Research and development at Bayer HealthCare

Innovation is the key driver of Bayer’s future growth. Challenges such as providing health care and nutrition for a growing world population and using natural resources efficiently can only be overcome with innovative solutions.

In 2011 we invested € 1,948 million (2010: € 2,066 Million) in research and development in the Pharmaceuticals and Consumer Health segments. This represented 66.4 percent of the Bayer Group’s entire research and development spending and was equivalent to 11.3 percent (2010: 12.2 percent) of HealthCare sales. At the end of 2011, some 7,700 employees of the HealthCare subgroup were working in research and development.

Research and development expenses in the Pharmaceuticals segment amounted to € 1,556 million (2010: € 1,684 million), or 15.6 percent (2010: 16.9 percent) of segment sales. The decline was mainly due to lower development costs following the successful completion of the majority of Phase III studies for our anticoagulant Xarelto™.

Drug discovery in the Pharmaceuticals segment is concentrated in the areas of cardiology and oncology, along with gynecological treatments and hematology. Other areas of focus are inflammatory processes and ophthalmology. In addition, we are strengthening our established products through lifecycle management, an example being the development of innovative administration forms for contraceptives.

Research activities and capacities are concentrated at three sites in Berlin and Wuppertal, Germany, and Berkeley, California, United States. Work in Berlin and Wuppertal mainly focuses on the discovery, optimization and development of new active substances. Research is also carried out at these sites in the fields of drug metabolism, pharmacokinetics, toxicology and clinical pharmacology. Berkeley is a major research and development center focused on biologicals for hematology, such as Kogenate™. We also operate further research centers, such as those in Beijing, China.

In the Consumer Health segment, we raised our research and development expenditures to € 392 million (2010: € 382 million), or 5.4 percent (2010: 5.5 percent) of segment sales.

In our Consumer Care Division, research and development activities at the product development centers in Morristown, New Jersey, United States, and Gaillard, France, focus on the development and commercialization of non-prescription (over-the-counter = otc) products. These activities center on supporting both existing and new brands by implementing product-specific and clinical development strategies that enable the successful exploitation of new technologies, the extension of indications for existing products or the reclassification of current prescription medicines as OTC products.

The research and development activities of our Medical Care Division focus on blood glucose monitoring and the continuing development of medical equipment used in the diagnosis or treatment of various diseases. At the four U.S. research and development locations for our diabetes care business, the largest of which is in Tarrytown, New York, we are working to strengthen our product lines and continue expanding into attractive segments of the diabetes market. In 2011 we progressed with the launch of several innovative products in key markets to meet the specific needs of people with diabetes.

To strengthen our position among the leading companies in the field of innovative, high-quality diagnostic imaging and interventional processes, we merged the Diagnostic Imaging unit, previously part of the Pharmaceuticals segment, with our medical equipment business to create the new Radiology and Interventional unit. The aim of our research and development activities for the medical equipment business is to steadily improve our contrast injection, thrombus removal and other vascular intervention systems in order to build on our leadership position, especially in the United States. We also intend to enter additional attractive segments such as medical data management tools for contrast injection systems, and drug-coated balloon catheters to treat vascular disease. The respective research and development centers are located near Pittsburgh, Pennsylvania, and Minneapolis, Minnesota, in the United States and in Sydney, Australia.

The Animal Health Division focuses its research and development activities at the Monheim site in Germany on antibiotics and antiparasitics as well as active substances to treat non-infectious disorders in animals. The research activities of Animal Health were integrated into the Global Drug Discovery unit of Bayer HealthCare effective March 1, 2011. The advantage of the new organizational structure lies in the joint use of technology platforms and the pooling of know-how and experience in drug discovery. At the same time, Animal Health continues to collaborate with the CropScience units, especially in the area of parasitology, to leverage our status as a company with multiple life science businesses.

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