanded the Pharmaceuticals business (Fx adj.) in all regions.

EBITDA before special items of the division increased by a substantial 13.3 percent to EUR 1,352 million (Q2 2015: EUR 1,193 million) in the second quarter of 2016. As expected, the earnings contributions from the very good business development stood against high investments in research and development. Currency effects of around EUR 40 million had a diminishing effect.

Consumer Health achieves sales growth with strong brands

Sales of self-care products (Consumer Health) declined by 2.3 percent on a reported basis to EUR 1,553 million (Q2 2015: EUR 1,590 million), but increased by 4.0 percent after adjusting for currency and portfolio changes. Business developed well in the Latin America/Africa/Middle East, Europe and Asia/Pacific regions, while sales in North America were down compared with a strong prior-year quarter. “Our Claritin, Aspirin, Bepanthen/Bepanthol and Canesten brands posted very high growth rates,” said Baumann.

Sales of the antihistamine Claritin rose by a considerable 11.0 percent (Fx adj.). Despite a weak allergy season, business in the United States developed positively, due primarily to the launch of the ClariSpray nasal spray. Sales of the analgesic Aspirin increased by 8.1 percent (Fx adj.) and thus expanded year on year in all regions on a currency-adjusted basis, with especially attractive gains in Latin America and the United States. Bayer posted significant currency-adjusted sales growth (plus 20.7 percent) for the Bepanthen/Bepanthol wound and skin care products, particularly in Europe. The considerable increase in sales of the skin and intimate health brand Canesten (Fx adj. plus 19.0 percent) was attributable to expanded volumes in all regions, particularly in China and Germany. By contrast, business with the analgesic Aleve declined overall (Fx adj. minus 5.1 percent). The Dr. Scholl’s foot care products registered a decline in sales (Fx adj. minus 13.6 percent) because of a weaker market environment and increased competitive pressure in the United States.

EBITDA before special items of Consumer Health declined by 9.4 percent to EUR 328 million (Q2 2015: EUR 362 million). The earnings contributions from the good business performance and cost synergies were not sufficient to offset the higher selling expenses as well as allocation and currency effects of around EUR 25 million.

Crop Science business holds steady in a continuingly difficult market environment

Sales of the agricultural business (Crop Science) came in at EUR 2,518 million (Q2 2015: EUR 2,636 million). This amounted to a decline of 4.5 percent on a reported basis and an increase of 0.4 percent after adjusting for currency and portfolio effects. “Business at Crop Protection/Seeds was steady year on year despite an ongoing weak market environment,” said Baumann. Crop Science achieved gratifying business development in the Asia/ Pacific region, where sales rose by 8.4 percent (Fx adj.). Sales were up slightly year on year in Europe (Fx adj. plus 0.9 percent) and were level with the prior-year period in the Latin America/Africa/Middle East region (Fx adj. minus 0.2 percent). Sales in North America fell by 3.4 percent (Fx adj.).

At Crop Protection, the Fungicides business posted a gain of 6.0 percent (Fx & portfolio adj.). Sales of Herbicides also developed positively (Fx & portfolio adj. plus 3.9 percent), while sales of Insecticides declined by 11.9 percent (Fx & portfolio adj.). Business at SeedGrowth declined by 6.1 percent (Fx. & portfolio adj.), while sales at seeds receded by 4.8 percent due to seasonal effects. Sales at Environmental Science edged down by 1.2 percent year on year. Following the conclusion in May 2016 of an agreement to divest the Consumer business of Environmental Science, these activities are reported under discontinued operations. Environmental Science therefore now comprises only the business for professional users. The key data, prior-year figures and outlook are restated accordingly.

EBITDA before special items of Crop Science declined by 8.2 percent to EUR 663 million in the second quarter (Q2 2015: EUR 722 million). The higher cost of goods sold, slightly lower volumes and a negative currency effect of around EUR 10 million were compensated only in part by higher selling prices and lower selling expenses.
 
Animal Health records growth in all regions

Sales of the Animal Health business amounted to EUR 426 million (Q2 2015: EUR 428 million). Business was level year on year on a reported basis (minus 0.5 percent) and expanded by 4.2 percent after adjusting for currency and portfolio effects. All regions developed positively on a currency-adjusted basis, the strongest gains being registered in Europe. Sales of the Advantage family of flea, tick and worm control products declined (Fx adj. minus 3.7 percent), mainly as a result of higher competitive pressure. Sales of the Seresto flea and tick collar rose strongly (Fx adj. plus 44.6 percent), thanks especially to higher demand in the United States. Sales also increased in Europe. EBITDA before special items of Animal Health declined by 16.7 percent to EUR 100 million (Q2 2015: EUR 120 million), due especially to seasonal shifts in selling expenses and negative currency effects of around EUR 5 million.

Continuing favorable raw material price development at Covestro

Sales of Covestro fell by 6.6 percent (Fx & portfolio adj. 3.9 percent) in the second quarter compared with the prior-year period, to EUR 2,975 million (Q2 2015: EUR 3,185 million). Selling prices were down significantly, mainly due to raw material price development and primarily at Polyurethanes. Volumes were above the level of the prior-year quarter overall. EBITDA before special items of Covestro improved by 7.3 percent to EUR 543 million (Q2 2015: EUR 506 million). The impact of lower selling prices was more than compensated by the net effect of lower raw material prices and higher volumes. Earnings were diminished by a negative currency effect of around EUR 5 million.

Life Science businesses post good development in the first half

Sales of the Bayer Group in the first half of 2016 came to EUR 23,687 million (H1 2015: EUR 23,796 million). Sales were level with the previous year on a reported basis (minus 0.5 percent) and increased by 2.8 percent after adjusting for currency and portfolio effects. EBITDA before special items advanced by 10.9 percent to EUR 6,441 million (H1 2015: EUR 5,810 million). The good sales development particularly in the Life Science businesses was accompanied by high R&D and selling expenses. Earnings were held back by negative currency effects of around EUR 150 million. Net income rose by 15.7 percent to EUR 2,891 million (H1 2015: EUR 2,498 million). Core earnings per share from continuing operations advanced by 9.1 percent to EUR 4.42 (H1 2015: EUR 4.05).

Confidence for the full year 2016

For the second half of 2016, Bayer is using the exchange rates prevailing on June 30, 2016, including a EUR-USD rate of 1.11. For the full year 2016, the company is now planning sales of EUR 46 billion to EUR 47 billion (previously: more than EUR 47 billion) for the Bayer Group including Covestro. This continues to correspond to a low-single-digit percentage increase (Fx & portfolio adj.). Bayer now plans to increase EBITDA before special items by a high-single-digit (previously: mid-single-digit) percentage. It is now Bayer’s aim to increase core earnings per share from continuing operations by a mid- to high-single-digit percentage (previously: a mid-single-digit percentage). This takes into account Covestro’s inclusion at around 64 percent starting on April 19, 2016 (January 1 to April 18, 2016: around 69 percent).

The Bayer Group continues to plan sales of approximately EUR 35 billion for the Life Science activities, i.e. the Bayer Group excluding Covestro. This still corresponds to a mid-single-digit percentage increase (Fx & portfolio adj.) as previously forecasted. Bayer now plans to increase EBITDA before special items by a mid- to high-single-digit (previously: mid-single-digit) percentage. This planning includes dissynergies of around EUR 130 million from the legal independence of Covestro and from divestments.

For Pharmaceuticals, Bayer now expects sales above EUR 16 billion (previously: approximately EUR 16 billion) despite some price decreases. This now corresponds to a high-single-digit (previously: mid-single-digit) percentage increase (Fx & portfolio adj.). The company now plans to raise sales of the recently launched pharmaceutical products toward EUR 5.5 billion (previously: to more than EUR 5 billion). Bayer now expects a low-teens (previously: mid- to high-single-digit) percentage increase in EBITDA before special items at Pharmaceuticals. It aims to improve the division’s EBITDA margin before special items.

In the Consumer Health Division, Bayer now expects sales to come in at approximately EUR 6 billion (previously: more than EUR 6 billion). The company plans to grow sales by a low- to mid-single-digit (previously: mid-single-digit) percentage on a currency- and portfolio-adjusted basis. EBITDA before special items is now expected to come in on the level of the prior year (previously: increase by a mid-single-digit percentage).

In light of the continuingly weak market environment, Bayer now expects Crop Science sales to be on the prior-year level (previously: increase by a low-single-digit percentage) on a currency- and portfolio-adjusted basis. This is equivalent to reported sales of about EUR 10 billion. Bayer now expects a low-single-digit percentage decrease (previously: low-single-digit percentage increase) in EBITDA before special items.

At Animal Health, Bayer continues to expect sales to be slightly above the prior-year level and is still planning a currency- and portfolio-adjusted sales gain and an increase in EBITDA before special items, each by a low- to mid-single-digit percentage.

For 2016, Covestro is now expecting a sales decline (previously: sales at the prior-year level) and, for the second half of 2016, EBITDA after adjustment for special items at least at the prior-year level (previously: for the full year, a decline in EBITDA after adjustment for special items).