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Executives

Alexander Rosar – Head of Investor Relations

Marijn Dekkers – Chairman and Chief Executive Officer

Werner Baumann – Chief Financial Officer

Analysts

Florent Cespedes – Exane BNP Paribas

Richard Vosser – JP Morgan

Daniel Wendorff – Commerzbank

Andrew Baum – Citi

Sachin Jain – BofA Merrill Lynch

Christian Faitz – Macquarie Research

Michael Leuchten – Barclays Capital

Matthew Weston – Credit Suisse

Tim Race – Deutsche Bank

Jeff Holford – Jefferies.& Company

Thomas Gilbert – UBS

Andreas Heiner – Barclays

Amy Walker – Morgan Stanley

Bayer AG (OTCPK:BAYRY) Q2 2014 Earnings Conference Call July 30, 2014 8:00 AM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Bayer’s Investor and Analyst Conference Call on the Second Quarter 2014 Results. Throughout this recorded presentation all participants will be in listen only mode. (Operator Instructions)

I would now like to turn the conference over to Mr. Alexander Rosar, Head of Investor Relations of Bayer AG. Please go ahead, sir.

Alexander Rosar

Thank you, Jasmine. Ladies and gentlemen, good afternoon and welcome, to our conference call, also on behalf of my colleagues. Today we’d like review our second quarter figures with you.

With me on the call are Marijn Dekkers, our CEO, Werner Baumann, our CFO; HealthCare is represented by Olivier Brandicourt; CropScience by Liam Condon; and MaterialScience by Patrick Thomas. Marijn will start off of with a brief summary of the developments in the second quarter.

We assume that you have received and reviewed our stockholders' newsletter, briefing documents, and the presentation slides; so we will just focus on the main points. Before handing over to Marijn, I would also like to draw your attention to our Safe Harbor statement. Thank you. Marijn.

Marijn Dekkers

Yes. Thank you, Alexander. Ladies and gentlemen, good afternoon, it is my pleasure to report that we continue to make very good progress, operationally in the second quarter, especially in our Life Science businesses. At Pharma we generated double digit organic growth, driven by the continuous success of our launch product, which collectively posted sales of €702 million. And that’s fully on track for our 2014 sales target of €2.8 billion.

At CropScience, we also reported excellent performance. We achieved organic growth of more than 10% and we achieve further market share gain. MaterialScience benefited from higher demand from key customer industry. The strong operational performance is only partly visible in our earnings numbers, because negative currency impact absorbed more than €160 million in adjusted EBITDA.

And further strategic progress was made in the quarter with the signing of the Merck Consumer Care acquisition and the Pharma sGC collaboration. And then we also signed an agreement to divest our Interventional devices business to Boston Scientific. Against this background and based on our expectations for the remainder of the year, we are maintaining our full-year total group guidance. So let me now elaborate on some key figures for the second quarter, and the sales data I will refer to our adjusted for currency and portfolio effects.

Group sales advanced by 6% to €10.5 billion, all subgroups contributed to this increase. Reported EBIT rose by 14% to €1.5 billion. There were net special items of minus €48 million versus minus €256 million in the prior year quarter.

Adjusted EBITDA increased by 1% to €2.2 billion in the second quarter. Adding back the negative currency effects of around to €160 million that would have given an 8% increase in adjusted EBITDA, which really demonstrates the operational strength of our business in the quarter.

Core earnings per share amounted to €1.53 and came in at prior level. From a regional perspective, we generated 36% of our Q2 sales in the emerging markets. And sales in these countries grew by 8%. Latin America again showed a double digit growth rate, and sales in Eastern Europe advanced by 8%, and in emerging Asia by 7%, with all subgroups contributing in both regions.

Our Pharma business in China advanced strongly with sales up 15% in the second quarter. Gross cash flow moved ahead by 1% in the second quarter, net cash flow increased by 4% to €1.6 billion, because fewer funds were tied up in working capital than in the prior year period.

With capital expenditures of €529 million, the operating free cash flow came in at €1.1 billion. Net financial debt increased from €9.1 billion at the end of March to €9.9 billion at the end of Q2, because cash inflows from operating activities only partly offset the outflows for the dividend payment in April.

So, let’s now move on to the performance of our subgroups beginning with HealthCare. Sales of the HealthCare subgroup increased by a 6% in the second quarter to €4.8 billion. Adjusted EBITDA came in at €1.4 billion an improvement of 2% over the prior year quarter or of almost 11% is adjusted for the negative currency effects of around to €120 million.

The improvements at HealthCare were mainly driven by the very good business development at Pharma. At Pharma we generated an impressive 10% sales growth to almost €3.0 billion. The growth was driven by our launch products Xarelto, Eylea, Stivarga, Xofigo and Adempas, which collectively posted sales of €702 million.

Sales of Xarelto maintained the strong growth momentum of prior quarter. Eylea grew strongly as well mainly in Western Europe. Our cancer drugs Stivarga and Xofigo made encouraging contributions to the sales development of Pharma. And Adempas posted sales of €23 million following the product's launch in further countries.

The performance of our established Pharma products was mixed in the quarter. On the positive side, sales of Nexavar rose by 3%, with particular contributions from the emerging markets in the U.S.

Mirena recorded sales gains of 13% mainly as a result of price increases in the U.S. And Aspirin Cardio experienced a substantial increase in demand especially in China, resulting in overall sales growth of 9%.

On the negative side, Kogenate sales declined by 17%, mainly due to capacity constraints they were caused by the utilization of existing manufacturing capacity for the development of our next generation hemophilia product.

Sales of Betaferon receded by 16% mainly due to increased competition in the U.S. Sales of the YAZ family contracted by 3%, and sales grows in the U.S. only partly compensated for the revenue decline in Western Europe due to generic competition.

Adjusted EBITDA of Pharma showed a 1% improvement over the prior year quarter or 11% when adjusted for the negative currency effects of approximately €100 million in the quarter. Earnings growth was diminished by our announced step up in sales and marketing activities, higher R&D expenses and the negative currency effects already mentioned.

Now, let’s move onto our Consumer Health business which improved revenue by 1% in the second quarter to €1.9 billion. Sales in our Consumer Care division rose as tall as 4%. Our Skin Care product Bepanthen registered strong growth in all regions, especially in the emerging markets. Sales of Aspirin were mainly held back by a weak cough and cold season in Europe.

Sales of the Medical Care division receded by 5%. The Diabetes Care business continued to be hampered by reimbursement pressure and price declines, especially in the U.S. Sales in the Animal Health division rose by 5% mainly driven by strong demand of our Seresto product line in the U.S.

Adjusted EBITDA of our Consumer Health business shows an increase of 5%, mainly as a result of efficiency measures in our Medical Care business. Currency effects of around minus €20 million negatively impacted the earnings performance. Adding those back will give a 9% increase in adjusted EBITDA in the quarter.

Now, let me elaborate on the Q2 developments of CropScience which benefited from a strong performance in North and Latin America. Sales in the CropScience subgroup increased by an impressive 11% to €2.5 billion in the quarter. The Crop Protection business posted sales growth of 10%.

We performed especially well in our SeedGrowth, Fungicides and Insecticides segments, all of which achieved double digit growth rate. Our herbicide business showed continued growth and advanced by 6%.

We were again particularly pleased with the performance of our new Crop Protection products. These products defined here as those launched since 2006, were up 20% nominally to around €532 million in the quarter, and thus made a substantial contribution to the positive sales development. The Seeds business ascended by 16%, largely driven by canola and cottonseed. And we also saw a good contribution from rice and soybean seed, whereas sales in vegetable seeds were slightly down.

Then revenues of the Environmental Science business increased by 8% in the quarter with higher sales especially in the consumer business. Adjusted EBITDA of CropScience declined by 1% to €650 million. Despite a positive impact of selling products and volume increases, earnings growth was held back by higher expenses from marketing and sales and for R&D.

In addition, currency movements diminished adjusted EBITDA by around €40 million heading back to negative currency effect would give a 4% increase in adjusted EBITDA.

So now let’s move on to MaterialScience. Sales of MaterialScience rose by 4% in the second quarter to €2.9 billion. This growth was the result of considerably higher volumes in all regions except Latin America and Africa, Middle East.

Selling prices overall were below the prior year quarter. Sales of the polyurethanes business units rose by 3%, driven by increased global demand from our key customer industry. Sales volumes increased especially in North America and Europe, but came in only at the prior level in Asia Pacific.

Sales in the polycarbonates business unit advanced by 8%. This growth was driven by the positive development in all regions except Latin America and Africa, Middle East. We were especially pleased with the higher demand in the automotive and electrical, electronics industry in Asia Pacific.

Adjusted EBITDA of MaterialScience declined by 2% from €274 million to €270 million. Here increased volumes, the tailwind from raw material prices and the success of our efficiency measures supports earnings development in the quarter.

Nevertheless, earnings were then hampered by lower selling prices, cost per scheduled maintenance shutdowns in Asia and North America, and negative currency effect of around €10 million.

Now, on guidance for 2014. We have updated the underlying exchange rate assumption, and are now using end Q2 rates. And actually, based on these rates the negative currency impact on sales and earnings will increase versus our original guidance. Nevertheless, in light of our strong operational performance, we are updating our full year financial guidance as follows.

We now plan to grow sales, group sales organically by about 6% compared to the 5% previously. As before, we are aiming to raise EBITDA before special items by a low to mid single digit percentage, allowing for expected negative currency effect of about €550 million or roughly 6%. We continue to aim to increase core earnings per share by a mid-single digit percentage allowing for expected negative currency effect of around 9%.

Our guidance for HealthCare remains unchanged despite additional R&D and marketing investments, in particular during the second half of 2014. We can reiterate our full year guidance for pharma, however due to a weaker than anticipated diabetes care business, we are adjusting our consumer health earnings guidance, and now expect underlying EBITDA below the prior year.

For CropScience, we are raising our top line guidance to high single digits organic sales growth. And for MaterialScience, we can reiterate our full year guidance and for Q3, we expect to increase sales and EBITDA before special items compared to Q2.

So ladies and gentlemen, overall we are pleased with the first half year of Bayer in terms of both operational performance and the clear strategic progress that we are making. We believe our Life Science businesses are on track to deliver strong organic growth. And we remain cautiously optimistic for material science.

The improved demand from our key customer industries in BMS during Q2 is a positive sign. We expect to successfully close the announced transactions during the second half of the year. And that concludes my remarks, and we would now be very happy to take any questions you may have.

Thank you.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, at this time we will begin the question-and-answer session. (Operator Instructions) The first question is from Mr. Florent Cespedes of Exane BNP Paribas. Please go ahead, sir.

Florent Cespedes – Exane BNP Paribas

Good afternoon, gentlemen. Thank you very much for taking my questions. First on (indiscernible) attrition, could you give us more color on how will you see the performance of this product given the attrition on the manufacturing side?

Then second question is, Olivier, after nine months on the driving seat, could you share with us what remains to be done, what are the next challenges for Bayer HealthCare? And regarding the pipeline, could you remind us when we’ll have the next set of chemical results for the five products that you have prioritized in Phase 2, and which saw the most meaningful results that you are waiting for? Thank you very much.

Marijn E. Dekkers

Okay, Olivier.

Olivier Brandicourt

All right. Okay, let me start by saying that we are selling every single vial we are producing. And there importantly has nothing to do with – other launching in certain market. The reason why this sounds unfortunate, we still see mainly as Marijn said, because of capacity constrain, due to our commitment to develop line expansion, we have formulation, and then long acting formulation.

And in order to do that, we needed to limit our capacity production in Berkeley, and there you see explanation. So we are managing that as well as we can, and for as for rest of the year, you heard guidance, we expect 5% to 10% decline due to resource capacity constrain versus what we have to do (inaudible).

Florent Cespedes – Exane BNP Paribas

And Olivier, do you believe that you will have an impact next year, as well?

Olivier Brandicourt

It’s a good question. We see that capacity constrain going through until 2015, at which time we are going to be able to produce Kogenate end formulation, where do we put the launch. So yes, the answer is yes, we see that throughout next year.

Florent Cespedes – Exane BNP Paribas

Thank you.

Marijn E. Dekkers

Regarding your pipeline question, right, so, you know that we have five focus project that can give you a quick debate for (indiscernible), which is our therapy for kidney disease chronic kidney disease, as you know it’s a induced and (indiscernible) production.

We have three Phase 2 going on actually, dose ranging and otherwise and we are expecting results during the second half 2014. Our EBITDA of 30 billion, we are expecting to see the results in the first half of 2015.

The third one is Vilaprisan, our progesterone receptor antagonist, the clinical trial is ongoing we are in our Phase 2. And we see the results of primary study completion coming during 2015. The two study as you know we are looking for two different indication, one is in worsening chronic heart failure and the second in diabetic nephropathy and we are expecting those results to be available during this second half 2014.

And finally, (indiscernible) which is now of partnership with Merck we are looking at worsening CHA in two different populations, one reduced ejection fraction and the other with preserved ejection fraction. And we should have the results by first half of 2015.

Florent Cespedes – Exane BNP Paribas

Any general comments about our challenges going forward.

Marijn E. Dekkers

Actually we have few challenges, of course, but that’s normal business and I think they are clearly is living through a terrific momentum and launching those products continue to be very exciting and very successful, becoming the number two and maybe in the future the number one logistic company globally and integrating (indiscernible) will also be extremely exciting. So, overall I'm very pleased to have made that move and I mean looking forward to the future.

Florent Cespedes – Exane BNP Paribas

Thank you very much.

Operator

The next question is from Richard Vosser of JP Morgan. Please go ahead.

Richard Vosser – JP Morgan

Hi, thanks, Richard Vosser, JP Morgan, couple of questions, please. Firstly, on CropScience, just wondered if you could take a look into the future in how the second half is developing, and whether your – so, particularly the picture for Latin America, whether you're going to see, or whether there could be potential product returns, or any risk of product returns from the North American business, given the season is so short over there. And also, allied to that how you expect the impact from lower commodity prices to affect the business in the second half, and also into 2015, if you can.

Second couple of questions, just on Eylea, the sales were clearly very strong. Just wondering whether you're seeing any off-label use in DME already. Clearly it's not approved, but whether you're seeing that and whether there would be a boost in growth with the launch in a couple of month's time. And then, finally, just on Stivarga, the growth in the US seems to be flattening. Just what can you do to change the trajectory there, or do we have to wait for more phase 3 data first-line colon to change the trajectory? Thanks very much.

Marijn E. Dekkers

Thank you, Richard for your question, we'll start with Liam, CropScience business outlook.

Liam Condon

Yes. Thanks a lot, Richard. As you know, second half is mainly LatAm driven and some 10% in APAC for us. At the moment, our outlook is that still, particularly in Brazil to grow our profitability its okay. It’s of course come down compared to the highest of last year because most of the sales are usually denominated in US dollars, and because of the devaluation of the reais locally, the growers are still actually making good money.

So we think this is good for overall sentiment and another element here is that El Nino is forecast to come into play with the probability of 85% and El Nino has usually very different impact on different countries, but as a generalization it tends to be more positive for Brazil despite of that it tends to be more negative part of Asia, for example, Australia. So that can help a little bit.

The big, I would say question mark in LatAm at the moment is Argentina and that's not related to the agricultural market that just simply the overall situation of the company or how the country is going to manage through the current bankruptcy negotiations. Once again that’s not an Ag specific issue, but that’s the only one that we would flag as a concern.

In APAC, I’ve already mentioned the impact of El Nino could be somewhat negative for Australia. Key thing in APAC for us is a very strong India business and overall for the market. Here the key issue is whether the monsoon comes or not and just this morning I spoke with our country head in India and he was very happy because it’s pouring rain. So we’ve had the delayed monsoon up until now and now its pouring rains, so we are hoping that its going to remain like that because that will of course be good for the overall business.

So looking forward, as the key thing in the - and you said it yourself, I mean, commodity prices are very low where they are today that’s a relatively – I mean we are partly down to 2010 level. Historically they are still okay, but compared with the past few years are relatively low, and this is of course based on forecast for increased supply in the market and that’s going to basically depend on what happens now with the harvest in northern hemisphere, how strong they are really going to be.

And what the planting conditions are going to be in the southern hemisphere. These are variables that we simply don’t know. And right it’s going to depend as always going forward somewhat on the weather and so its very hard to make the call at this point in time how things are going to develop.

If you take, for example, corn, it short in North America and the U.S. huge market, its the short growing season and so far conditions are very good, but because of the short growing season it’s only 100-days and corn needs 100-days in the ground if you get early crop sometime in September it’s going to have a major negative impact overall all on the yield. So there are a lot of variables in place. We are forecasting overall for the second half of the year that there will be continued growth, and that we’re expecting overall for the year, overall market growth of around above high 5%.

And going forward into 2015 similar market levels put us highly ending mark growth level it’s really highly dependent now what happens in the coming months in harvest in Northern Hemisphere and planting conditions in the Southern Hemisphere. And product returns in North America, we don’t have any specific concerns right now some feedback we got from the markets is not a specific concern to us.

Richard Vosser – JP Morgan

Okay. Thank you. Liam. Eylea, Stivarga.

Marijn E. Dekkers

Eylea is doing very well and we continue to do well we are closely counting on the DME indication, I have no indications at the off-label despite the fact that in that the uptick area off-label use seems to be very prevalent as we know is actually happening. So, I have no indication of that but as I said DME is going to be a major indication for Eylea and we are expecting the positive news, pretty recent now and our data are very strong showing difference of (indiscernible) vision bimonthly doing regiment so with that strong condition we think DME will be very successful for Eylea and it represents about in terms of revenues and market is estimated to be approximately two-thirds of the web and the demand that’s what the sales…

I think you had a question on Stivarga; it’s into U.S. and or globally. I think it’s a good question. If you look at our second quarter numbers in the U.S. it’s been pretty steady into number of prescriptions, too, and patients treated, or new patients treated. We see also relatively slow growth form an academic center (indiscernible) since the development of the product. However, we think we had very good results, very good ramp up of the launch, because we had that initial of borders of patients waiting for new treatment and that is now stabilizing.

We are positive for the future for Stivarga for different reason both in the U.S. and ex-U.S. and by the way the Stivarga is always the market leader into U.S. in third line. Third line which is third line plus I think with about 25% overall of smart share and when you are considering the payer (indiscernible) and population is about 30%. It’s the reason we posted this edition on gaining experience with the drug.

They are improving their patient selection and they are using more and more Stivarga as early as their label allows, instead of reserving the patient work for the – as a last resort. There is definitely an indication around adverse event management, too. And we got very – a set of very positive data with our second clinical study for the CONCUR, which was conducted in Asia, and it was presented recently in Barcelona.

And those results confirm that Stivarga's efficacy and safety is actually higher and outcomes are better in less pretreated MCRC population. So, that – for all those reasons, including also the fact that we don't have reimbursement in Europe in all important markets, and we are trying to gain that reimbursement. We are currently in negotiation. All of those factor should how the brand continue to (indiscernible).

Richard Vosser – JP Morgan

All right.

Marijn Dekkers

Okay thank you, Richard.

Richard Vosser – JP Morgan

Thanks.

Operator

Next question is from Daniel Wendorff of Commerzbank. Please go ahead.

Daniel Wendorff – Commerzbank

Good afternoon and Daniel Wendorff from Commerzbank. Three questions, if I may, two product-related ones and on Xarelto and the strong momentum you saw there really in the second quarter and also compared to Q1. And what is driving this? Are you gaining market shares in terms of new prescriptions? And how does your competition do there?

And second question, on Adempas and the jump in Adempas sales, is this related to a certain country, and which indication? Is it more CTEPH or PAH? And last question on the phasing of the additional EUR500 million you intend to spend in marketing and R&D, can you potentially comment on how we are there in this spending chain, or is the majority coming in the second half of this year? Any more color there will be helpful. Thank you.

Unidentified Company Representative

Okay. Thank you.

Marijn Dekkers

Yes. So, yes, as you said, there is very strong momentum behind Xarelto. We achieved EUR381 million, 80% growth for the quarter. And clearly, it is because we are gaining market share into the different regions of the world. The current market share globally for Xarelto is 28%. Pradaxa is at 14% and Eliquis at 6%. That's the global overall anticoagulant market including orals and injectable, right, so that's important. In the US we are seeing Eliquis competition kick in certain physician populations, right?

So, we still have, in term of retail sales, we are at 39#%, Pradaxa at 16%, and Apixaban at 10%. When you look at DRXs, with all anticoagulants for the entire market in the US, then you realize that Warfarin is still prescribed in 70% of application. So there are – the Warfarin stickiness is still there. Xarelto shows 40% of share and Apixaban 3.5%. Where you see more competition is when you look at new brand Rx and you look at oral and only, and not to automatically use a new oral, but oral with Warfarin.

So, Xarelto is at 40%, Warfarin is still at 45% but declining, and Eliquis at 12%. Well, Pradaxa is at 4%. Cardiology is where the competition is strongest with – again in the US and DRXs, Xarelto at 40%, Warfarin 25%, so much less than the 45% I just mentioned, and Apixaban is getting momentum there at 28.5%. But, we're still leading by more than 10 points.

However, that is not yet completely translated into P&T market, where Xarelto is at 38%, Warfarin at 49%, and Apixaban stays at 8%. So, there is still a lag between (indiscernible), and so we're very and we definitely are the market leader. And it's also in the US. It's also true in Europe. Xarelto is at 45 in Germany, and the others have 10% and 6%. In France, 23% for Xarelto, 15% for Pradaxa, and 2% for – we still – it's the strength of the brand is clearly demonstrated, as well. I think that's it for Xarelto.

Unidentified Company Representative

Yes. Adempas? So, there is – in which country are we having the sales and in what indications are particularly going well.

Marijn Dekkers

Well, Adempas, we are really at the beginning of the rollout of launches are now because mainly the US brand and we are just starting to launch in Europe. We are still, therefore, in the very early days sales were about EUR23 million, but we can, nonetheless, state that we are taking – really reaching our original expectation. In term of CTEPH versus PAH, approximately we have 50% of CTEPH, 50% of PAH in the US. Ex-US the ratio is more like 64%-40%, and if you look at Europe, it's more 80%-20%. I think your question was mainly related to the ratio.

Daniel Wendorff – Commerzbank

Yes, yes absolutely. Thank you.

Unidentified Company Representative

Thank you. And then, the last question is to answer as well, which is Xarelto, a simple answer, and that's the question of what about phasing of the increased marketing and R&D expenses in pharma in 2014.

Marijn Dekkers

Well, that can only confirm what your…

Unidentified Company Representative

Just in you said in your remark, which is definitely it's heavier during the second quarter and second half. And more specifically when it comes to our R&D with a lot of study going on with more spending during the second half.

Marijn Dekkers

Okay thanks Daniel.

Daniel Wendorff – Commerzbank

Thank you.

Operator

The next question is from Andrew Baum of Citi. Please go ahead.

Andrew Baum – Citi

Yes, good afternoon, three questions. Firstly, could you clarify your strategic intent regarding animal health? I sometimes get the feeling when speaking to various Bayer senior executives that there is a active internal discussion as to Bayer's internal commitment. I'd be interested in your views.

Second, regarding your heart failure portfolio, obviously with the early termination of the PARADIGM trial with Novartis's LCZ696, the standard of care may be changing. How do you think about initiating Phase III programs? Or do you think, by the time you come to initiate the Phase III, you'll have a firm idea of where LCZs fits in? And then, finally, obviously the pressures continue on the diabetes monitoring business. How are you thinking about managing that, going forwards? Are you still committed to running it for cash, or is a divestment still a possibility?

Marijn Dekkers

Okay, I'll answer the portfolio questions one and three, and then Olivier will answer the heart failure question. I think with animal health, we really like the animal health industry. We have a good animal health business, but of course things are happening in the animal health industry with Zoetis going public and now to Novartis business going to Lilly, and that makes us take a look at I think mostly the question, to what extent is critical mass important in animal health, right, and that is not a discussion that is super-urgent because things don’t change in days or months, or probably even in a couple of years.

But, it is something that we're very aware of. You know that we believe that in consumer care, critical mass is extremely important, that size is extremely important. This is why we really wanted to do the Merck acquisition. Whether that's all translatable also in an animal health business is an interesting strategic question that Bayer is occupying itself with, and has for some time. So, stay tuned on that. Diabetes is a tough environment. In general, I would say diagnostic businesses are tough, particularly in the U.S. But, as we have mentioned before, this is a business that requires very little cash investment from Bayer and is generating good cash flow. So, we are committed to this business particularly because of the very good cash flows that it continues to generate. And then, Olivier?

Olivier Brandicourt

Yes, on the cardiovascular side, as I mentioned earlier, I think your question is in regard of Vericiguat, where we have those two phases B studies ongoing with two different population, one with reduced injection fraction and the other with preserve. And as you know, the Novartis compound was one with reduced injection fraction. So, they have no doubt strong results, and to your point before starting Phase 3, we will analyze definitely their data which we can anticipate by then will be fully published. And, as part of our own preparation for Phase 3, we discussed the design with KOL and authorities, so – and what I can say was we expect our Phase 3 to involve very large outcome studies and pretty typical in cardiovascular indication, and we committed to do that. (indiscernible).

Andrew Baum – Citi

Thank you.

Operator

The next question comes from Sachin Jain of Bank of America Merrill Lynch. Please go ahead.

Sachin Jain – BofA Merrill Lynch

Hi, a few questions, please, firstly a follow-on on diabetes care. competitors I think have been commenting they've been seeing stabilization in that business as last year's reimbursement pricing pressure annualizes. So, just the question is for 2H of this year. Are you seeing any stabilization, or are your trends continuing?

Second question is for Werner, and I guess also follow-on on the portfolio question prior. As you transition to this new role from October, can you just give us a bit more color on exactly where your focus will be in this newly created portfolio and strategy role?

Third question is on the phase 2 clinical data. Olivier, you very kindly listed the timelines of that data in-house. Wonder if you could just clarify how that data will be communicated to the market. Would we expect press releases as soon as you have the data, or are we waiting for conferences? And then, a clarification question on Kogenate, as well. You suggested that the capacity constraints would continue into 2015. Just to be clear, are we expecting another step down in sales in 2015 or just annualizing the capacity constraint of this year? Thank you.

Marijn E. Dekkers

Okay, let's start with the diabetes question, Olivier.

Olivier Brandicourt

I think that's a pretty straight answer. The answer is yes. We are planning to see continues to decline of diabetes care, mainly driven by the U.S., as I mentioned, and in Europe, Germany. And that explains – it's the explain it’s a main reason for obviously guidance the guidance we have, actually issues regarding consumer health in EBITA for the full year. So, the two are very strongly related. The second question?

Marijn E. Dekkers

Well, it was for Werner and his future role.

Olivier Brandicourt

Yes, Sachin. Very simply said, I wouldn't read too much into it in terms of portfolio and strategy, because the way the German Board (indiscernible) said that, certainly in our case, we (indiscernible) take responsibility for everything which is going on in the Company, and I'm taking on kind of a sponsorship role now for the corporate development area, which is right now reporting to Marijn, just to put that into perspective, it used to report to Richard Pott, who retired last year before, yes? So, again, not a lot to be read into it, and last but not least, in terms of portfolio management, which is the M&A piece, there is no change in terms of my responsibilities here because that is the M&A department, which does currently report to me and they are continued to report to me.

Marijn E. Dekkers

Okay, then Olivier, [the delta] (ph)?

Olivier Brandicourt

Data publication or data release, usually Bayer goes through a conference and congresses for data release, and I think we will continue to do that with this (indiscernible) asset we are talking about here. And I think your last question…

Marijn E. Dekkers

Kogenate.

Olivier Brandicourt

…was Kogenate and whether or not we should see it very difficult for me to give you an exact number. We said 5% to 10% for 2014. What it will be for 2015 it's difficult to predict. Again, we are trying to manage that as well as possible, not impacting too much f (indiscernible) in the main countries and is a major market. Overall, I would say it would be pretty stable with really flat versus 2014, but I don't have much elements to guide you for 2015 there except that the capacity constraint will still remain during the year.

Sachin Jain – BofA Merrill Lynch

Thank you very much.

Marijn E. Dekkers

Thank you, Sachin.

Operator

Next question is from Christian Faitz of Macquarie. Please go ahead.

Christian Faitz – Macquarie Research

Yes, thanks. I have two questions. First of all, on CropScience, what percentage of a 3% price increase was caused by ForEx adjustments, i.e. you pricing on the ForEx you experienced in, for example, developing markets? And then, second of all, on MaterialScience, what is the split of volume and pricing in your 2.5% [FX for trusted] (ph) growth in Asia, please? Thank you.

Marijn E. Dekkers

Okay, (indiscernible).

Unidentified Company Representative

Okay. On the pricing, I think it's pretty easy. We separate that quite strictly. So, the pricing that you have seen is not related to pricing increases it’s not related to any currency devaluation. But, it's just for us straight price increases.

Christian Faitz – Macquarie Research

Okay, thanks.

Marijn E. Dekkers

And then, MaterialScience, Patrick…

Patrick Thomas

The best answer I can give you, is just give you the size of the quantum of price effect in quarter-on-quarter sequential EBITDA bridge. It was really a mid single digit absolute number of millions, so it's a very small number. The volume effect is far greater than that. And of course, the biggest effect sequentially was because of the turnarounds, which is running around about EUR50 million. That was the biggest. Second largest was the (indiscernible) and oil price effect, which led to around EUR50 million impact on the raw material costs.

Christian Faitz – Macquarie Research

Okay, very helpful. Thank you.

Marijn E. Dekkers

Next question.

Operator

Next question is from Michael Leuchten of Barclays. Please go ahead.

Michael Leuchten – Barclays Capital

Thank you. Two questions on pharma and one on finance, please. On pharmaceuticals, just yet again going back to Kogenate, does the capacity issue have an impact on your ability to file long-acting factor 8? Does that filing slip because you need to build it at capacity? Second question on Xofigo in Europe, just wondering what the plans are for introduction across the region.

And then, the finance question is on foreign exchange. In the first quarter, you were saying that, at March rates, the additional foreign exchange headwind will be EUR200 million on top of what you expected at the beginning of the year. That has gotten better now with your guidance in Q2. Looking ahead, for modeling purposes, I just wondered whether you could give us some sensitivity as to what currencies helped you out to reduce that additional headwind by EUR100 million. Thank you.

Marijn E. Dekkers

Kogenate?

Patrick Thomas

Kogenate. The answer is no. It's because we want to be fully ready to launch this new formulation, right, is that we have that capacity constraint. So, it’s not the reverse (indiscernible) not limiting us to be ready for filing and launch. So, that's the answer to the first question.

Marijn E. Dekkers

Xofigo Europe.

Patrick Thomas

Xofigo Europe, Xofigo now is approved in 38 countries, and we launched in 2018. And in Europe it includes Germany, Austria, UK, Ireland, France, Netherlands, and a set of smaller countries. So it’s very early days, but it’s going well. We have in so far about 4100 U.S. patients who have received Xofigo since launch. And in Europe we are getting close to 1000 patients. So that’s the numbers.

Michael König

And then FX.

Werner Baumann

Yes okay on FX thanks Michael for the question. I think a clarifying comment may help here. What we said in March and what we are saying now is in March we said it’s really going to the bad compared to our initial guidance, with an increment of $200 million negative impact on the bottom line. What we are saying now is it continues to be bad, but it’s best bad. It’s not actually again going to be better in terms of upside and hence we have also further qualified our full year guidance. The reason why we didn’t do this in March was because it was only three months in to the year and we wanted to see how rates are developing going forward.

Now with half a year under our belt, we see that we have actually really significant negative variations in our year-to-date performance and (indiscernible) in terms of what it means. If you look at HealthCare overall, we guided for I think, $250 million in total for full year, that $250 million has already materialized as of first half the year and there’s still some more to come. And that is the overall backbone in terms of our updated epic guidance, which now is increment of $100 million, compared to the rates we use of our guidance. And that has reflected also in the wording of the different business.

Unidentified Company Representative

And these all rates in Q2.

Unidentified Company Representative

In Q2.

Unidentified Company Representative

30 of June.

Michael König

Thank you.

Unidentified Company Representative

Okay thanks Michael.

Operator

Next question is from Matthew Weston of Credit Suisse. Please go ahead.

Matthew Weston – Credit Suisse

Thank you very much. Three questions if I can. The first two simply on the Pharma. Just a quick follow-up on Eylea. Can I just check that all the growth that was reported in the quarter was underlying and there were stocking impacts? And then secondly, just looking at Mirena, great performance in the U.S. which you attributed to price. But ex-US seems to have deteriorated quite rapidly, is there a specific reason for that in the quarter? And then finally, on crop, LatAm fungicide has been a key driver of growth over recent quarters and years, we’ve now eventually seen your competitor launch Solatenol. A quick question have you seen any impact to-date in Brazil with Solatenol launch and what are you assuming for the second half of the year?

Unidentified Company Representative

Olivier Eylea I think to do with stocking.

Olivier Brandicourt

No I can’t answer, the answer is no.

Unidentified Company Representative

Could you answer, it’s perfect.

Unidentified Company Representative

Mirena ex-U.S.?

Unidentified Company Representative

Mirena ex-U.S. we were actually flat or slightly declining to 1% and the increase was definitely coming more from the U.S. And impacting market share may be linked to the launch of next one on and that’s what I would answer.

Matthew Weston – Credit Suisse

Okay. And then Latin America fungicide.

Unidentified Company Representative

Yes, as you rightly say we've been growing very strongly in the recent years with fungicides and particularly in Brazil and the reason is quite simple because of disease pressure is so strong and there is huge demand in Brazil for innovations for fungicides and the fact that competitors coming with new products is clearly I would say good overall market we are the strong lead prefer to innovation, we are also developing new fungicides, but overall we will continue to grow our fungicide business in Brazil very clear in all in patients that we get form the market pre-ordering. By the remainder of the year in Brazil we are confident that we will reconsider.

Matthew Weston – Credit Suisse

Perfect many thanks indeed.

Unidentified Company Representative

Just coming back on, in Mirena number I gave the western European number but Mirena, is ex-US still growing at 3.1% because of...

Unidentified Company Representative

In total emerging

Unidentified Company Representative

No, totally 13, US is 20, ex-US in total is 3 and it’s driven by emerging (indiscernible).

Matthew Weston – Credit Suisse

Thank you.

Unidentified Company Representative

What I mentioned was mainly for work.

Matthew Weston – Credit Suisse

Thank you.

Unidentified Company Representative

Thank you Matt.

Operator

Next question is from Tim Race from Deutsche Bank.

Tim Race – Deutsche Bank

Hi there team. Two questions please, first on CropScience. Just a big picture you have sort of loss management changes over the last few year and we come from a position of underperforming many of these, we are actually now continually taking share. What would you pin point this change in sort of (indiscernible) and what the secret of success. Is this new management, new incentives, is it a change of both in the marketing and basically how long can we expect this sort of share take – continue (indiscernible) just sort of big picture here.

And then the second question on Xarelto. Xarelto in the U.S. is pretty hard to predict how it comes during the quarter, to what rate it’s going to be and so when we see the step up, could you just help us understand or help in a better way forecast in the US relative (indiscernible) thank you.

Unidentified Company Representative

Yes Tim thanks for the question, I will take the first question, because it’s a little hard for me to answer, although he does know the answer, but it’s still hard maybe to say and what CropScience is doing significantly better now than a number of years to go as marketing and sales. We always had good products, we were always good at inventing new molecules, new technologies that are really important for the farmers in the marketplace, but we had a tendency to be satisfied when say that the top 10% of our customers the most sophisticated one the early adapter would like the product as much as we do and say (indiscernible) our justification for all that wonderful R&D work that we've done.

Well now we say sure those first adapters of new technology are important, but we also want the other 90% of our customers for these new better products. So we don’t stop when we get some good feedback we keep going and keep selling and that is making a real difference, because now we have a mechanisms to get these good products transitioned into real sales results and Liam and his team are doing a fantastic job doing that and that is why we are gaining share, it’s in the end that simple translating good stuff from a product point of view into real sales.

Tim Race – Deutsche Bank

Okay.

Unidentified Company Representative

There are also I think – year (indiscernible) you know that we have given limited guidance so far in terms of what the composition our sales number and then also the profit contribution of our U.S. relations with (indiscernible) this call is actually not the appropriate one to elaborate further on that. What I can say is that if you look at Xarelto in the U.S. and (indiscernible) sales number they have reported. I think the quarter was at about $360 million. And the overall royalties via (indiscernible) and they go up to a maximum of 30% based on the contracts we have and that’s about it how we think over here.

Tim Race – Deutsche Bank

Okay thank you.

Unidentified Company Representative

Thanks Tim.

Operator

Next question is form Jeff Holford of Jeffries. Please go ahead.

Jeff Holford – Jefferies.& Company

Hi thanks for taking my question. I wonder if you can just talk a little bit more about the pricing in material science. Last quarter we definitely began to hear bit more some green shoots form you on pricing this quarter. The language and the release at least just seemed a little bit more conservatives at where pricing is at least year-on-year. So I wonder if you can just talk a little bit more about the pricing environment in material science first going forward. Thank you.

Unidentified Company Representative

Okay Jeff thanks. Patrick.

Patrick Thomas

Yeah. In Christine’s question I answered the question as to what it meant quarter-on-quarter. Let me just try and bridge year-on-year and if I take the full half year you will see the magnitude of the pricing effect. So pretty much volume and price offset one another year-on-year if we bridge from 2013 to 2014 that’s the number of about 130 million post-price effect.

Going forward we intend to increase prices, I think the environment is moving in that direction and I think we've seen somewhat of a turning point in polycarbonate, we've just seen the growth numbers coming through the second quarter where the overall market grew above 30%.

So if we go back sequentially back to the beginning of 2002 there when we saw the negative decline in the polycarbonates world market around minus 1%, quarter two was minus 4% in 2012, then it got to about a 1% to 2% growth in quarter three, 1% in quarter four, then plus-4% quarter one this year, and now plus 7% and 8%. So I think that turning point on polycarbonates full stop strength in the market we seen some assets close around the world, as you'll have seen in the publications, and we can spend there is going to be some moment and in a price at some point, but not declining.

Marijn Dekkers

Sorry, Patrick, you said 2002, but you meant 2012, from…

Unidentified Company Representative

2012, yes correct. So that’s the position of polycarbonates on the isocyanate, there's some pressure on TDI pricing at the moment there is anticipation new assets coming onstream. I was actually at our new TDI plant in Dormagen this morning where we've already started decommissioning the old unit. So we can transfer operated, so that’s starting to comes the market and give us a fixed cost boost. And then, on MDI, there's been a lot of volatility in price primarily because of really volatile demand in the MDI market at the moment. So, that's the overall effect and outlook.

Jeff Holford – Jeffries & Company

Thank you.

Unidentified Company Representative

Thank you, Jeff.

Operator

Next question is from Thomas Gilbert of UBS. Please go ahead.

Thomas Gilbert – UBS

Yes, good afternoon, (indiscernible). Four questions, please, three on CropScience, one on finance. First of all, the top three seed companies out there grew in the first half, if anything, on price and not on volume. How can your seed care business grow double-digit, how, why, and how forward, please?

The second one is on investments in CropScience, saying you're setting that up. Is that mainly related to you rolling out your own soybean brand, and how is that – I think it's called Credenz – how is that going, schedule-wise, still looking for Latin America season later this year, and then northern hemisphere next year? And will these investments have to actually further increase incrementally as you approach that rollout?

Thirdly, thank you for the guidance on the P&L on CropScience. Can we expect the usual cash inflow from the business, i.e. are the capital requirements for you to harvest that growth the same, or is this anything with payment terms, advanced payments, i.e. is the cash conversion this year the same as in any average year?

And then, finally, on the pensions, pension deficit has increased a bit on an IFRS basis. You injected, I think, EUR1 billion into CTA couple years back. I don't remember exactly when that was for my memory, a couple years back. So, my question is how do you look at the pensions at the moment in terms of cash contributions, and can you remind us whether – what the Merck consumer OC business brings in terms of pension deficit onto the balance sheet? Thank you.

Unidentified Company Representative

Because those three questions…

Unidentified Company Representative

Yeah

Unidentified Company Representative

Okay.

Unidentified Company Representative

So first as you have seen we had much stronger seed business than our competitors, and this is simply due to the fact we are very strong in canola and cotton and they bounce back will also remember that we had a quite a week year last year in canola and cotton in fact strongly. Canola typically in Canada and cotton, it finally rained West Texas from the US, but also in Brazil. Related to that, also our seed growth business is doing better, so particularly see growth for canola in Canada. There has been very strong, but also a seed growth business for corn and soy as really gained the market share in the US. So, this is the way I would answer the question specifically seed growth.

Thomas Gilbert – UBS

Can I ask, is this the biologics offering that is driving that, the Poncho Votivo?

Unidentified Company Representative

Yes, exactly yes.

Thomas Gilbert – UBS

Okay.

Unidentified Company Representative

Yes, exactly yes, the Poncho Votivo, so a combination of a (indiscernible) and a biologic.

Thomas Gilbert – UBS

Thank you.

Unidentified Company Representative

And investments going forward, as we laid out several times we continue to invest in production capacities in research and development and marketing sales and its basically you had asked about soybean and upcoming investments and the rollout of Credenz, our soybean brand in Brazil, Latin America.

We are on track to launch this brand this year. This is part, of course, of the multiyear soybean the market development strategy. So we can investing in various small or soybean companies in Latin America we have been investing and breading centers, particularly in Latin America, and the rollout plan here is very much on track.

So, we will launch the first brand this year and continue to roll that out for continuous years. And this is something where we see also good through our crop protection business by linking then the seeds offering together with crop protection which, again, is something that's benefiting our overall business. And the third question on cash conversion, will it be the same this year as let's say an average year, as far as you can have an average year in agriculture, we yes.

Thomas Gilbert – UBS

So, nothing unusual in payment, extension of payment terms, advanced payments in the US the typical seasonality in the casual?

Unidentified Company Representative

Yes.

Thomas Gilbert – UBS

Okay. thank you.

Unidentified Company Representative

Okay Thomas then let me come to your pensions question into radically so refer to accounting rules what is the here is very much technically driven volatility in our long-term obligations, and it simply with the variance of – and the variability of the long-term rate, and then we do that on a quarterly basis without any immediate pay out obligation with such a long-term set of provisions on the balance sheet.

But happen to you on the second quarter is that they almost exclusive is the vast majority of that increase has been driven by a further erosion of the long-term rate in Germany we have a last part of our pension obligation yeah so we saw the long-term rate go down by half a percentage and that illustrate what half a percentage means on global basis that refers to $1.5 billion yes between 1.4 and 1.6 growing up and down in terms of our obligation.

So in terms of our plans to further funds and our pension deficit we currently do not have any plans to do so further yet as we have mentioned in prior calls we look at it periodically and we have the opportunity would not from doing that. And last but not least in terms of Merck, Merck OTC, the OTC business and there is no impact at all – certainly not an material impact in terms of our pension obligation which – benefit obligation which would be impacted by some of the Merck people in the US.

Thomas Gilbert – UBS

Very clear thank you.

Unidentified Company Representative

Thank you.

Operator

The next question Andreas Heiner of Barclays. Please go ahead.

Andreas Heiner – Barclays

Yes, one small question – two small question on biomaterial science, then two on CropScience. At first, biomaterial science, it was the only area where you have reduced the FX impact. Why is that? And looking forward to the second half, is there any other major turnaround we have to be aware of, or is this period over? And then, coming to Bayer CropScience, you had also very strong increase in North America, and you are also basically the only crop protection company telling this. Is that also strongly linked with the two crops, cotton and canola, where you have this integrated business model, or did you gain market share also in other crops? Thanks.

Unidentified Company Representative

Yes, maybe I can answer the first question. Our business is are impacted by different variances of exchange rate based on the mix of the businesses in different countries and you may see from time-to-time that we have opposite direction in terms of currency impact as our changes over the year. And in terms of BMS that is exactly the case we have since we take this (indiscernible) currency we are excess in behalf in this case now reduced impact in material science and on the flip side of significantly increased impact in potentially in pharma. Yes, that’s fair in the most of the negative.

Unidentified Company Representative

In terms of turnaround we have one further turnaround this year any significant message in Baytown its predominately in the fourth quarter although we incur some profit in the third quarter. Its not of the scale of turnaround we experience in quarter two.

Andreas Heiner – Barclays

Okay.

Unidentified Company Representative

Yes, and related to North America, as you rightly state, due to our strength in cotton and canola and our integrated business model, this for sure has a positive impact on our overall ability also to pull in crop protection sales. And – but, I think it's also clear that we have gained some market share also other areas related to soy and corn. So, for example, because there are shift from corn to soy. And, that has been – there was an creased demand pre-emergent soy herbicides, and because of the shorted season for corn, there was a demand for post-emergent corn herbicides.

These are all the areas, where we have a broad and innovative portfolio, so I think this is basically helping us a lot, and this combined with what they already mentioned, seed growth on Poncho Votivo, it's a combination of a chemical and a biological. This is on the one side canola in Canada, but it's also corn and soy in the U.S. (indiscernible).

Andreas Heiner

Good, okay. Thank you.

Operator

And the next question is from Amy Walker of Morgan Stanley. Please go ahead.

Amy Walker – Morgan Stanley

Good afternoon, team, it's Amy Walker at Morgan Stanley. I apologize in advance. I was a little late to the call, so I hope you haven't covered this ground already. But, I had a couple of question for Olivier to start off with, please. Olivier, firstly, in the women's health franchise, can you give us a bit of an update on the progress you're making with the Essure non-surgical sterilization technology you acquired last year? When do you think there'll be enough mass there to start reporting the sales? And can you give some color on how you plan to extend that outside the US and whether that's happening already, and how that's developing, please?

And the second question on oncology, given the recent line extension disappointment for Nexavar and the slightly weaker than expected trajectory versus consensus anyway for Stivarga, do you feel that Xofigo and the PI3K in Phase 2 are enough to sustain the franchise, given the immuno-oncology revolution? And on that topic, can you maybe update us on what's happening with Compugen and your activities in checkpoint inhibitors, please?

And then, very lastly if I can, on MaterialScience, Patrick, I don't know if I've missed something here, but the year-on-year changes in price, volume and currency weren't very different in the second quarter from what they were in Q1, and yet profit was down a lot sequentially, nearly EUR100 million. I think EUR50 million of that you've guided for at the EBITDA level to be an impact from the turnaround. Was the rest mainly raw materials, or is there something else going on? And if it was raw materials, what are you seeing there in Q3, please? Thanks.

Unidentified Company Representative

Yes, sure. The sales of Essure came at EUR28 million in this quarter, and about EUR50 million for the first half. We see a little bit of social media containing, as you probably know, (indiscernible) against Essure in U.S., but things seems to improve. And we're having –we're seeing it's really the beginning, but we’re seeing a good momentum (indiscernible). So, overall, again, it’s a business that we should see growing more significantly in the next – in the near future.

The second question you had was related to Stivarga. Would you – I didn’t catch exactly.

Amy Walker – Morgan Stanley

It was just around perhaps a little bit of disappointment on Stivarga's rate of momentum and wondering whether you think that, given Nexavar has had a couple of failures in terms of pipeline and Stivarga is a little slow, are you comfortable with the medium-term outlook for oncology? Does it worry you that there's sort of potential headwinds from immuno-oncology? Are you doing enough there? What's happening with Compugen? Just a little bit of thinking around the strategic and the medium-term on the oncology franchise.

Unidentified Company Representative

What I would propose, Amy, is just to give you a sense of where we stand on Stivarga, and then maybe having the full discussion around immuno-oncology and what we're doing there with the different partners during our September management meeting in London, where I will have both [Jorg Merrer and Andy Bush] (ph), who would be able to get into the details about our portfolio. But, I must say we do have a lot of things going on. We have a large Phase 1 portfolio of oncology assets. We are not part of the first wave. As we discussed during the last week management meeting, we’re not part of the fist phase of immuno-oncology, but we're getting ready for the second. And I expect that you would be in agreement that we can be a player then later on.

Regarding Stivarga, as I said we – earlier during the call, we got a lot of – a bolus of patients during very quickly during launch and after launch in the U.S. to serve in first line patients were waiting for something new to come, and we got that bolus of prescription, it has now (indiscernible) and physicians – we are now the leading brand in terms of market share in third line and fourth line therapy in the U.S. We had 30% (indiscernible) population of about 25 overall.

So, is that good and strong foundation – formation, but we need to continue to support the brand and I think it will come two or three directions of first one. And again, I mentioned that earlier, but I think it's important that, improving the patient selections by physicians will be very important for the future growth of the brand, and specifically selecting earlier patients than what they are doing today, which is to see the patient for fourth line. Physicians are also learning the safety profile – the adverse event profile of this brand and learning how to deal with it, and more and more effectively. And finally, I think we have a good…

Unidentified Company Representative

Just a second, Amy.

Amy Walker – Morgan Stanley

Yes?

Unidentified Company Representative

We hear you type, so can you – there is a lot of noise and a lot of static on the line because of the typing.

Amy Walker – Morgan Stanley

I apologize, Marijn. I will mute my line now.

Unidentified Company Representative

Okay, thank you.

Unidentified Company Representative

And Amy, the last one, and I referred to that earlier, too, it's a result of our second phase (indiscernible) study called CONCUR in the Asian population, really showing that outcome can be very significantly improved, when you are dealing with (indiscernible) retreated population in MCRC. So, overall, we’re still very confident with reporting the brand. We're rolling out the launches in Europe. We are in price negotiation with many payers in Europe, and we’re remaining very positive.

Unidentified Company Representative

Okay, thank you.

Unidentified Company Representative

And finally, Amy, you're right in your analysis, the other EUR50 million of turnaround, EUR50 million was the raw materials EUR50 million. And, I expect quarter three raw materials to be pretty much on quarter two levels.

Amy Walker – Morgan Stanley

That's all very clear. Thank you very much, gentlemen.

Unidentified Company Representative

Thank you, Amy.

Operator

Excuse me, Mr. Rosar, there are no further questions at this time. Please continue with any other points you wish to raise.

Alexander Rosar

In this case, ladies and gentlemen, also on behalf of my colleagues. I would like to you thank you for being with us on our call today and your questions. Now, we would like to say good-bye and we all hope to meet you soon during our mid-management conference in London on September 30, again.

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