Bayer's Balanced Business Approach

By Cliff Mintz Ph.D., Life Science Leader magazine

The German conglomerate known as Bayer AG has a long and storied history in the pharmaceutical industry. The company is probably best known for Bayer Aspirin, a product the company first introduced (as a prescription medication) in 1899. Today, Bayer HealthCare, a subgroup of Bayer AG, is divided into four divisions: 1) Animal Health, 2) Consumer Care, 3) Medical Care, and 4) Pharmaceuticals. Worldwide, Bayer HealthCare employs over 55,000 workers and in 2010, the subgroup had 16.9 billion Euros in sales.

Bayer HealthCare Pharmaceuticals Inc. manages and oversees Bayer HealthCare’s American Pharma business, concentrating in the areas of women’s healthcare, diagnostic imaging, general medicine, oncology, and hematology/neurology. While best known in the United States for its contraceptive franchise that includes Yaz, Yasmin, Mirena, and Beyaz, Bayer HealthCare also markets a recombinant factor to treat hemophilia, Kogenate; Betaferon/Betaseron, a treatment for multiple sclerosis; and the oncology agent Nexavar, indicated for certain forms of liver and kidney cancer.

Unlike many of its big pharma competitors that recently have shifted focus from small molecules to protein-based therapeutics, Bayer HealthCare has a successful history of researching and developing both types of therapies. The company remains committed to its traditional small molecule discovery approach and to increasing its R&D abilities for biological-based treatments. As an example, in January 2011, the company opened the Bayer U.S. Innovation Center in San Francisco, which complements the company’s existing biologics and hematology R&D presence on the West Coast.

Although net income in 2010 was up, sales of some its most popular brands, including Yaz/Yasmin, slumped, whereas others like Nexavar and Betaferon/Betaseron exhibited only very modest growth. One person who has been charged with helping improve the company’s performance and oversee its growth is Mark Trudeau, president, U.S. Region, Bayer HealthCare Pharmaceuticals.

Trudeau has more than 25 years of experience in the pharmaceutical industry. Prior to joining Bayer in 2009, he headed the Immunoscience business at Bristol-Myers Squibb (BMS). During his 10+ year career at BMS, Trudeau held senior leadership positions in marketing and commercial operations, including serving as president of the Asia/Pacific Region; president and general manager, Canada; and general manager/managing director, United Kingdom. Before BMS, Trudeau was with Abbott Laboratories for 10 years, serving in a variety of marketing and leadership positions, including leading the company’s Neuroscience and Immunoscience businesses. He began his career in engineering at Eli Lilly & Co. and at E.I. Dupont De Nemours, Inc.

In an interview, Trudeau shared his views on the Bayer HealthCare U.S. business, the company’s R&D focus, and its plans for the future.

Which of your divisions represent the greatest opportunity for future growth of the company?
Trudeau: All the businesses you mentioned are equally vital to the ongoing success of the company, and therefore, it’s difficult to single out one division that represents the greatest opportunity for future growth.

While other companies tend to specialize and focus on certain therapeutic areas and indications, we view our diversified healthcare model — with both consumer-focused businesses and a pharmaceutical division — as a great way to balance the inherent risks in the life sciences industry.

There is no doubt the outlook is very bright for our global pharma division with an incredibly robust pipeline that will hopefully yield new medicines for indications in cardiology, ophthalmology (macular degeneration), and oncology.

Currently, the focus of the prescription medicines division appears to be in reproductive health. Are there plans to expand into new therapeutic indications?
Trudeau: Although reproductive health is an important component of our core business, we have made substantial investments into products suchs as Xarelto (rivaroxaban), an anticoagulant, and Nexavar (sorafenib), Alpharadin, and regorafenib, which are treatments for several cancer indications.

Xarelto (rivaroxaban) is approved in approximately 100 countries for the prevention of venous thromboembolism after elective hip and knee replacement surgery. It is an oral anticoagulant being evaluated for the prevention and treatment of a broad range of blood clotting disorders. In clinical studies, the compound has shown no requirement for routine laboratory coagulation monitoring and exhibits limited risks for food and drug interactions. Rivaroxaban is being jointly developed by Bayer HealthCare AG and Johnson & Johnson Pharmaceutical Research & Development, which is part of the Johnson & Johnson family of companies.

We continue to explore the pan-tumor potential of our best-selling oncology product Nexavar, which has been approved as a treatment for certain forms of kidney and liver cancer. It is currently being clinically evaluated as a single agent or combination therapy for breast, lung, and thyroid cancers.

Two Phase 3 compounds that we are very excited about are Alpharadin as a treatment for bone metastases from prostate cancer and regorafenib for colorectal cancer and gastrointestinal stromal tumors.

Does Bayer plan on increasing its focus on developing new biotechnology drugs in the future?
Trudeau: With our hemophilia A treatment, Kogenate, and the MS medication Betaferon/Betaseron, we already have several very successful biotechnology products on the market. That said, Bayer recently devised a global strategy specifically dedicated to expanding our position in biologics, which includes critical in-house research in hematology, oncology, and other highly targeted indications and partnering and collaborating with young life sciences companies and academic institutions. Our newly opened U.S. Innovation Center in San Francisco is part of this strategic plan and is currently home to a global hematology research team and our U.S. biologics research organization. Also, we recently entered into a collaborative research agreement with the University of California, San Francisco to promote collaborations on early R&D research in biotechnology and related disciplines.

Finally, Bayer HealthCare spends roughly 15% to 17% of its annual pharmaceuticals revenue on R&D to discover new and innovative products.

How is Bayer using collaborations and industry partnerships to expand its business and grow the company?
Trudeau: We have entered into two successful and meaningful long-term partnerships: one with Onyx Pharmaceuticals to develop and commercialize Nexavar (sorafenib) for certain cancers and a second with Johnson & Johnson to develop and commercialize Xarelto (rivaroxaban) to better manage blood coagulation disorders.

Moving forward we will continue to establish collaborations and partnerships with academic institutions and other companies when they make sense to us and are consistent with our R&D and commercialization strategies.

How do you plan to leverage the new Bayer Innovation Center in San Francisco?
Trudeau: Like many of our competitors, we are always looking externally for new business opportunities and areas in which we can innovate. From the perspective of our U.S.-based commercial business, the U.S. Innovation Center gives us the ability to engage with leading world-class scientists who are at the forefront of medical and biologics innovation. Within the center, a dedicated team of scientists, dubbed the “Science Hub,” are charged with developing research bench collaborations. The U.S. Innovation Center houses 65 Bayer scientists who are conducting biologics and hematology research.

Recently, we entered into a long-term master research agreement with the University of California, San Francisco. This agreement sets the stage for collaboration in a variety of therapeutic areas. This is the first of what we hope will be many collaboration agreements with researchers at academic institutions and life sciences firms that will allow us to work more closely with scientists earlier in the drug development cycle to more quickly identify and commercialize promising new drug candidates. Also, these relationships will provide us with guidance and the necessary feedback from the scientific community to continue to develop novel medications that address serious unmet medical needs in the U.S. and elsewhere.

Which emerging markets represent the greatest growth opportunity for Bayer Healthcare?
Trudeau: Bayer HealthCare currently generates more than 20% of its revenue from emerging markets, and we expect to increase that rate significantly in the future.

To that end, we see a strong opportunity to expand our businesses in China, Russia, and Brazil. These markets are characterized by a growing and more affluent middle class, a better awareness of health and healthcare issues, and improving health insurance coverage. We currently have strong positions in these emerging markets and intend to further develop and continue leveraging them into new business opportunities.

Paradoxically, increasing wealth and affluence frequently result in lifestyle changes that can result in the emergence of chronic, often debilitating diseases such as obesity, diabetes, and hypertension. Our R&D portfolio has been optimized to address these and other unmet medical needs as they arise in these markets.

What effect has U.S. healthcare reform had on your business?
Trudeau: The critical question for Bayer is, will the opportunity for greater access to healthcare be balanced by the cost containment policies necessary to achieve it? The reality is that it is too early to make that determination right now.

Implementation of healthcare reform will likely be a 5- to 10-year process. However, as the debate over healthcare reform continues (and its implementation gets under way at both the state and federal levels), we must ensure that, on balance, efforts to control costs do not negatively impact patient access to needed medications or discourage innovative companies like Bayer from developing future and potentially lifesaving medicines and treatments.

Although Bayer supports healthcare reform, we continue to have concerns about a handful of key issues, including the overly broad powers of a nonelected Independent Payment Advisory Board (IPAB). Without change, IPAB could introduce sweeping Medicare changes, and the changes would not be subject to judicial or administrative review. We, and others, worry that this may evolve into a cost-cutting board without consideration for patient access to care or recognition of the advances of new, innovative medicines and medical technologies. Additionally, in terms of the prevention and diagnosis of disease, we feel the current healthcare legislation takes a shortsighted view of preventative care, specifically as it relates to the role and value of imaging services. It may be too early to determine how cuts to reimbursement for these services will impact patient care, but it raises a concern.

On the positive side, we are encouraged by legislative language that would provide a regulatory approval pathway for follow-on biologics with a data exclusivity period of 12 years.

Will the pharmaceutical industry of the future look much different than it does today?
Trudeau: I expect the future of the pharmaceutical industry (and Bayer) to be bright if we continue to adequately invest in R&D to allow us to discover new and innovative medicines that address unmet medical needs.

However, on the flip side, there are many new challenges that the pharmaceutical industry must address. First, changes in drug pricing policies and medical reimbursement costs will likely have a profound effect on the industry. For example, some governments have already resorted to drastic prescription drug cost-containment measures in an attempt to cope with today’s challenging economic and financial realities. Second, for the past 10 years or so, escalating R&D costs have negatively impacted the discovery of new molecular entities, thereby limiting innovation.

Further, changes in healthcare insurance coverage and the growing lack of patient access to adequate healthcare are beginning to affect the industry. Finally, changes in U.S. patent law and rising healthcare litigation threaten to undermine the productivity and effectiveness of the life sciences industry.

Until these issues are addressed, I suspect the pharmaceutical industry of the future will look markedly different than it does today.