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Executives

Alexander Rosar, Head of Investor Relations

Marijn Dekkers – Chief Executive Officer

Werner Baumann – Chief Financial Officer

Jörg Reinhardt – Chairman, HealthCare

Sandra Peterson – Chairman, CropScience

Patrick Thomas – Chairman, MaterialScience

Analysts

Tim Race – Deutsche Bank

Richard Vosser – JPMorgan

Michael Leuchten – Barclays

Jeremy Redenius – Sanford Bernstein

Karen Jay – JPMorgan

Jo Walton – Credit Suisse

Christian Faitz – Macquarie

Ling Wang – Summer Street Research Partners

Florent Cespedes – Exane BNP Paribas

Andreas Heine – UniCredit

Ronald Kohler – MainFirst

Bayer AG (OTCPK:BAYRY) Q3 2011 Earnings Call October 27, 2011 7:00 AM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Bayer’s Investor Analyst Conference Call on the Third Quarter 2011 Results. Throughout today’s recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. (Operator Instructions)

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

Alexander Rosar

Thank you, [Cleo]. Ladies and gentlemen, good afternoon. Welcome, also on behalf of my colleagues to our conference call during which we will review our third quarter figures. With me on the call are Marijn Dekkers, our CEO; Werner Baumann, our CFO and our subgroups are represented plus the HealthCare by Jörg Reinhardt; CropScience by Sandra Peterson; and MaterialScience by Patrick Thomas.

Marijn will start-off our conference call with a brief summary of the developments in the quarter. We assume you have all received and reviewed our corporate newsletter, the briefing documents and the slides, so we just run you through the main points.

Before handing over to Marijn, I’d also like to draw your attention to the Safe Harbor statement. Thank you. Marijn?

Marijn Dekkers

Thank you, Alexander. Ladies and gentlemen, good afternoon. It’s my pleasure to share some good numbers and developments with you. In the third quarter of this year, we delivered 5% organic sales growth. We delivered higher earnings and improved margins. Also we continue to make good strategic progress. Our Pharma Innovation pipeline delivered exciting clinical results and good regulatory progress.

In the emerging markets we continue to generate significant growth and our restructuring plans are well underway and contributed to the performance improvements of the group. Based on our achievements so far than our expectations for the remainder of the year, we confirm that our total Group outlook – we confirm our total Group outlook for 2011.

In comparison to the last quarter, we are now incrementally a little more positive on the earnings outlook for HealthCare and CropSciences and somewhat more negative on MaterialScience. But importantly net has mentioned contents that we will achieve our communicated times.

So, let me now elaborate on some key figures for the third quarter. As always I will concentrate on the sales data adjusted for portfolio and currency effect. As I said already the third quarter was a good quarter overall. We achieved 5% organic growth and improved adjusted EBITDA by 8%. The increase in earnings was due to cost reductions at Pharma and higher volumes at CropSciences. MaterialScience came in below the prior year quarter because of higher raw material and energy costs that were not compensated by higher selling price.

Reported EBIT almost doubled to €1.1 billion due to the improved operating performance and lower special charges. Earnings in the quarter were diminished by net special charges of €75 million mainly for restructuring. However, earnings in the prior year quarter were hampered by special charges of €436 million in connection with litigation.

Net income in the quarter more than doubled to €642 million. Earnings per share rose $0.78 while core earnings per share moved ahead by 18% to €1.12.

We are pleased to report good growth momentum for our business in the emerging markets. Sales in these countries rose by nearly 10% with all subgroups contributing to the increase. In the U.S., business came 3% and in Western Europe sales were basically flat.

Healthcare posted 8% and CropSciences 15% sales growth in the emerging market. MaterialScience expanded its business in the emerging markets by 8% with a particularly strong growth in Latin America and Eastern Europe. Q3 business in China was up 3% year-on-year and picked up strongly versus the second quarter of 2011. Sequentially, Q3 over Q2 2011 we recorded 12% growth.

Gross cash flow in the third quarter climbed by 50% to €1.3 billion as a result of the improved operating performance and lower special charges. Net cash flow was leveled year-on-year at €1.6 billion and free operating cash flow came in at €1.2 billion. This put us in a position to further reduce our debt. Net financial debt fell from €7.4 billion at the end of the second quarter to €7.0 billion at the end of the third quarter despite negative currency effects of €0.3 billion.

Now, let’s move on to the performance of our subgroups. Sales of the HealthCare subgroup came in at €4.2 billion, an improvement of 2% over the same period of last year. This improvement was mainly driven by the positive development of the Consumer Health segment.

Sales in the Pharmaceutical segment were flat with the prior year quarter at €2.7 billion, increases in the emerging countries especially China and Brazil were almost fully offset by sale declines in North America and Western Europe, which were partly caused by the negative effect of healthcare reforms in those markets.

The performance of our key pharmaceutical products was mixed in third quarter. Betaferon sales in Q3 showed a slight decline of 2% with selling prices increasing and higher volumes in North America, partly offsetting losses of market share and price reductions caused by Healthcare reforms in Europe.

Kogenate receded 4% due to fluctuations in the ordering schedule of our distribution partner. Our YAZ family of products benefited from higher demand in North America and Asia-Pacific, and improved by 60% compared to the weak prior year quarter. The increase in the U.S. was attributable to higher sales of YAZ, as well as the launch of Beyaz and combination of YAZ unfolds.

Nexavar developed favorably mainly for the liver cancer indication and advanced by 5%. Aspirin Cardio advanced by 11% driven by the expansion of our marketing activities in China.

Levitra was down 31% because of the partial reorganization of distribution for general medicine products in the United States. Business in the prior year quarter has benefited from an agreement concluded with the major customer. Thanks to a strong focus on efficiency and good cost control we were able to improve earnings of Pharma.

Adjusted EBITDA gained 15%, lower development costs due to the successful termination of most of our Phase III studies for Xarelto partially contributed to this. Earnings were burdened by Healthcare reforms and negative currency effects.

Sales of the Consumer Health segment advanced by 4% to €1.5 billion, it was the strongest growth achieved with our over-the-counter pharmaceuticals. Sales of the Consumer Care division increased by 5%. The Medical Care segment advanced by 3% driven by the Contour blood glucose meter system.

We also grew sales of our Medical Device business in all regions, first and foremost in North America. Sales of the Animal Health division came in flat year-on-year with increases in Asia-Pacific and Latin America compensating for the decline in North America. Our Advantage product line suffered as a result of adverse weather conditions.

The adjusted EBITDA of Consumer Health dropped by 3%. This was because of positive effects from business expansion were negated by higher marketing costs, most notably at Consumer Care and adverse currency effects. The performance of the HealthCare divisions resulted in adjusted EBITDA of €1.2 billion for the subgroup as a whole, an improvement of 9% over the prior year.

Before I move onto the other two subgroups, let me also remind you of the good progress we’ve achieved with our innovation pipeline at HealthCare during the third quarter.

Firstly, on September 8th, FDA Advisory Committee voted 9:2 with one abstention in favor of approving Xarelto for the prevention of stroke and systemic embolism in patients with atrial fibrillation. The decision by the FDA is expected in early November this year. On September 23rd Xerelto was recommended for approval by the European Committee for Medicinal Products for human use or CHMP for short.

The positive opinion comprised two indications, first prevention of stroke and systemic embolism in adult patients suffering from atrial fibrillation and second treatment of deep faint thrombosis and prevention of Recurrent DVT and pulmonary embolism. The approval decision of the European Commission is expected before year-end and approval would make Xarelto the only new oral anticoagulant available for adult patients across three indications in all EU member states.

And on September 29th, we announced that the Phase III ATLAS clinical trial evaluating Xarelto plus standard therapy in patients with acute coronary syndromes has met its primary efficacy end-point. Full data will be presented at the AHA Scientific Sessions on November 13th.

And then just yesterday we announced exciting new data from the Phase III trial in which we studied regorafenib in patients with colorectal cancer. The trial met its primary end point of statistically significantly improving overall survival. This was the result of a planned interim analysis.

The successes of our late stage pharma pipeline are important achievements underscoring our expectations for increasing growth momentum in the RX pharmaceuticals business in the future. So let’s now move on to CropScience.

Sales in the CropScience segment advanced by 9%, driven by volume increases at Crop Protection. High agricultural commodity prices contributed to a positive market environment.

In the Crop Protection BioSciences segment sales in the third quarter came in 11% above the prior year period at € 1.3 billion. At Crop Protection all product groups performed favorably. Our seed treatment and fungicides business both showed strong growth rates. The herbicide segment also developed nicely.

Sales of our insecticides increased significantly despite the cessation of marketing for older products such as Temik. The discontinuation of these all of the products amounted to 24 million sales in the quarter. The considerable decline at BioSciences result from a drop in business with our canola and cotton seeds in North America in the third quarter following a strong season as whole, in the first nine months though, we saw double-digit growth rates in both crops. Our vegetables seeds business which we sell under the product name, Nunhems continued to develop favorably especially in the U.S. and Asia-Pacific.

Sales in the Environmental Science segment were down by 3%, caused by a decline in business with specialty active ingredients and products for professional use in Japan. The Consumer Products business performed nicely especially in the U.S.

Adjusted EBITDA of CropSciences moved ahead by 47% driven by significantly higher volumes and good capacity utilization in our production plants.

Customer centric innovation is the main theme in our CropSciences business. So let me just give you two examples on the progress achieved on the development of our CropScience innovation. The first example is our newly launched seed treatment product, Poncho/VOTiVO. Sales of this product increased by 45% in the first nine months of this year.

The second example is on seed technology, which is becoming increasingly important for our business. We introduced about 100 new varieties in our vegetable seed business during the first nine months of 2011 and so our sales raised by 40% during this period.

So now, let’s move onto MaterialScience. Sales in the MaterialScience subgroup expand by 7% chiefly due to higher selling prices in all business units and regions. Overall, the volumes were level with the prior year, higher volumes in Latin America, Africa, Middle East and North America fully offset the declines in Asia-Pacific.

Sales of MDI and PET increased due to higher selling prices in all regions, although volumes were slightly low. Sales of TDI came in below to prior year level.

Our Polycarbonate business unit benefited from substantially higher volumes of our granules product group. We also slightly improved the global price level for our Polycarbonate products.

Adjusted EBITDA declined by 15% in MaterialScience because the selling price increases did not fully compensate for higher raw material and energy costs. In addition, higher project related operating costs and downtime costs has a negative impact on earnings. However, cost increases due to inflation were offset by our ongoing efficiency improvement programs.

So ladies and gentlemen, let’s take a look at the full year guidance. After a good third quarter, we can confirm the full year sales and earnings forecast that we already raised in April. To summarize the main points for 2011, we continued to target the currency and portfolio adjusted sales increase for the Bayer Group of between 5% and 7%, which corresponds to sales of between €36 billion and €37 billion. This guidance is based on the exchange rates prevailing at the end of the third quarter of 2011. We still plan to increase EBITDA before special items to more than €7.5 billion and to improve core earnings per share by about 15%.

So, now we come to the outlook by subgroup. HealthCare now plans to increase sales by a low single-digit percentage after adjusting for currency and portfolio effect. Mainly in light of the savings from the efficiency programs, we now expect adjusted EBITDA to grow by a mid single-digit percentage to at least €4.6 billion.

In the Pharmaceutical segment, we expect virtually unchanged or only slightly higher sales after adjusting for currency and portfolio. Particularly in a few of our productivity measures, we expect to increase adjusted EBITDA by about 5%, improving the adjusted EBITDA margin to approximately 30%.

In the Consumer Health segment, our outlook is unchanged. We expect sales and adjusted EBITDA to increase by mid single-digit percentages. As previously communicated, we aim to improve sales at CropSciences by a high single-digit percentage on a currency and portfolio adjusted basis in 2011. In light of the good business performance so far, we are little more positive with regard to the bottom line performance and now, plan to expand adjusted EBITDA by more than 20% compared to the weak prior year.

At MaterialScience, particularly in view of the increasing raw material and energy costs, we have to lower our earnings forecast. We anticipate higher Q4 sales but lower adjusted EBITDA than in the same period of 2010. As a result, we expect to increase full year sales by high single-digit percentage on a currency and portfolio adjusted basis, but posting slightly lower adjusted EBITDA in the region of €1.3 billion.

So, ladies and gentlemen, before opening the Q&A let me summarize shortly the main points. We delivered growth and performance in the third quarter. Growth in the emerging markets remained a key contributor to the business expansion. Significant progress has been achieved with our innovation pipeline and we are reiterating our full year financial outlook for 2011.

So, that’s concludes my remarks and we will now be happy to answer any of the questions you may have. Thank you.

Question-and-Answer Session

Operator

(Operator Instructions) The first question comes from Mr. Tim Race. Please state your name, company name, followed by your question.

Tim Race – Deutsche Bank

Thank you for taking my question. It’s Tim Race here from Deutsche Bank. And my first question is just on the Healthcare margin improvement. Could you just help me understand if this is all efficiencies that are helping improve the margin here or is the element of quarterly phasing? And also along these lines just the reduced R&D spend. Is this going to be enough to offset sort of the increased launch costs, we should expect Xarelto coming up next year and how much of those launch costs are you already carrying in the P&L at the moment?

And then second question on the HealthCare side as well. If you could just discuss the levels of pricing impact you’ve been seeing in Europe particularly and also any sort of pricing elements you’re seeing in the emerging markets particularly Russia and China at the moment?

And then maybe a third question if I may just on the CropScience. Could just give us an idea of Crop Protection pricing maybe I missed that and also where you think the environment pricing maybe going next year? Thank you.

Marijn Dekkers

So Jörg, can you start HealthCare margins?

Jörg Reinhardt

Yeah. Yes. I mean, you’re absolutely right. Two aspects that play a role here. One is certainly the efficiency improvements that we have talked about, the other one is also phasing to some extent. And as you know, I mean especially with the R&D there’s a tendency I believe across all companies to have higher expenditures in the fourth quarter of the year and we expect this to happen as well for us. At the same time, we would also think that in the fourth quarter the expected launch costs for Xarelto are going to be higher than in the third quarter. So, overall, we will see margin wise significantly weaker fourth quarter.

Now, going forward, we do expect, also based on the success of our pipeline with the most recently in our regorafenib but also Alpharadin and also obviously new studies for Xarelto that you will have to do. We will see an increase in R&D costs going forward based on the full pipeline that we have which is a good problem to have of course.

We will also have the full impact of the launch expenditures for Xarelto next year and we will may potentially have some impact coming from [Thospira] where we see significant impact from generics in Europe. So all of that will be a burden for next year. On the other hand, we will continue to improve our efficiency and defectiveness within the company. So overall, we’ll have to see how next year develops but certainly the third quarter margins are not a good prediction for what the overall margin will be next year.

You also mentioned, your question regarding pricing. Here we see negative impact in Europe, across actually all counties isn’t negative impact in the single digits range. We see also a negative impact on pricing in China and more or less the same range. We have a positive impact as we’ve already mentioned still to some extend in the U.S. and in some Latin American counties. So, overall, we would expect for the full year a negative price impact of around 1 percentage point.

Marijn Dekkers

Good. Thank you. Sandy, Crop Protection pricing development?

Sandra Peterson

Sure. So, let me give you a perspective on 2011, what we’ve seen in terms of pricing and I’ll spend a minute on 2012. So if you think about our pricing in 2011, the way we look at it is we need to look at not just this quarter, but if you look at it over the last six quarters we have actually been able to have relatively stable pricing in our CP portfolio and we’ve been able to sustain price levels higher than the industry average, so we’ve been quite disciplined about maintaining pricing in the category.

For the third quarter specifically, we have the primary impact of the negative pricing in CP in the third quarter was due to trough and rebates for products that were sold in the United States. In the first half of 2011 where we actually saw 35% increase in our CP volumes in the first half of the year.

The third element that’s important how we actually think about pricing and our philosophy around it, not including in the core pricing analysis is the pricing of our new products and our philosophy is that new products should commence higher prices and we have been very successfully and very pleased with our four new product launches this year. They have seen not only higher demand than we had anticipated, but we also for all of them we’ve been able to garner premium pricing of 10% to 40% on all of those.

So once that indicates their value in bringing new things to the market and the market is actually receptive, can do innovations and they are willing to pay for it. So we have seen very strong indications on our new products at the pricing premiums that we have asked for have actually been able to hold through the marketplace.

If we talked about 2012, as you know we are right in the middle of discussions about pricing for 2012 and at the moment we are feeling relatively confident that we will be able to increase pricing as we go into 2012, because of the market dynamics, because of our portfolio and it’s also a way for us to pass on some of the raw material and energy cost increases that we’ve seen in our business.

Tim Race – Deutsche Bank

Okay. Thank you.

Jörg Reinhardt

Thanks.

Marijn Dekkers

Next question.

Operator

The next question is from Mr. Richard Vosser. Please state your name, company name, followed by your question.

Richard Vosser – JPMorgan

Hi. It’s Richard Vosser from JPMorgan. Thanks very much for taking my questions. A couple of Pharma related questions. Just going back to the Pharma margin improvement this quarter. I just wondered, if you could break out in – a little bit more detail what the efficiency savings have contributed. And probably, I know you’ve given an update for the Group level, but how much of the savings in Pharma have been realized. I think the target for Pharma was somewhere around €430 million by the end of 2013. How much of that been realized and how much of reached the bottom line so far?

And secondly just on Yasmin, you mentioned you’re seeing significant EU genericization, how much was actually seen in the third quarter and how do you see that playing out through the fourth quarter and 2012, because there was a limited actual impact I think on the numbers for Yasmin so far?

And then just on Betaseron, you mentioned as well higher volumes in the U.S. Are you seeing enough uptick or an uptick in new patients driven by the new agent [Gillenia] that she is benefiting you and I suppose how long do you think this holds for? Thanks very much.

Marijn Dekkers

Okay. Jörg?

Jörg Reinhardt

Yeah. Thank you, Richard. And I mean regarding detailed breakdown of the savings, I’m actually at the moment not in a position to give you a detailed breakdown. But when you look deeper at the numbers what we see in Pharma is significant lower R&D costs and also marketing and sales costs. And in both areas we did start significant exercises that did result in higher levels of efficiencies. Overall, I mean, the impact on the overall savings program on Pharma maybe in the range of around €50 million or so for the third quarter.

Now regarding Yasmin, we have said in the past that we do expect next year up to a 30% impact of generics on around 400 million that are exposed in the European area, that is next year. This year in the third quarter we have not seen much of an impact and in the fourth quarter, we expect some but it’s not going to be significant. So, overall, as Marijin pointed out, I mean, we did benefit in the third quarter obviously from the low base situation in the U.S. last year and from the continued growth that we still have with Bayer at a low level but still it’s growing.

Regarding Betaseron, yes, there is a little bit higher demand, but I mean the U.S. situation did also benefit from a higher price that we had in the U.S. should not be forgotten. So significant uptake of new patients is not really what see, may be a little bit here or there but it’s not a trend that would actually help to support a brand from a mid-term perspective. So, we would stick to our predictions for a mid single-digit decline for Betaseron for the coming years.

Marijn Dekkers

Okay. Thank you. Next question please.

Operator

The next question is from Mr. Michael Leuchten. Please state your name, company name followed your question.

Michael Leuchten – Barclays

Thank you for taking my questions. It’s Michael Leuchten from Barclays. Two questions on MaterialScience. Firstly, the volume comment in your release on Asia-Pacific, can you add any comments to that, why you see a decline in volume there? And then secondly, you’ve been very clear on how much the raw materials and energy prices are impacting your numbers in Q3 and also in Q4, but is that pressure easing going forward or is it there to stay?

Marijn Dekkers

Okay, Patrick?

Patrick Thomas

Yeah. In Asia-Pacific, clearly the biggest driver for us is China. And with the government trying to contain inflation, we’ve seen a number of industries affected, primarily the construction industry and related to the construction industry, the furniture industry. So those are probably been the most significant effects.

Earlier in the year, of course, we had the Japanese disaster and reduction in capacity because of components. The automotive industry has largely recovered now and actually we’ve seeing year-on-year growth in Japan now as we come to third quarter. In terms of raw materials, there is some signs in the fourth quarter, there has been some easing in some of the aromatic prices and some of that has been as a result of some capacity shutdowns, particularly in the starting chain.

But generally as long as the oil price stays where it is, I believe the raw material prices will be driven largely by that factor. Among we see the oil price drop back again, maybe as stability is restored in some of the North African oil producing countries then we will see some real easing.

Marijn Dekkers

Okay. Does that answer the question?

Michael Leuchten – Barclays

Yeah. Thank you.

Marijn Dekkers

Okay. Thank you. We will go to the next question.

Operator

The next question is from Mr. Jeremy Redenius. Please state your name, company name followed by your question.

Jeremy Redenius – Sanford Bernstein

Hi. This is Jeremy Redenius from Sanford Bernstein. Thanks for taking the questions. First of all, on HealthCare, I think, I usually refer to Xarelto as about a $2 billion drug. Marijn, in very rough terms if you could allocate that to different regions, while for me whether it be U.S. or ex-U.S.? And then also perhaps by indication, how much might roughly be in staff versus ACS versus others in your mind? And then other -- and the BM -- Bio MaterialScience, a couple of questions.

First on raw materials, I guess sequentially have you been able to offset raw materials cost inflation with price increases. And then also could you talk a little bit about just recent volume developments in the competitive dynamic as this new capacity continues to come on line in the couple of your key products? Thank you.

Marijn Dekkers

Okay. So, the first question is rather just a quick correction. We are always talking in euros and not dollars, so when we say $2 billion, we mean euros. Okay. So I know, it may not be big difference, but I actually for us it is.

Jörg Reinhardt

Yeah. Regarding the breakdown, I mean it’s important to note that when we talk of $2 billion, we mean our sales, which means sales outside of the U.S. The U.S., portion of it meaning the J&J sales are not part of this 2 billion euros.

So and you would expect that a significant part of this 2 billion is coming from Europe, but one should not neglect the rest of the world is -- a complete breakdown -- I’m actually not prepared to give to you, but it’s important to understand 2 billion outside of the U.S.

Regarding the indications, it is a little bit difficult to predict especially given the situation that we only have parts of this indication to scoop at the moment, but I believe it’s prudent to believe that the highest number of treatment days which then relates into sales is coming from the staff indication which is roughly 1.6 billion treatment days around the world.

When you compare this to ACS where we have around 400 million treatment days per year, you’ll see there is a significant difference here obviously also in market potential and we then look at VTE indications which are in prevention and treatment of VTE, we have around 350 million treatment days.

So, I mean obviously market share depends also on label and competitors et cetera. So it’s a little bit early and difficult to really give the concrete breakdown but it gives an idea as to what the overall sizes of the indications would be.

Let me make one correction which I missed starting my comments when we talk about 2 billion we mean more than 2 billion in U.S. sales outside of the U.S.

Jeremy Redenius – Sanford Bernstein

Okay. And then MaterialScience?

Jörg Reinhardt

Yes. Jeremy, on the pricing versus raw material sequentially, we’ve seen last six quarters of price increases on year-on-year basis. If we look at the sequential effect, I guess in quarter one pricing exceeded raw materials. During quarter two, pricing roughly compensated the raw materials and in quarter three, the pricing power was not as great and was less than the raw material effects.

I guess the important thing and that follows to your next question is the price impact from supply and demand and clearly the new plants both ones that we have built and our competitors have built in the middle-east affect the Polyurethane and Polycarbonate markets.

In the Middle East, we see that product finding its way to market in the Polycarbon sector relatively quickly. And I think that plant will be absorbed relatively easily as the growth rates in polycarbonates still seem to be high. The main industry is driving that, the electronics and automotive industries are still relatively strong.

In the TDI industry, where we have introduced new capacity, than the market dynamic isn’t quite so strong because of the effect I mentioned earlier particularly in Asia, when the construction industry is down, the furniture industry is down and the biggest use of TDI is primary in the furniture cushioning industry.

So that will take longer for that balanced to be restored, but it will become restored and there are no other major announcements of TDI capacity in the pipeline other than ours.

Marijn Dekkers

Okay. Thank you Patrick. Next question please.

Operator

Your next question is from Ms. Karen Jay. Please state your name, company name followed by your question.

Karen Jay – JPMorgan

Good afternoon. This is Karen Jay for Cory Kasimov from JPMorgan. Thank you for taking my question. It had to do with next of our sales, last quarter you provided geographic breakdown I was wondering if you could do the same in the euros and not as a percentage for us this quarter?

Jörg Reinhardt

Okay. I’m happy to do so. We had in the third quarter, in Japan and I know that you’re especially interested in Japan 29 million euros, in China we had 15 million euros, in France and Italy, we had 11 million euros each and in Germany 8 million euros and in Brazil 5 million. In the United States, sales were 44 million euros.

Karen Jay – JPMorgan

Excellent. Thank you very much.

Marijn Dekkers

Next question please.

Operator

The next question is from Jo Walton. Please state your name, company name followed by your question.

Jo Walton – Credit Suisse

Jo Walton from Credit Suisse. Two pharma and one MaterialScience please, there is an FDA panel later this year to discuss oral contraceptives. Is there any impact that you could see on that? Is there any potential impacts even on your new drug Beyaz that could come out of that.

Secondly, on if you could tell us a little bit more about how Xarelto is performing against Pradaxa in Europe. I know that you’ve got limited indications, but if you could tell us a little bit about where the product is being successfully adopted. And in MaterialScience if things where to stay where they are today. So, let’s just assume that raw material and energy costs where to stay at today’s level. How much would that impact margins on a full year basis?

Marijn Dekkers

Okay. Thanks, Jo. So, Jörg.

Jörg Reinhardt

Yeah. So, Jo. Yes, there is the panel in the U.S. it’s going to take place on December 8. I mean we’ll have to see how this discussion goes. Obviously the FDA will present data on a new study that they have one together as if from an [MTN] we’ll have to see what this data will look like. We have not seen any results yet. So, don’t know what’s going to come there.

I mean we are confident in the efficacy and safety of [Thospira] be it now for YAZ or be it Beyaz. So, we would expect both products to actually continue its current path in the U.S. even after that advisory board because we believe that the overall potential risk that YAZ or Beyaz present to patients is absolutely compared with that what other all contraceptives do.

And as we all know overall the risk of VTE for patients who take our contraceptives is lower than the risk for people for example during pregnancy. So overall we will have to see what the impact will be. But as you know the current situation in the U.S. for YAZ and Beyaz for the whole franchise is that we had a significant decline versus last year and overall worldwide sales, the U.S. situation is not so important for us anymore.

Regarding Xarelto, we are performing well against the Dabigatran in the indications that we are approved for that has been the case and it’s still the case. Obviously, the Dabigatran got the dispatch indication in Europe in the meantime, so it’s a little bit more difficult to compare but overall we are actually quite happy with the uptake of Xarelto. It goes without saying that we’re all waiting now for the hopefully still happening approval in past, before the end of the year.

Our sales forces are fully established up and running and extremely keen to get the product to sell. We are then planning to launch immediately in a number of countries as you notice not possibly in all of them, but we will launch in Germany and will launch in U.K. and we will then launch during next year in other European countries. So we are absolutely committed to the product obviously and very energetically looking forward.

Jo Walton – Credit Suisse

Okay. And then the margin affect of today’s raw material cost levels?

Patrick Thomas

Yeah. Joe, the -- I guess the adjusted guidance that we have given for 2011 in coal price is raw material outlook that we see, clearly at this point in the air, we have a high visibility on raw material pricing. So there shouldn’t be any further raw material shocks in this year’s forecast.

Jo Walton – Credit Suisse

Thank you.

Marijn Dekkers

Okay. Thanks Jo. Next question please.

Operator

(Operator Instructions) The next question is from Mr. Christian Faitz. Please tell your name, company name followed by your question.

Christian Faitz – Macquarie

Hi. Thanks. This is Christian Faitz from Macquarie. I have three questions. One in MaterialScience, two in CropScience. Can -- Patrick, can you take us over the business progression in MaterialScience from month to month in the third quarter and how does it look at the moment? Back on to this, did September offer kind of the summer holidays come off as a good month as you expected or it was that lower than the previous months?

And in CropScience, one question is regarding Latin and North America, did you see any probably buying pattern in these regions in the third quarter? And in selective herbicides can you update us on the sales performance there and also in glufosinate, how is it benchmarking against glad to say at the moment in terms of sales due to the increase in glyphosate versus glufosinate? Thanks.

Marijn Dekkers

Patrick.

Patrick Thomas

Yeah. Christian, thank you for this question. This is not an easy question to answer because in fact seasonality was varied between monthly progressions, between every product. So, in fact in MDI and polycarbonates in Europe, we saw an uptick in September.

Generally, Europe is more positive in September, in North America we saw a slight dropping down in September and in Asia, it was mixed between products, Polycarbonates actually dropped slightly and the polyurethane products increased. So I wouldn’t say there was any distinctive pattern, if I look at it in the context of overall seasonality. It looks pretty normal to me.

Christian Faitz – Macquarie

Okay. Does it look normal at the moment?

Patrick Thomas

If I look at October then, it’s not violently abnormal either.

Christian Faitz – Macquarie

Okay. Thank you. Sandy, flying patterns of herbicides?

Sandra Peterson

Yeah. So I guess my (inaudible) question in general, what’s the general dynamic in North Latin America and North America as it relates to purchasing patterns? For our business, we have been -- had consistent demand and growth in our business. So we haven’t seen any shift in phasing for our own business and we’ve just seen a continued increase in demand for our businesses and our performance in the third quarter is based on that normal progression.

As it relates to a selective herbicides and glufosinate, we have seen a part of our positive performance, in particular in the U.S. in the first half of the year was driven by an increased demand for both selective herbicides and glufosinate from our product portfolio and as you know that challenges with weed resistance in the United States have become increased and there was an increased awareness that they’re actually migrating further North, much more quickly than some people had anticipated.

And so we’re seeing an increasing demand for our portfolio products that helps in certain situations actually deal with some of these weeds that had become resistant to glufosinate.

Christian Faitz – Macquarie

Great. Thank you.

Marijn Dekkers

Okay. Next question please.

Operator

The next question is from Ling Wang. Please state your name, company name, followed by your question.

Ling Wang – Summer Street Research Partners

Hi. This is Ling, Ling Wang from Summer Street Research Partners. I was wondering whether you can comment on the market opportunities for regorafenib which reported positive results in colorectal cancer and also the timeline for the regulatory filings for this compound? Thank you.

Marijn Dekkers

Okay, Jörg.

Jörg Reinhardt

Yeah. As you know the most recent results on regorafenib are very positive as Marijn pointed out. We are planning to publish the data in -- at a Scientific Conference in the first quarter of next year, haven’t decided yet which one. I mean, it’s important to note that this study was done in third, fourth line colorectal cancer population which is of course limited when you look at your overall colorectal cancer patient population.

You can assume that, excuse me, you can assume that around 650,000 new cancer cases -- new colorectal cancer cases happened around the world in each given year, but it may only be around 5% of that population that maybe eligible for our product. So it’s limited indication, but still when you consider 5% of 650,000, still significant number.

So the potential there is encouraging also for further indications. Obviously, we will try regorafenib in other indications at earlier stages of colorectal cancer as well. There’s also second Phase III program ongoing in cyst which is going to report probably in the first quarter of next year. That is also in population that’s relatively related to third line indication, but still that indication will show us what sort of potential rigor often it may have beyond the colorectal cancer.

But as I came a little bit as a surprise, so, we are working on our filing plans, but obviously we do attempt to file as soon as possible, but it’s a little bit early to give you an exact date. We will do it as quickly as we can and I think that in the number of weeks we can give you a more precise timing as to when we will be able to file.

Ling Wang – Summer Street Research Partners

Thank you. And just a follow-up, did I hear correctly or what is your number the new incident number you quoted is that a 50 U.S. and EU and what is the number you mentioned?

Jörg Reinhardt

In the U.S., we have around 160,000 new cases worldwide it is around 650,000.

Ling Wang – Summer Street Research Partners

Okay. And then you mentioned publications of the guidance first quarter. Is that presentation at a conference or peer review publication?

Jörg Reinhardt

No, you’re right that’s publication at a conference and we haven’t decided yet which conference that’s going to be. But it will be mainly an abstract plus presentation at a conference.

Ling Wang – Summer Street Research Partners

I see. I guess you have not decided which one, but what are the possible ones you might be targeting?

Jörg Reinhardt

No, we have not decided which ones, there are range of options and I think in 2 to 3 weeks, so now we can give you a more details on that.

Ling Wang – Summer Street Research Partners

Great. Thank you.

Marijn Dekkers

Okay. Thank you, Ling. Next question please?

Operator

The next question is from Mr. Florent Cespedes. Please state your name, company name followed by your question.

Florent Cespedes – Exane BNP Paribas

Good afternoon, gentlemen. This is Florent Cespedes from Exane BNP Paribas. Thank you for taking my question, HealthCare related questions mainly. First, after the ECTRIMS Congress on multiple sclerosis, have you revised your forecast for Betaseron? And could you remind us the next step for you regarding intuzumab?

Now, second question on the HealthCare margins for 2012. And what is the main moving factor that would place you in a more confident position to announce margin improvement in 2012? Is it the U.S. approval of Xarelto? And maybe a last one on Kogenate, could you have a quick update on the long-term price reduction program as your competitors are also projective on this field?

Jörg Reinhardt

Thank you. Regarding Betaseron, no we have not changed our forecast. As I have pointed out earlier, today, we still expect mid single digit decline for Betaseron for the foreseeable future and that outlook is unchanged. Regarding intuzumab, we are waiting for more data to come, which should come I guess as far as I know in the next few months.

Obviously, this is under control and in the hands of Genzyme Sanofi. So we are here sitting at the sidelines and waiting for more information and we have announced that we have interest in making use of our co-marketing lines and that’s still unchanged. Regarding margins for 2012, we are not in the position today to give any guidance as to what margins in 2012 would look like.

I pointed out earlier that there are certain factors that will be a burden on the margin. So on the other hand we have factors that will help us to improve or will help us to balance that burden which is mainly our efficiency program. You need to assume that next year we’ll see higher R&D costs based on the new port programs that we’ll have to run or we’re able to run whether you’re offering or oscillating et cetera.

You’ll also have to assume that the launch of Xarelto, but also in EYLEA in the second half of next year will cost some money and we will see how we can balance this with further productivity improvement. Regarding Kogenate we are making good progress with our long-lasting or long-acting version. I think that we will be in a position before the end of the year to give you and further update here as to what the results look like and what we’re planning as next steps.

Florent Cespedes – Exane BNP Paribas

Thank you very much.

Marijn Dekkers

Thank you for your question. Next question please.

Operator

The next question is from Mr. Andreas Heine, please state your name, company name followed by your question.

Andreas Heine – UniCredit

Good afternoon. Andreas Heine from UniCredit. One question on BioScience please. Your competitors claim to have gained market share and specifically in North America in cotton and canola by several percentage points, how do you see your own market share in 2011? And the second thing is on MaterialScience raw material cost.

I thought that for the two big products MDI and Polycarbonate basically goes back to the benzene price and the raw materials are derivatives of this and the benzene price came down considerably over the last two months.

So why don’t you see a relief on your raw materials here. And secondly for quite some other plastics the margin has improved more considerably in 2010 and 2011 and the pricing power was higher.

So if these raw material prices are coming down, do you expect them -- do you expect that you can increase your margin by keeping prices or you have to give the price, the advantage on your price to the customers in the forward-looking softer market? Thanks.

Marijn Dekkers

Sandra on CropScience, BioScience.

Sandra Peterson

On BioScience, so specifically on BioScience a couple of things. As you know our year-to-date performance globally in BioScience is up 19%. And if you look specifically at our Canola business and our Cotton business, our Canola business year-over-year is up 21%.

We don’t have specific market share data, but every indication that we have through the first nine months of this year is that we continue to gain market share in Canola in North America.

As it relates to our Cotton business, our Cotton business also through the first nine months of this year on a global basis is up 27% and we’ve seen extremely strong growth in markets such as Greece, Turkey, India, Brazil, Mexico.

As it relates specifically to the U.S. we did lose a little bit of market share in 2011, primarily driven by geography. We have a very large part of the acreage that is planted in West Texas is planned with our product and as you know there was no harvest this year.

So that part of the market unfortunately did not perform at all this year. So I would say it’s a one-time effect in that part of the market. However, we still maintain as far as we can tell at this point in time the number one market share in the United States in cotton.

Andreas Heine – UniCredit

Thanks.

Marijn Dekkers

Thank you. Okay, benzene

Patrick Thomas

Yes. Thank you, Andreas. You are, of course, correct. The benzene prices have been coming down through September and October, but also seasonally an important factor is our sales level, which is always reduced in the quarter four period. So the impact with those lower benzene prices will be fell right towards the end, middle to end of December and into the first quarter if they remain down.

We have a secondary factor which is, we take a number of shutdowns during the fourth quarter, which means we are not actually able to fully take advantage of those lower raw material prices although, we do engage in some trading in that area.

Looking then forward beyond that the main drivers as I said earlier is supply and demand balance and the prices are largely driven off back supply and demand balance rather than off the raw material impact directly. So prices are under pressure at the moment primarily because of the supply and demand balance not because of the lower benzene price.

Andreas Heine – UniCredit

Okay. Thanks

Marijn Dekkers

Thank you. Next question.

Operator

Your next question is from Mr. Ronald Kohler, please state your name, company name followed by your question.

Ronald Kohler – MainFirst

Yes. Hello, my name is Ronald Kohler from MainFirst. And first question are actually on Bayer HealthCare, first point you’d restructured your contract with Levitra. Can you provide a little more details my understanding is that your sales will be permanently down but your income will be higher as always, some details would be appreciated?

Second question, France just announced some more of corrective measures, any idea of the impact might be on Europe business sales force? And another question related to biomaterial science, you guide in the fourth quarter for higher sales. Does that imply also year-on-year volume increase or is that getting very, very unlikely?

Patrick Thomas

Yeah. I’m afraid, regarding the restructuring of our Levitra contract, that’s the information that you just summarized that we’ve been providing so far. And we would like to stick to that. Meaning that, yes, we have the significant impact on sales, but we also have an impact on the bottom line, which we have not disclosed. And that’s all the information that we can actually share at the moment.

Ronald Kohler – MainFirst

Perhaps a little bit differently asked, if the Levitra drop fully explained by that restructuring of the contract or is that anything operational organically attracting?

Patrick Thomas

Okay. Better question. Yeah. There is a split. One is related to the contract, the other one we had a very, very strong quarter last year based on a specific deal that we had in the U.S., which we didn’t have this year. So the drop that you see is probably going to be stronger, although stronger this quarter than what we might see going forward. But it will still be significant drop.

Regarding France, I mean France has been negative in terms of pricing impact for us since quite a while. And obviously whatever happens there doesn’t help us to make the situation even less attractive. We do expect an impact which will be, however, limited and will not change the overall outlook neither for Pharma nor for HealthCare.

Ronald Kohler – MainFirst

Okay.

Marijn Dekkers

Thank you for your questions. Next question please. Sorry.

Werner Baumann

Sorry.

Marijn Dekkers

I have to hurry, sorry.

Werner Baumann

Yes. Well the forecast indeed is for higher fourth quarter sales compared to last year. The primary driver there will probably be volume rather than price.

Marijn Dekkers

Okay.

Ronald Kohler – MainFirst

Year-on-year probably that left mediocre market development.

Werner Baumann

Sorry Ronald I didn’t catch that.

Ronald Kohler – MainFirst

Yeah. Okay so you expect volume growth despite that this kind of mediocre market development those, are you confident on the volume increase.

Werner Baumann

Everything we’re seeing at the moment suggests that the volume will be better than last year.

Ronald Kohler – MainFirst

Okay. Thanks great.

Marijn Dekkers

Thank you. Next question.

Operator

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

Alexander Rosar

Thank you, Zeal. Ladies and gentlemen, before closing the call, I’d like to draw your attention on two upcoming investor relations events. The first one is on October 14th. We are planning for conference call, sorry November 14th. We are planning for a conference call on to discuss the view of the results of the Xarelto Atlas trial.

And secondly, starting November 15th, we will host our China Investor Conference. With that also on behalf of my colleagues, I’d like to thank you all for being with us on the call and your questions. Good bye and see you soon.

Operator

Ladies and gentlemen, this concludes the third quarter 2011 results investor and analysts conference call of Bayer AG. Thank you for participating. You may now disconnect.

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