Consumer Care A Strong Foundation in Consumer Health Spring Investors Conference 2004 Leverkusen, March 19, 2004 Gary S. Balkema President Consumer Care Division Safe Harbor This presentation contains forward-looking statements based on current assumptions and forecasts made by Bayer Group management. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. These factors include those discussed in our public reports filed with the Frankfurt Stock Exchange and with the U.S. Securities and Exchange Commission (including our Form 20-F). The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments. Investor Conference 2004 # 2
Agenda Consumer Care Background Geographic Strength Brand Strength Marketing Strength Consumer Care Performance Consumer Health Potential/Bayer Opportunities OTCs Aspirin Cardio Glucose Self-Testing Investor Conference 2004 # 3 Consumer Care: OTC 2003 Sales Sales in EUR million 1,330 Strong sales trend continues through Q IV US business key driver % yoy -2 % Weak US$ hides underlying growth currency adjusted % yoy + 12 % Full Year 2003 Excludes Household Business Investor Conference 2004 # 4
OTC Business: Geographic Strength Breakdown By Region OTC Market 2003 Sales: EUR 47.4 billion (Growth: + 3 %) Bayer 2003 Sales: EUR 1.3 billion (Growth: + 12 %) Asia Pacific (+3 %) 28 % North America (+5 %) 33 % Latin America #1* (+ 14 %) 17 % Asia Pacific N/A* (+ 13 %) 3 % 50 % 11 % Latin America (+8 %) 28 % Europe (+3 %) 30 % Europe #7* (+ 4 %) * Industry Ranking North America #5* (+ 16 %) Growth rates in local currencies Investor Conference 2004 # 5 OTC Business: Strong Growth vs. Key Competition 14.0 12.0 10.0 Bayer Rank #6 Growth out-paced competitors 1 through 5 8.0 6.0 4.0 2.0 0.0 1 2 8 7 12 3-2 -2.0-4.0 % YoY J&J GSK Wyeth Pfizer Novartis Bayer OTC Market Growth rates shown are currency adjusted 2003 Investor Conference 2004 # 6
Estimated OTC Market Segments 2003 Cough/Cold/Sinus/ Allergies 4.9%* 19% 18 % Analgesic 2.2%* Others 3.1%* 21% 13 % 15% 14% Gastrointestinals 1.8%* Vitamins/ Minerals/ Supplements 1.8%* Dermatologicals 2.9%* Source: IMS/IRI *Segments CAGR 2000-2003 Investor Conference 2004 # 7 OTC Business: Brand Strength Broad Segment presence with strong core brands +20% growth Alka-Seltzer Plus Tabcin Aleve Cold & Sinus Cough/Cold: EURO 120 Cardio: EURO 140 +10% growth Cardio Aspirin Gastro: EURO 185 +4% growth Alka-Seltzer Phillips Talcid 14% Nutritionals: EURO 205 +40% growth One-A-Day Flintstones 11% 9% 16% 16% Analgesics: EURO 448 34% +7% growth Aspirin Aleve Midol Derm: EURO 209 +8% growth Canesten Rid Lasonil Growth rate in local currency 2003 vs.2002 Investor Conference 2004 # 8
OTC Business: Marketing Strength Focus on Consumer Marketing Excellence Bayer Aspirin (US) share increase +60 % since Sterling acquisition Aspirina growth in Brazil more than 3 times market growth in 2003 New Aspirin Complex launch in Germany achieved 17 % share by end of 2003 Canesten in Canada dislodged J&J s Monistat from # 1 position, achieving 45.3 % share in Q4 (+4.8 pts. vs. YAG) Gyn in UK growing almost 2 times market rate with launch of Oral Derm in Germany growing 7 times faster than market Share increase +38 % since formation of USA J.V. Share growth from 6 % to 16 % since 1993 Investor Conference 2004 # 9 OTC Business: New Products New Products drive Brand Growth Cough/Cold: EURO 10 million Aspirin Complex: Combines ASA + pseudoephedrine to relieve cold/flu symptoms Alka-Seltzer Plus Ready Relief: Fast dissolving multi-symptom cold relief Nutritionals: EURO 63 million One-A-Day WeightSmart: Complete multi-vitamin with EGCG Total New Products: EURO 105 million Bayer Muscle & Joint: Analgesics: A cream that relieves sore muscles EURO 9 million quickly and improves circulation Aspirina Plus: Analgesic (ASA + caffeine) that effectively relieves muscular pain and backache Derm: EURO 23 million Lasonil Gel: Topical/ anti-inflammatory for traumatic pain Canesten Oral: A convenient, fast treatment for vaginal yeast infection containing Fluconazole Investor Conference 2004 # 10
OTC Business: Above Market Performance 1 year growth 2002 2003 Market: + 3 % Bayer: + 12 % 5 year growth* 1998 2003 Market: + 2.5 % Bayer: + 5 % 10 year growth* 1993 2003 Market: + 4 % Bayer: + 10 % * CAGR in local currencies Investor Conference 2004 # 11 OTC Business: Significant Global Player 1993 2003 Global Rank #9 Global Rank #6 1993 2003 US Rank #9 US Rank #5 Successfully driven Bayer OTC business to #6 global ranking Key Growth Drivers: 1. Sterling Drug acquisition 2. US Roche / Bayer J.V. (Aleve) 3. Brand acquisitions (Rid, Lefax, Germolene, Germoloids, Cevalin) 4. Organic growth Investor Conference 2004 # 12
OTC Business: The Future OTC evolution to include chronic conditions, prevention/wellness and asymptomatic disease Aging and more educated/informed consumers more chronic conditions improved ability to self-medicate HealthCare economics more open access to OTCs government-led switches OTC tax-deductibility (US) channel expansion = Evolving OTC environment Current Future Acute Chronic conditions Treatment Prevention Treatment Wellness Symptomatic Asymptomatic with self-testing/pre-diagnosis Investor Conference 2004 # 13 OTC Business: Bayer Future Bayer brands uniquely positioned to leverage OTC evolution Future OTC Chronic Conditions Wellness Prevention Asymptomatic Bayer Leverage Chronic Pain (back, body, muscle): Aspirin, Aleve Dietary Supplements: One-A-Day Cardio Prevention: Aspirin Cardio Glucose Self-Testing Products Investor Conference 2004 # 14
Aspirin Cardio : Cardio Prevention Opportunity Science around Cardiovascular risk is At the core of Primary Prevention lies the concept of risk reduction. Decision to treat should be based on total level of the risk vs. level of each risk factor Risk factor for CVD are: Age and gender: men over 40, women over 50 Physical inactivity Cigarette smoking Dyslipidemia Obesity Family history Hypertension Diabetes Primary prevention guidelines for Aspirin C.V. have been generated by a number of key expert groups: AHA, ADA, USPSTF, Second Joint Taskforce of European Cardiology and other societies, WHO/International Society of Hypertension Investor Conference 2004 # 15 Aspirin Cardio : Cardio Prevention Opportunity Based on guidelines/risk factors, 5 times as many patients eligible for Aspirin therapy than currently on Aspirin therapy in Bayer CC s developed countries alone 60 million on therapy More than 300 million eligible Investor Conference 2004 # 16
Diabetes: Glucose Self-Testing Opportunity Worldwide Diabetes Patient Population 300 300 Patient number [million] 200 100 Type I 155 140 Type II 177 159 210 193 270 0 15 18 1999 2002 2010 2025 Glucose self-testing market is a strong growth segment Incidence of diabetes increasing to epidemic proportions 22 30 Investor Conference 2004 # 17 Glucose Self-Testing: Market 2003 Market: 3.8 billion Market growth mid-term: double digits Bayer rank worldwide: #3 Investor Conference 2004 # 18
Glucose Self-Testing: Success Factors 1. Deep understanding of consumer segments and needs 2. New test meters designed to fit specific consumer segment needs 3. Ability to market to professionals and consumers Investor Conference 2004 # 19 Glucose Self-Testing: Products Bayer developing meters for specific consumer target based on segmentation models Ascensia Breeze/Confirm Very convenient and easy to use > worry-free monitoring Multi-test capability (10 test disc) Ascensia Contour Highly sophisticated, multiple site test capability Very small blood volume required Ascensia Entrust For more price-sensitive segments Investor Conference 2004 # 20
The Future with Consumers HealthCare boundaries are blurring: Consumers more informed and aware Cost management pressures driving drug access change switch pressures reimbursement changes DTC advertising in the Rx environment Switches trending to more chronic conditions; possible future asymptomatic conditions (with self-testing and/or intermittent physician intervention in OTC setting) Organizational skills for success becoming broader multi-channel multi-audience Investor Conference 2004 # 21 Bayer Consumer Health: Well Positioned for Future Growth Bayer well-positioned in the evolving environment Geographic breadth Excellent consumer marketing track record Opportunity to capitalize on consumer health trends including Bayer HealthCare synergistic projects including Aspirin Cardio and Ascensia self-testing products Proven track record of internal and external growth capabilities Enormously strong brand equities backed by the trusted, highly respected trademark Investor Conference 2004 # 22