Bayer Looking to Expand in Russia

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Bayer (BAYRY) recently announced its intention to expand its business in Russia further. The company expects sales in Russia to grow to €1.3 billion in 2017 from the 2012 level of €726 million, representing an increase of 80%. The company expects significant sales growth in all its subgroups.

Bayer has already seen growth in the first half of 2013, with sales in Russia climbing around 12.5% year over year. The company also plans to increase its employee strength in the country to around 2,400 in 2017 from 1,570 in 2012. Bayer believes Russia can be among the top ten markets for the company by 2022 with sales exceeding €2 billion there.

Bayer’s HealthCare segment was the primary revenue generator in Russia last year, contributing around 67% of the total revenue from the country. Bayer mentioned in its press release that its HealthCare segment is currently the fourth largest health care company in Russia. The segment is expected to benefit from both prescription-only and non-prescription pharmaceutical products in Russia.

Bayer believes that its HealthCare segment will increase around 14% on an average per year in Russia. The segment is expected to contribute approximately €910 million in 2017 there, which can make the company the third largest health care company in Russia. New products like Nexavar (kidney cancer), Stivarga (colorectal cancer) and riociguat (pulmonary hypertension) are expected to drive growth in the HealthCare segment in the coming years.

Meanwhile, the company’s Material Science segment, one of the world’s largest polymer manufacturers, is expected to contribute around €230 million in 2017 as opposed to €149 million in 2012, implying an annual growth rate of around 9%. In 2012, the Material Science segment accounted for 20% of Bayer's sales in Russia.

Bayer’s CropScience unit, which is engaged in developing and marketing chemical crop protection products (insecticides, herbicides, and fungicides), seeds and integrated plant biotechnology solutions for agricultural and non-agricultural uses, contributed around €93 million from Russia in 2012. The company believes revenues from this segment will be up to around €150 million by 2017, representing an annual growth rate of 8%. Bayer also has plans to launch 23 new crop protection products in the coming years in Russia.

The company further mentioned in its press release that it has entered into a strategic agreement with Medsintez for manufacturing and commercializing diagnostic imaging products and pharmaceuticals. Pharmaceutical products under the deal include anti-infective Avelox.

Bayer presently carries a Zacks Rank #3 (Hold). Currently, companies like Actelion Ltd. (ALIOF), Gilead Sciences Inc. (GILD) and Biogen Idec Inc. (BIIB) look well positioned in the pharma space with a Zacks Rank #1 (Strong Buy).

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