Bayer committed to pharma R&D and CapEx despite planned Monsanto buy

By Gareth Macdonald contact

- Last updated on GMT

Related tags: Bayer, Pharmacology

Bayer formulators at work (source: Bayer)
Bayer formulators at work (source: Bayer)
Bayer has said it will not cut drug R&D or manufacturing investment as a result of its planned acquisition of Monsanto.

Monsanto accepted Bayer’s $56bn (€49.7bn) offer on Wednesday. The deal – which is still subject to financial regulators' approval – is the latest in a wave of agribusiness consolidation that has seen Dow Chemical and DuPont agree to merge and Syngenta accede to a takeover by China National Chemical.

When news of its interest in Monsanto broke in May some analysts – including BMI Research’s Craig Smith​ – cautioned that Bayer’s growth in agribusiness may shift its focus away from pharmaceutical development and manufacture.

Smith told us at the time that “If the deal with Monsanto goes ahead, over half of Bayer's business will represent agribusiness, threatening the company's key growth drivers - namely pharmaceuticals and consumer healthcare.”

“As such, Bayer could possibly be diverting funds away from R&D activities for its pharmaceuticals and consumer healthcare divisions. Given that Bayer already devotes marginally smaller funds to R&D than other multinational pharmaceutical companies, this deal could significantly weaken their capacity to grow within the pharmaceuticals space.”

Monsanto’s acceptance OF Bayer’s improved offer this week saw others​ ask similar questions about its commitment to pharmaceuticals.

Unfounded

Such concerns are unfounded according to Günter Forneck from Bayer’s media relations team, who told us “all of our businesses will have the resources needed to further develop. No reductions in R&D spending or capex are intended.​”

Forneck pointed to statements Bayer made in May when it said buying Monsanto would reinforce “Bayer as a global innovation-driven Life Science company with leadership positions in its core segments​.”

Monsanto has expertise in genetic manipulation. While applying this knowhow to drug development was not the main motivation for the deal, Forneck did confirm that Bayer had started assessing potential pharmaceutical applications.

How the combined knowledge regarding specific technologies might be fruitful for different businesses needs to be analyzed. At Bayer there are already certain, but limited activities in place in this regard​” he said.

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