Bayer COO: we stopped assigning sales targets. Our teams aimed higher

Bayer Pharmaceuticals says its removal of country-level sales targets and fixed annual budgets has supported growth despite loss of exclusivity for Xarelto and Eylea. Nubeqa reached blockbuster status five months ahead of schedule and generated €2.4 billion in global sales in 2025; its U.S. veterans initiative increased utilization by 60% in 2024. The U.S. now accounts for more than 30% of Bayer pharmaceutical sales, up from 19% a few years ago, while China sales of Kerendia doubled and Nubeqa sales rose 70%.

Analysis

The investable implication is not the operating-model rhetoric itself, but a potential improvement in pharma capital allocation as legacy-product cash flows roll off. If Bayer can consistently redeploy commercial spend toward Nubeqa and Kerendia rather than defend country budgets, incremental sales should carry better returns on promotional spend and reduce the probability of another guidance reset. The key earnings question is whether this converts into durable Pharma margin expansion rather than simply higher selling expense behind a small number of assets.

The U.S. mix shift raises both upside and concentration risk. A higher U.S. weighting improves monetization for differentiated medicines, but makes BAYN more exposed to IRA pricing negotiations, formulary access, Part D redesign, and competitive oncology launches; the value of faster field-force deployment is limited if reimbursement or label breadth is the binding constraint. Commercial wins in VA channels are also not necessarily representative of broad commercial-market economics, so management's claimed execution gains need validation in prescription trends, net price realization, and SG&A-to-sales leverage.

Near term, this is modestly supportive of sentiment but unlikely to rerate BAYN absent evidence that the Pharma organization can offset loss-of-exclusivity pressure while expanding margins. Over 6-18 months, successful resource reallocation would strengthen the case for separating or revaluing Pharma on a cleaner growth profile, but the thesis is vulnerable to pipeline setbacks and any need to reinvest heavily to defend share. The contrarian view is that decentralized resource allocation may increase forecast dispersion and reduce visibility precisely when investors require tighter control over cash generation and leverage reduction.

Key Decisions for Investors

• Maintain BAYN as a watch-to-accumulate rather than a catalyst trade; add only after the next results demonstrate Pharma growth above management guidance alongside improving Pharma EBITDA margin or declining SG&A as a percentage of sales. This validates that commercial flexibility is producing operating leverage, not merely spend reallocation.
• For a 6-12 month relative-value expression, consider long BAYN versus short a broad European pharma basket (EXV) only if BAYN's valuation discount remains intact and Nubeqa/Kerendia growth supports a guidance raise. Target a 10-15% relative move; exit on a Pharma guidance cut, material U.S. pricing headwind, or evidence of margin deterioration.
• Monitor quarterly Nubeqa and Kerendia growth, U.S. Pharma sales mix, gross-to-net pricing trends, and SG&A leverage. A deceleration in either growth asset without an offsetting pipeline catalyst would falsify the reallocation thesis and argue against buying perceived turnaround strength.
• Do not extrapolate the operating-model narrative into a near-term multiple expansion before legal, agricultural, and balance-sheet overhangs are separately resolved; those risks can dominate Pharma execution in BAYN equity performance.