Meet Management in Tokyo Bayer in Asia/Pacific Wolfgang Plischke Member of the Board of Management of Bayer AG November 21, 2012 Disclaimer This presentation may contain forward-looking statements based on current assumptions and forecasts made by Bayer Group or subgroup 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 Bayer s public reports which are available on the Bayer website at www.bayer.com. The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments. Page 2 Meet Management in Tokyo November 2012
Presence in Asia/Pacific is Essential RoW APAC 56% of the global population RoW APAC One third of global GDP (at PPP) and expected to rise Population growth: ~5bn people projected at peak in 2050 RoW APAC EU NA The largest share (39%) of world energy demand 35% of the world s total cropland: ~540m hectares EU NA APAC 51% of global automotive production Page 3 Meet Management in Tokyo November 2012 APAC: Asia/Pacific; EU: Europe, NA: North America, RoW: Rest of the world Sources: Asia Development Bank Key Indicators 2012; World Bank Development Indicators; OICA Bayer Has a Global Footprint with a Strong Presence in Asia/Pacific 2011 Sales 40% North America 22% Group 36.5bn 17% 21% Asia/ Pacific Highlights Present in Asia/Pacific for more than a century All subgroups have strong exposure to the region Long-term commitment underlined by significant investments Expected to remain a growth engine for Bayer Europe LatAm/Africa/ Middle East Page 4 Meet Management in Tokyo November 2012
Strong Increase in Sales in Asia/Pacific Sales in Asia/Pacific in bn Asia/Pacifc Sales Development 7.5 7.8 95% sales increase in Asia/Pacific since 2004* 4.0 4.6 5.4 Asia/Pacific has become more important for Bayer share of Group sales increased 2004: 17% 2011: 21% 2004 2006 2008 2010 2011 A growth engine for the Group CAGR 2004-2011: Asia/Pacific: 10% Europe: 6% North America: 2% LatAm/Africa/Middle East: 10% Page 5 Meet Management in Tokyo November 2012 *Asia/Pacific reporting in current subgroup structure since 2004; Figures as reported in the respective Annual Reports China and Japan are our Most Important Markets in Asia/Pacific 2011 Sales in bn 2.5 2.0 1.5 1.0 0.5 PR China Japan India Australia Korea Taiwan Thailand Indonesia Singapore Hong Kong Vietnam Page 6 Meet Management in Tokyo November 2012
Early and Significant Investments Page 7 Meet Management in Tokyo November 2012 Milestones for Bayer in Asia/Pacific Bayer products marketed in China since 1882 Bayer Japan established in 1911 Bayer India established in 1896 Polycarbonate plant in Map Ta Phut inaugurated in 1999 MaterialScience production site in Shanghai. Groundbreaking in 2001 Page 8 Meet Management in Tokyo November 2012 Major examples only
Strong Local Site Network in Asia/Pacific 74 sites in the region 13% of global assets 26,500 employees (Sept. 30, 2012) 500 million investment in Capex and R&D in 2011 Local production provides proximity to our customers Local R&D know-how to complement global expertise Local Headquarters Manufacturing Site R&D Site Page 9 Meet Management in Tokyo November 2012 5bn Invested in CapEx and R&D in Asia/Pacific During the Last Decade Share of Group CapEx in APAC R&D Spending in APAC No. of Employees in APAC 40 30 20 10 0 % 200 m p.a. 30 x1,000 150 25 20 100 15 50 10 5 0 0 Long-term commitment to Asia/Pacific underlined by significant investments State-of-the-art production sites Increased investments in R&D Marketing and sales organization strengthened significantly Investments in external growth opportunities Page 10 Meet Management in Tokyo November 2012 APAC: Asia/Pacific Data as reported in the annual report for the respective year
Bayer s Largest, Fully Integrated Polymer Site, Constructed in Shanghai Strengthening Leadership Through Local Production and Know-how Integrated production site for polycarbonate, polyurethanes and coating raw materials > 2bn invested in greenfield project All production lines in world-scale format Excellent infrastructure and customer proximity State-of-the-art technologies lead to: Lower conversion costs Energy savings PUR MDI 350 kt PUR TDI 250 kt Existing Capacities PCS 200 kt CAS HDI 30 kt Further Expansion Planned Page 11 Meet Management in Tokyo November 2012 CAS: coatings, adhesives & specialties; HDI: hexamethylene diisocyanate; MDI: methyl diphenylene diisocyanate; TDI: toluene diisocyanate; PCS: polycarbonate; PUR: polyurethanes HealthCare to Establish a Fully Integrated Global R&D Base in China Berkeley Berlin, Wuppertal Beijing 100m investment by 2014 to establish R&D center in Beijing Managing drug development for China and other Asian countries China to become Bayer s third global pharma R&D center after Germany and the U.S. Multiple collaborations Complementing global competence with local expertise Page 12 Meet Management in Tokyo November 2012
Science for Food Security Developing Better Wheat Varieties Long-term partnership with the Commonwealth Scientific and Industrial Research Organisation (CSIRO) Based in Australia, CSIRO is a world leader in the development of new wheat varieties Targeting to improve the productivity and sustainability of cereal production Wheat is grown on a larger area than any other crop, but is less productive Page 13 Meet Management in Tokyo November 2012 Investment in External Growth Opportunities in Asia/Pacific Fosrenol 1 and Zetia 2 in Japan Topsun OTC business in China Bomac Animal Health business in New Zealand Fosrenol for the treatment of chronic kidney disease Zetia for the treatment of hyperlipidemia Western OTC cough and cold portfolio Includes White and Black, a popular cold medicine with high brand awareness Broad range of animal health products for the livestock sector Southern hemisphere hub to drive product innovation Pharma J.V. with Zydus Cadila in India Enhancing the presence in the fast growing pharmaceutical market in India Page 14 Meet Management in Tokyo November 2012 Major examples; OTC: Over-the-counter; 1) a Shire brand; 2) a Merck & Co. brand
By 2015: + 75% in Healthcare Spending in Asia/Pacific Page 15 Meet Management in Tokyo November 2012 Source: Frost & Sullivan, August 2012 Growth Drivers for HealthCare in Asia/Pacific Healthcare insurance coverage increasing Rapidly growing and ageing population Increasing prevalence in chronic and lifestyle diseases Better affordability of modern medicines Healthcare reform in China Healthcare access projects in developing Asia 850 million people 65 years projected for APAC in 2050 1 ~10m cases/year of cardiovascular disease projected for China in 2030 2 Per capita spending for health more than tripled in China between 2000 and 2009 3 Asia/Pacific is expected to represent 33 percent of the global healthcare market by 2015 4 Page 16 Meet Management in Tokyo November 2012 Sources: 1) Asia Development Bank: Key Indicators 2012; 2) Moran et al., Circ. Cardiovasc. Qual. Outcomes 2010; 3) WHO World Health Statistics 2012; 4) Frost & Sullivan, August 2012
Bayer HealthCare in Asia/Pacific 2011 Sales in Asia/Pacific; % yoy Fx adjusted Highlights Medical Care 14% 8% Animal Health 21 percent of HealthCare sales generated in Asia/Pacific (FY2011) 13,800 employees (Sept. 30, 2012) Japan and PR China are our key markets 9% 3.7bn (+9%) 69% million 9M 2012 % Fx FY 2011 % Fx Japan 1,210-1 1,547 +4 PR China 995 +24 977 +19 Significant investment in R&D and marketing and sales Consumer Care Pharma Expect over-proportional growth to continue Page 17 Meet Management in Tokyo November 2012 Our Key HealthCare Products in Asia/Pacific are Addressing High Medical Need Brand Key Indication 9M 2012 Sales in APAC ( m, % yoy Fx) Hypertension 334-1% Type 2 diabetes 266 +8% Sec. prevention of MI 180 +21% Liver & kidney cancer 176 +1% * Hyperlipidemia 150 +9% Iopamiron ** Infectious diseases Hyperphosphatemia in CKD 139 137 +12% +19% X-ray contrast agent 127-14% Hemophilia A 109 +27% Page 18 Meet Management in Tokyo November 2012 * a Merck & Co. brand; ** a Shire brand; APAC: Asia/Pacific; CKD: Chronic kidney disease; MI: Myocardial infarction
HealthCare Innovations Cover Specific Needs of Patients in Asia/Pacific Innovation Key Indication Asia/Pacific Specific Aspects Thromboembolic diseases Eye diseases Liver cancer (HCC) Dysmenorrhea Phase III trial in SPAF (J-ROCKET) in Japanese patients with lower anticoagulant dose Phase III trial in myopic CNV in Asia/ Pacific to address the high prevalence of the condition in the region Phase III trial in adjuvant treatment of HCC: 32% of study sites in Asia/Pacific One third of women of reproductive age in Japan report menstrual pain, which can be related to dysmenorrhea Page 19 Meet Management in Tokyo November 2012 SPAF: Stroke prevention in patients with atrial fibrillation CNV: Choroidal neovascularization By 2050: + 1bn People in Asia/Pacific will Need Food Page 20 Meet Management in Tokyo November 2012 Source: Asian Development Bank, Key Indicators 2012
Growth Drivers for CropScience in Asia/Pacific Demand for further yield improvement in key crops Increased adoption of sustainable agriculture Continued professionalization of agriculture Increasing consumer preference for high quality fresh produce The world will need 20 30% more rice by 2030 1 Need for targeted crop protection products including non-chemical solutions Use of high-yielding seed, innovative crop protection solutions and modern farming practices Increasing importance of the entire food value chain Focus on food safety Overproportional market growth in Asia/Pacific driven by population growth, increasing wealth and ongoing Ag-industrialization Page 21 Meet Management in Tokyo November 2012 Source: 1) FAO, IRRI Bayer CropScience in Asia/Pacific 2011 Sales in Asia/Pacific; % yoy Fx adjusted Crop Protection 83% Highlights 17 percent of CropScience sales generated in Asia/Pacific (FY2011) 6,100 employees (Sept. 30, 2012) India and Japan are our key markets 1.2bn (+3%) million 9M 2012 % Fx FY 2011 % Fx India 238 +8 396 +3 Japan 231 +12 287-1 Environmental Science 9% 8% Seeds Capturing market potential through strategic distribution partnerships and R&D alliances Further growth expected as local markets become more developed Page 22 Meet Management in Tokyo November 2012
Providing Solutions Along the Entire Value Chain Seed SeedGrowth* CropProtection Service Broad Portfolio & Customer Proximity from Seed to Shelf Page 23 Meet Management in Tokyo November 2012 *Formerly Seed Treatment Seeds and Crop Protection Solutions for Key Crops in Asia/Pacific Rice Broad portfolio from seed to harvest Global leader in hybrid rice seed, which offers higher yield, high quality grain, good cooking and taste properties Innovative, sustainable rice cultivation programs 90% of rice is cultivated and consumed in Asia Crop protection products against the economically most significant diseases and pests in rice Vegetables A leader in vegetable seeds offering ~2,500 varieties in 28 vegetables (Nunhems) Comprehensive range of combined chemical and biological crop protection solutions 75% of vegetables are produced in Asia Food chain partnerships to create a grower-to-grocer sustainability trail Page 24 Meet Management in Tokyo November 2012
By 2040: + 1bn City Dwellers in Asia Page 25 Meet Management in Tokyo November 2012 Source: Asian Development Bank, Key Indicators 2012 Growth Drivers for MaterialScience in Asia/Pacific Ongoing urbanization New and improved transportation systems Need for better energy efficiency Higher living standards Number of megacities in Asia expected to increase from 12 to 21 by 2025 1 Lightweight cars New energy vehicle development Rail transportation networks EcoConstruction with high thermal insulation standards Cold-chain efficiency Improved housing standards Comfort & furniture Consumer electronics Asia/Pacific with China at its core is the largest market for Polyurethanes and Polycarbonates Page 26 Meet Management in Tokyo November 2012 1) Asian Development Bank, Key Indicators 2012
Bayer MaterialScience in Asia/Pacific 2011 Sales in Asia/Pacific; % yoy Fx adjusted Highlights Polycarbonates Industrial Operations 27 percent of MaterialScience sales generated in Asia/Pacific (FY2011) Coatings, Adhesives, Specialties 17% 39% 2.9bn (+1%) 43% Polyurethanes 4,100 employees (Sept. 30, 2012) PR China is the key market followed by Japan million 9M 2012 % Fx FY 2011 % Fx PR China 1,216 +6 1,398-3 Japan 238-4 308-2 Significant investments in state-of-the-art production facilities Asia is the key growth region for all product groups, PCS headquarters transferred to China Page 27 Meet Management in Tokyo November 2012 CAS: Coatings, Adhesives, Specialties PCS: Polycarbonates Our High-tech Materials Meet Key Customer Industry Needs Automotive Construction Electro / Electronics Polycarbonates Polyurethanes & CAS Low weight for better energy efficiency in transportation High mechanical strength enables product durability Transparency for optical applications and architectural glazing High heat resistance and reliable electrical insulation properties Excellent design flexibility that goes beyond that of glass Outstanding thermal insulation properties Versatility allowing full spectrum of flexible to rigid foam applications Excellent abrasion resistance and rebound resilience Durability for reliable protective coatings Page 28 Meet Management in Tokyo November 2012 CAS: Coatings, Adhesives, Specialties
Summary Presence in Asia/Pacific is essential Bayer is well positioned to capitalize on attractive growth opportunities in the region Increased healthcare spending (+ 75% by 2015) Key products from HealthCare address high medical need Growing population (+ 1bn by 2050) CropScience provides solutions from seed to shelf to ensure safe and healthy food Rapid urbanization (+ 1bn city dwellers by 2040) High performance products from MaterialScience contribute to an efficient infrastructure Page 29 Meet Management in Tokyo November 2012