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Executives

Alexander Rosar - Head, IR

Marijn Dekkers - Chairman & CEO

Werner Baumann - CFO

Jörg Reinhardt - Chairman, Bayer HealthCare AG

Sandra Peterson - Chairman &CEO, Bayer CropScience AG

Patrick Thomas - Chairman, Bayer MaterialScience AG

Analysts

Tim Race - Deutsche Bank

Sachin Jain - Merrill Lynch

Jeremy Redenius - Sanford Bernstein

Richard Vosser - JPMorgan

Fabian Wenner - Kepler Capital Markets

Christian Faitz - Macquarie

Andrew Baum - Citi

Jo Walton - Credit Suisse

Peter Spengler - DZ Bank

Florent Cespedes - Exane BNP Paribas

Damien Conover - Morningstar

Ronald Köhler - MainFirst

Matt Lowe - JPMorgan

Bayer AG (OTCPK:BAYRY) Q4 2011 Earnings Call February 28, 2012 8:00 PM ET

Operator

Ladies and gentlemen thank you for standing by. Welcome to Bayer’s Investor and Analyst Conference Call on the full year and fourth 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, Clare. Ladies and gentlemen, good afternoon and welcome, also on behalf of my colleagues to our conference call during which we will review our fourth quarter and full-year figures with you.

With me on the call are Marijn Dekkers, our CEO; Werner Baumann, our CFO. HealthCare is represented by Jörg Reinhardt, CropScience by Sandra Peterson; and MaterialScience by Patrick Thomas.

Marijn will start off with a brief summary of the developments in the fourth quarter and our achievements in the full year. We assume you have all received and reviewed the briefing documents and the slides, so we’ll 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. 2011 was a very good year for Bayer. We grew our business than we substantially improved earnings. We achieved the targets that we raised after the first quarter and against this background, we are proposing at the shareholders meeting to increase the dividend to EUR 1.65 per share.

As the global economic recovery lost momentum during the second half of 2011, we were faced with mixed business performance in the fourth quarter. HealthCare and CropSciences performed in line, but MaterialScience clearly below our expectations. During 2011, we continue to aggressively pursue our strategy of target investment in our innovation capability.

And in this respect we were especially successful in 2011. At Pharma we now have four new products with blockbuster potential which are launching or expect to launch near term. Our Crop Protection new product pipeline includes products with a combined sales potential of approximately EUR 2 billion. We also successfully strengthened our presence in the dynamic emerging markets where sales moved ahead by 9% in 2011.

We are creating the necessary financial flexibility to the restructuring program we communicated in November 2010 to improve efficiency and reduced internal complexity. This program is proceeding as planned according to the principal, more innovation, less administration. We are looking with a good level of confidence to 2012 and are targeting higher sales and earnings, although the outlook for the global economy and especially for the Euro Zone is marked by uncertainty.

Let me now elaborate on some key figures for the fourth quarter. When talking about sales, I will concentrate on portfolio and currency adjusted data. Group sales rose by 2% to EUR 9.2 billion in the quarter. This was largely attributable to a good performance of Consumer Health and CropScience. Reported EBIT rose significantly to EUR 629 billion mainly due to lower special charges.

In Q4, 2011 earnings were diminished by net special charges of EUR 215 million mainly from restructuring compared to net special charges of EUR 954 million in the previous year quarter. Adjusted EBITDA declined by 9% mainly caused by a sharp drop in earnings of MaterialScience. HealthCare and CropScience were able to increase earnings.

Net cash flow receded by 41% to EUR 1.152 billion and was impacted by payments made in connection with litigations concerning Liberty Link rights of $484 million. After investments of EUR 725 million, the operating free cash flow came in at EUR 427 million. Net income in the fourth quarter amounted to EUR 397 million. Earnings per share rose to EUR 0.48 while core earnings per share came in at EUR 0.97, an increase of 2% over the prior-year quarter.

How does this development breakdown by segments? HealthCare sales rose by 2%, business in pharma slightly increased by 1% with declines in Europe and the US offset by higher sales in the emerging economies and Japan. Sales of Consumer Health moved ahead by 5% with all divisions contributing to the growth. The adjusted EBITDA of HealthCare was up 4%, driven by the business expansion in Consumer Health.

CropScience sales increased by 3% due to higher volumes especially at Crop Protection in Latin America as well as due to a favorable BioScience development. The adjusted EBITDA increased slightly. It included as a divestment gain of EUR 22 million, half the size of the gain in the fourth quarter of 2010. MaterialScience sales were on last year’s level, with higher prices compensating for lower volumes. The adjusted EBITDA fell sharply by 64%. Higher selling prices were not able to compensate for the impact of higher raw material prices.

So, ladies and gentlemen, let me now briefly comment on our full-year performance against the targets we set ourselves for 2011. Group sales in fiscal 2011 rose by 6% to a record EUR 36.5 billion, exceeding our original target of EUR 35 billion to EUR 36 billion sales. With an adjusted EBITDA of EUR 7.6 billion generated in 2011, we clearly exceeded our original targets to increase adjusted EBITDA towards EUR 7.5 billion. Core EPS was originally forecast to improve by 10%, we achieved a 15% plus, again more than we communicated early 2011. And we were also able to substantially reduce our net financial debt by EUR 0.9 billion.

Now let me discuss 2011 for the three sub groups versus their respective targets. HealthCare showed only modest growth in 2011, but it’s operating results improved significantly. As in the previous year, the pharma segment was hampered by the efforts of many countries to reduce health system costs. Intense competition from generic products also presented an ongoing challenge. That makes it all the more important that our cost management was successful, that our consumer health segment outperformed the market and that we achieved or exceeded our communicated times.

Boosted by improved weather conditions in the major growing regions and good prices for agricultural commodities, our CropScience sub group posted encouraging sales growth and even better increase in earnings compared with a relatively weak 2010 and thus achieved or exceeded our communicated times.

MaterialScience however clearly experienced the increase in volatility in the global economies. In 2010 the sub group has re-attained its pre-crisis sales level more quickly than expected and continue to expand in the early part of 2011.

But in the fourth quarter, particularly we felt the impact of the cooling economy and the growing burden of high raw material costs. As a result MaterialScience posted continuing sales growth but a drop in the operating results and thus fell short of our communicated earnings target. Nevertheless 2011 as a whole was operationally a very successful year for Bayer. In addition we made significant strategic progress.

I personally believe the highlight of 2011 from a strategic point of view was the fantastic regulatory and scientific progress we achieved in our pharma pipeline. This was well ahead of the expectations we had at the start of the year and allowed us to selectively raise the peak sales estimates for some of these future products.

We currently have four drug products with blockbuster potential, which are either already marketed or at an advanced stage of development. This is good news for patients and also for Bayer as each of these products could achieve peak annual sales in excess of EUR 1 billion. They include the eye medicine VEGF Trap-Eye and the cancer drugs alpharadin and regorafenib. And we can confirm the peak sales potential of more than EUR 2 billion per year for our innovative anticoagulant Xarelto following its approval in new indications in the United States, the EU and Japan.

For many years CropScience has steadily brought new innovative solutions for farmers to the market. With products launch in 2006, we expect to cross the 1 billion mark this year. A good example, recent example of our new product strength is the Xpro family fungicides introduced in 2011. This novel technology improves disease control in cereals and has a positive effect on the plant physiology, which in turn increases stress tolerance and boosts grain yield.

We believe this product family has a peak annual sales potential of more than EUR 300 million. With innovated crop protection products launched in 2011 and to the increase use until 2015, we intend to generate combined peak sales of approximately EUR 2 billion. This is a strong commitment that shows how confident we are of our CropSciences’ [restructured] plans will deliver.

In addition, to innovation another major effect for our future successes is of course our presence in the dynamic emerging markets. As always, our definition of emerging markets comprises those outside of the industrialized countries, such as the US, Canada, Western Europe, Japan, Australia and New Zealand. In this context I am very pleased to report that during 2011, we posted 9% growth in the emerging economies, which account for 36% of group sales. The figure is well above average growth rates of other regions and on this course how well positioned we are in these countries and that our significant investments there are really paying off.

Let me give you some examples of our emerging markets investments. China is the fastest growing country for our healthcare franchise. To ensure that we are sufficiently staffed in this rapidly growing nation we hired around 1000 additional sales reps in 2011. Furthermore, we relocated the headquarters of our primary care business to Beijing.

At CropScience we opened up a new seed treatment application center in Brazil and received approval for Liberty Link soybeans in Argentina.

MaterialScience inaugurated a new TDI production facility with a planned capacity of 250,000 tons per year at the Bayer integrated site in Shanghai and we moved our polycarbonates headquarters to Shanghai in order to be there where most of our customers are.

So all our subgroups delivered strong growth in the emerging markets; healthcare posted a 10% growth in emerging markets, pharma even grew by 24% in China, CropScience grew by 11% in the emerging markets. Highlights were a 50% in Brazil and a 21% growth in Eastern Europe. MaterialScience increased by 7% in the emerging markets.

Sales in China receded growth by 3% driven by volume losses in all business units. So we aggressively pursued our strategy of targeted investment in our innovation capability and in emerging markets. We are creating the necessary financial flexibility through the restructuring program we communicated the November 2010 to improve efficiency and reduce internal complexity. Measures leading to annualized savings of EUR 543 million were already implemented by the end of Q4.

Now let me look at our planning for 2012; our budget for 2012 built on the following finding and assumptions. In our opinion, the outlook for the global economy in 2012 and especially for the Eurozone is marked by uncertainty. GDP growth in Europe and North America will be most likely significantly lower compared to last year. By contrast, the major emerging economies are forecast to grow rapidly again in 2012 with China, albeit at reduced speed.

We have based our budgets on a US exchange of 140 to the Euro and the average crude oil prices of $US110 per barrel. We’re fairly optimistic for the development of our life science markets during 2012. We expect the growth rate for the Pharma market to be in the mid-single-digit, driven by the emerging countries. The OTC market is likely to expand a low-to-mid-single-digit percentages with higher rates in the emerging markets being offset by slower expansion in Europe and the US. The diabetes care market will probably see growth at a low-single-digit rate and the animal health market will probably show moderate growth.

The market environment for the global Seed and Crop Protection business is expected to remain favorable in 2012. We expect crop commodity prices to remain relatively high, prompting further investment in the Seed and Crop Protection products in order to safeguard and raise crop yields. We anticipate that the MaterialScience’s main customer industries will continue to grow, though perhaps more slowly.

We continue to robust global growth in the automotive industry as well as for the global electrical and electronics industries. The recovery in the construction industry is likely to continue into 2012, whereas global furniture sales stays in 2012 are likely to show small growth.

Now in this context we can look to 2012 with cautious optimism. For the group we are targeting a sales increase of about 3%. Based on our currency assumptions we therefore expect group sales to come in at around $37 billion. We are planning a slight improvement in adjusted EBITDA. We also plan to slightly improve core earnings per share.

What does this mean for subgroups? Healthcare’s top priority for 2012 is to successfully commercialize the new pharmaceutical products. We expect sales to increase by a low-to-mid-single-digit percentage. We plan to slightly improve adjusted EBITDA although earnings are likely to be hampered by higher marketing expenses in the effect of the genericization of Yasmin in Europe. We forecast sales of the pharmaceutical segment in 2012 to remain stable or move slightly higher and adjusted EBITDA to approximately match the prior year levels.

In the Consumer Healthcare segment we anticipate mid-single-digit growth in sales and in adjusted EBITDA. We expect market conditions for our CropScience business to remain favorable in 2012. We predict the above market growth and anticipate that sales and adjusted EBITDA will advance by mid-single-digit percentages. In light of the weaker development in 2011 we currently forecast sales and adjusted EBITDA in 2012 for MaterialScience to remain level with the prior year.

Should the market environment develop more favorably than anticipated we could see sales and earnings to increase accordingly.

For MaterialScience, forecast sales in the first quarter of 2012 to be roughly level with fourth quarter of 2011. We expect adjusted EBITDA to be well above the figure for the fourth quarter of 2011, but below the first quarter of 2011.

Our budget for R&D and CapEx remains at a high level. We’ve planned capital expenditures of EUR 1.5 billion for property, plant and equipment and EUR 0.4 billion for intangible assets. We expect research and development spending to continue on the high level of recent years at about EUR 3 billion.

So before opening the Q&A session, let me summarize the main points. 2011 was a very good year for Bayer. We set records in terms of sales and earnings. Growth in the emerging markets came in well above the global average. Our Pharma pipeline exceeded our expectations in 2011. We are looking with confidence to 2012 and are targeting higher sales and earnings.

This now concludes my remarks and we are now happy to entertain your questions.

Question-and-Answer Session

Operator

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

Tim Race - Deutsche Bank

Hi there guys, this is Tim Race here from Deutsche Bank and two Pharma questions if I may and a CropScience question.

First of all, the obligatory Xarelto question just on the chronic use; we’ve had a few weeks of sales by you in Europe and perhaps the US sales by your partner. Could you just comment on what trends you have seen and how you think the launch is going so far?

Looking at the US prescription trends, it looks a little bit slow, but obviously we are talking about the chronic market in new patients here, so maybe you could talk about the dynamics between new patients and switch patients perhaps?

Then the second question on Pharma just on Yasmin, and obviously relatively strong still in the fourth quarter, when should we start seeing weakness in Europe hitting the (inaudible) and just if you could help describe the dynamics of its decline in Europe perhaps?

And then just on CropScience, we saw in the fourth quarter negative pricing effects; could you talk about what to expect in pricing in 2012 and whether the fourth quarter is just a blip? Thank you.

Marijn Dekkers

Okay, thank you. So the two Pharma questions Jörg Reinhardt?

Jörg Reinhardt

Thank you. Yeah, let me give you some color on our launch of Xarelto as much as possible after a few weeks in the market now. We have launched in the meantime in 24 countries. This is exclusive to US, so it’s 25 with the US.

The most important launch obviously is from a Bayer perspective is our performance in Germany. We have now been in the market for around seven weeks. Our market share in the meantime is at the level of 6.8% which is absolutely in line with our expectations and is totally in line with plan. We do see a good response in the market in Germany from cardiologist and also from primary-care physicians. We see this market share growing quite nicely. So altogether, after a few weeks in Germany we are quite happy with the launch.

When we look into the UK, situation is a little bit different. As you know we are still negotiating and discussing with NICE. We do expect some feedback from NICE now by the middle of March. In the meantime you have seen that we got approval from the Scottish NAS system at a favorable price of GBP2.10; that is according to expectations and mainly a good sign also for the overall UK market, but obviously, we’ll have to wait for the final outcome somewhere in the second half of March.

In Japan, we are preparing for the launch in April. We will get the NHI price listing in April and we’ll then launch immediately, so first sales should happen towards the end of April, beginning of May.

As you know, in the rest of Europe, we are going through price negotiations and reimbursements discussions. Current expectation is that in the major markets like Italy, France and Spain, we will be on the market in the third quarter. We expect to have agreements on price and reimbursement in summertime, but that’s at the moment still a little bit open.

In Canada, we have launched and we are actually quite happy with the launch after the second week, so there is not much I can refer to.

Now in the US, obviously, you have listened to our partner J&J and I don’t want to comment that much. I can only repeat what J&J is saying. They are quite happy with the launch so far and it’s according to their expectations. I think what we can also see is that we are gaining market share in new patients and when you look at patients that are totally new to the brand, we see a continuous increase in the share for Xarelto and we see some decline in the share for Pradaxa.

What is also interesting is to state that or to observe that the percent of patients or new patients on warfarin is still relatively high. One might have expected that the majority of new patients gets on to the new drugs, which apparently is still not the case. We are still at a level close to 50% of new patients going on to warfarin. This is declining, but its takes time. So overall, we are quite pleased with what we are seeing. We are confident that we will make Xarelto the success that we are all expecting it to be.

Regarding Yasmin, yes, we do see some initial impact in Europe, which is compensated by growth that we have for these brands in Latin America and also in Japan. But that was the rest of last year; we do now in the first quarter and in the second quarter and expect a stronger impact on Yasmin.

We have been guiding for EUR 100 million decline in Europe for 2012 and we are still sticking to that. We do see a pretty stable business in the US and some growth in other parts of the world. So overall we believe that Yasmin, the whole franchise will see a single digit decline for 2012 going forward.

Marijn Dekkers

Thank you Jörg and Sandy about pricing in the fourth quarter?

Sandra Peterson

So thanks for the question. I think the simple answer to your question is that fourth quarter pricing is somewhat of a blip; I think we should put it in context that if you look back in 2010, we actually were able to sustain our pricing unlike many other in the marketplace so we are cycling that effect.

And in the fourth quarter we actually, in our European markets as well as in our BioScience business saw a positive increase in pricing in the marketplace and as we are in the middle of the first quarter where actually pricing seems to be relatively stable and we’ve been able to take price in the number of markets and it seems to be sticking. So I think that we're feeling pretty good about where we are from a pricing and a margin standpoint going into 2012.

Operator

The next question comes from Sachin Jain of Merrill Lynch. May we have your question please?

Sachin Jain - Merrill Lynch

Sachin Jain from Merrill Lynch, a few questions if I could. Firstly on Xarelto, just wondered on physician feedback, and what aspects of the profile are you getting most traction with relative to Pradaxa?

And then in terms of you mentioned, I think 50% of new patients still staying on warfarin, what seems to be the biggest sticking point preventing docs from switching to the novel agents? That’s the first question.

Second question I think, within your release you pointed to an increase in R&D as you move into 2013; given the end of Xarelto I figures your earlier programs are largely coming to an end. Just wondering what Phase II to Phase III transitions could be driving an increase in spend as we look into '13?

Then just one question on MaterialScience, raw material cost sensitivity, you are guiding 110, clearly oil price is above that, just wondered if you discuss the sensitivity around that and ability to pass on those prices? Thank you.

Marijn Dekkers

So, Jörg you take the first one on Xarelto?

Jörg Reinhardt

Yeah, regarding the profile I mean it shouldn't come as a surprise to anybody that at the end of today, convenience is playing a significant role here and once they profile of Xarelto, certainly a very attractive for physicians and also patients. I mean other than that I believe that the perspective in the market and among physicians is that these products are compellable as long as they haven't gained their own experience with it and I believe that's also the reason why to switch out of warfarin and take some more time.

People want to gain experience with a handful of patients and products before. They feel comfortable to switch fully on to them and that's why I believe that this replacement of warfarin may take a little bit longer than what some people would have expected, but it will happen. I mean also that we or the feedback that we hear that is that physicians once they have patients on Xarelto are very happy with the product and stick to it.

So that's also a comment on the second question, why do we still see a significant percentage on warfarin. I also believe that we may see a difference over time here between the US and the rest of the world. I believe as you can see from the German market share that this switch out of warfarin maybe faster in other parts of the world than it is in the US. But it’s something which we will simply have to observe going forward.

Marijn Dekkers

I will take the R&D question because I am not sure that we communicated the right way if you say it’s going to increase significantly. We were in 2011 around EUR 2.9 billion R&D. We are planning EUR 3 billion for this year. We were EUR 3.1 billion in 2010, so we've been hanging around the EUR 3 billion level.

Of course some studies, expensive studies from Xarelto have come to an end, but they are being replaced with other studies like riociguat, regorafenib, alpharadin on the pharma side. We’re also aggressively expanding our R&D in BioScience and anything that has to do with seeds and seed trades. So overall this EUR 3 billion level feels right at the moment, but it’s not really a significant increase from the levels where we have been last year. And then oil price sensitivity.

Werner Baumann

Yeah Sachin, actually the question on oil price. I don’t have a magic formula anymore to get from oil price to feedstock impact. Quite simply because most of the margin bridges have become significantly disturbed with the volatility for traditional margins of benzene over naptha have become detached from any of the traditional rules. So where we’ve got the numbers from, as we looked last year and saw a $112 a barrel as the average oil price for the full year which is the highest in our history.

And we’ve adjusted this year at a $110. As you correctly pointed out, we’ve already seen prices spiking above that although in other years we have seen that effect as well. Well, I can say is on price we’ve now seen in quarter four, the seventh consecutive quarter of price increases and we intend to continue with those price increases to try and recover those raw material increases. If we take a full year for 2011, roughly 800 million of increased raw material price were offset by roughly 720 million of increased price effect. So we’re achieving that compensation although there is always a lag in the process that you would expect.

Operator

The next question comes from Jeremy Redenius of Sanford Bernstein.

Jeremy Redenius - Sanford Bernstein

I have one for each business. Coming back to a couple of the questions about the Xarelto just from a different angle, are you comfortable at the pace of ramp up and not the peak, but the pace of the ramp up and consensus sales estimate for Xarelto given the extreme food [ragging] we have seen by some governments in major European markets when it comes to providing reimbursement and access to new treatments. Do you feel the analysts have the pace of the launch right?

Second, in MaterialScience, could you talk us through the raw material dynamic that impacted Q4 so strongly and how do you see it evolving from here. Also what do we have to believe for TDI margins to start to improve from 2011 levels? Could supply and demand just be so out of balance that improvement is several years away still? And then thirdly on CropScience, what are your expectations for market growth in crop protection and then also in feeds? Where do you expect to make the biggest gains and do you expect to step up cost scenario in order to capture this growth? Thank you.

Jörg Reinhardt

I forgot to mention this because I wanted to make a comment regarding consensus. We are absolutely fine with the consensus numbers that are out there. I understand they are around $270 million for this year which is pretty much in line with what we expect to beat the ramp up for 2012? Obviously it’s too early to comment on further numbers but I believe both parts here, you guys as well as we here have the same perspective as to how this product is developing this year?

Jeremy Redenius - Sanford Bernstein

Okay. Then Patrick, raw material prices in BMS, how they are evolving in TDI margins?

Patrick Thomas

Yeah, Jeremy, let me just put the fourth quarter raw materials base in context just very crudely. So, we suffered, in terms of EBITDA year-on-year by about EUR 50 million in volume and offset that with about a 100 million in price, just putting that in context. The raw material impact is about 165 million negative. So, that gives you some idea of the relative effects of raw material compared to price and volume.

The other big effect that we saw in the fourth quarter was a 100 million of unusual costs coming through primarily relating to planned and unplanned shutdowns and the associated inventory reductions that went through. So, I think probably that helps you get a better feel for the gaps that was created in quarter four as an EBITDA level year-on-year and the context in which raw materials fit.

On TDI, let’s just look at the capacity. So, overall industry utilization in 2011 in total was around about 83%. Normally, prices start rising significantly as around about to 80% level, 88 and above. The market itself declined very slightly, although we grew and we expect a recovery of back to the normal sort of growth rate during beginning of this year.

There’s been one tick up which was one of the soft spots in furniture in China because we just heard the Chinese government is announcing a stimulus program for the furniture industry in China because that’s one of the problem areas that has been affected by the constraint on construction. TDI in Europe and America were supported strongly by the automotive sector although less so by the furniture sector.

And overall in Asia, there’s been some significant capacity coming off stream. So, there’s been some mothballing and may be even some plants that will not restart. We’ve seen that in Japan, in China and in Taiwan and also we’ve seen it in Brazil where one of our competitors has taken that TDI plant offline. So that means that the utilization rates heading into 2012 were actually starting a little bit better and certainly because of the deep drop in price, a number of the smaller players are desperate to raise pricing and we are seeing market beginning to move back up again.

Sandra Peterson

And so you asked a couple of questions what is expectations of market growth and then how we are going to take advantage of it from a cost perspective. It’s obviously much too early in the season to have a really good sense of what the market is going to look like this year, but at the moment I think most people believe that the crop protection market will be see moderate growth in 2012 and the seeds and trades part of the business will see a slightly higher level of growth and that consistent with probably what we saw in 2011.

And our goal which we’ve consistently said is that we are intended to continue to grow above that market both in crop protection and in BioScience in 2012 and the way in which we are going to do this is we actually, as you know we announced a significant restructuring program at the end of 2010.

That is still running, it’s on track and to achieve the 265 million in structural cost that we are taking out of the business, some of which is being invested behind growth in emerging markets. So the way in which we are going to advantage of the upside growth potential is by redeploying some of those funds, but we are also as you know have really changed the way in which we manage our whole supply chain infrastructure and that’s leading to us being able to see year-over-year improvement in our COGS level and we will see that again in 2012, a further improvement than our COGS that we saw in 2011 where we saw a step function improvement in our COGS level.

So that's how we are going to manage getting the value out of that growth. We will be investing behind it but we are taking money out to other places. So we should not see any substantive increase in our expenses.

Operator

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

Richard Vosser - JPMorgan

One question just on your financing structure; I think there's about 2.5 billion of bonds for repayment in 2012 and given the low interest environment, just wondering how you think of these refinancing whether you will refinance those bonds, keep the level of net debt similar or look to continue to deleverage and if you choose not to refinance where can we think of the uses of cash through 2012?

Second question sort of related to that and in terms of the pharma business. With the launch of Xarelto ongoing and other launches coming this year do you feel the management has enough capacity to look for outside opportunities now or do you feel that they still need to spend time executing those launches?

And then a final pharma related product question just on alpharadin. I noticed that you've started an expanded access program. Just wondering how many patients you are targeting for that program and what are the activities you are planning to increase the awareness of the brand ahead of potential launch this year, early next year and finally when you think you might be able to complete the start up as the manufacturing plants for that product? Thanks very much.

Marijn Dekkers

Okay, Richard. The first question on the bonds our CFO Werner Baumann will answer.

Werner Baumann

Hi, Richard, as we’ve said our (inaudible) billion, one of the Euro denominated EMTN bond, which is still less over of our [latest] acquisition for last years we are paying nearly that two billion. We are seeing that now at the end of April. We do that out of our existing cash and liquidity position as of yearend, which I am last year was more than four billion, the second (inaudible) of about little bit more than 400 million, which is a the Yen denominate EMTN bonds. And that is the only piece, which we are going to refinance. So the other two billion we are not going to refinance we are actually using some of our liquidity to deliver in terms of full year targets for our net debt position. We are expecting to be down to a level of around six billion that means a billion less of net financial debt compared to yearend 2011.

And last but not least if you look at the state of our (inaudible) in terms of our financial position and our total debt you always had hedge our pension obligation on top. So we are 14.8 billion overall debt position, which is now coming down by that roughly a billion in that financial at the end of 2012.

Richard Vosser - JPMorgan

Thank you, Werner. Jörg, do we have capacity to look at outside opportunities.

Jörg Reinhardt

Well, Richard, as much as I want our Pharma management to focus fully on the launches I would also expect that some of us still have some free capacity to look for opportunities outside. So yes, of course we will watch what is going on. But as you know, I mean, it depends on the opportunity and we look at it more deeply.

Regarding alpharadin; yes, we have started and expanded patient program, expanded access program especially in the US but we will expand this also to Europe. As you know we have only limited exposure of US physicians who are also waiting so far. So it was very necessary to actually give them more access to the compound and let them work with the compound and get patient for the product.

On absolute number of patients, I can’t give you because it will also be depending a little bit on the availability of material but you can assume that it will be several hundreds.

Regarding the production site; yes, we are making progress. We are still sticking to our mid of 2012 forecast as to when we will be ready and we can produce larger amounts there. And that also applies to the submission of the [registration files] which are still planned to be submitted along in the mid of the year.

Operator

The next question comes from Fabian Wenner of Kepler. Please state you name, company name, followed by your question?

Fabian Wenner - Kepler Capital Markets

Hey good afternoon. It’s Fabian Wenner from Kepler. Two questions please. First one for Marijn on the chemical cost coverage in MaterialScience and Bayer adheres to stringent cash value base metrics. Now out of the last four years MaterialScience has failed to meet your return targets twice and in the other two years barely met it, it seems as of the above TDP growth Bayer wants is not sufficient to cover the cost of capital. What exactly can and will be done to sustainably raise returns in the business on top of the recent deficiency programs?

And the other question was regards to acquisitions, maybe for Werner. Let’s assume there was a large acquisition target that you’re interested in. What net debt, including pensions to EBITDA to you and the rating agencies still deem acceptable to keep your current rating? Thank you.

Marijn Dekkers

So, I’ll take the first question on the BMS and earning rate of capital returns. We find it an interesting combination over the last four years of significant investments in our Caojing facility in China to get that up to speed which is obviously not something we do, you know, in one or two year outlook but more of a 22 to 30-year outlook and then exceptional fluctuations in the economy and in the demand for products.

So, I would not characterize the last four years as characteristic for BMS in the longer run. That’s certainly not how we’re thinking about. But we’re very focused on earning our cost of capital, of course in the long run, and you know, Patrick, and the team in MaterialScience are working very hard to leverage our investments to the best of our abilities. We’ve actually adjusted the bonus program for the MaterialScience employees in 2012 and where the size of the bonus has a strong influence of our capability to earn cost of capital.

Werner Baumann

And, Fabian, it’s a little bit like, Bayer is (inaudible) for a person I don’t know. In absence of knowing the profile of the acquisition targets, its actually impossible to talk about certain aspects of that, but in general terms there is a FFO to net debt ratio you can take as an orientation, which we need to maintain in order to maintain and defend our A minus rating and that is full time FFO to net debt. So we have to be at that level in order to justify our A rate and that is also state of the company’s policy. We think that we need it looking at the profile of the business that we are running and we work only very short transition of period of time to justify the A rating, only with the perspective of gaining it back to that level within a years time or so.

Fabian Wenner - Kepler Capital Markets

Can I ask follow up to that? Have you set recently any maximum cap for an acquisition target?

Jörg Reinhardt

Well, the sky is the limit. But Fabian, it is very difficult to answer that question because you look at financial structure in a very different manner if you have a business we start and generate any cash general or turn actually because burning cash compared to an operating business, which translates the bottom line and then comes {inaudible) potential.

Fabian Wenner - Kepler Capital Markets

That has already helped me Jörg. Thanks.

Marijn Dekkers

I think Fabian, just a general comment. In the last decade or so I think Bayer has been very disciplined in how it has done its acquisitions and how it has dealt what its debt and how it has dealt with bringing down that debt levels of larger acquisitions but we have no intention of changing that pattern of discipline.

Operator

The next question comes Mr. Michael Leuchten of Barclays please state your name company name followed by your question?

Michael Leuchten - Barclays

Thank you, its Michael from Barclays. Patrick, one question on MaterialScience, are you kind enough to give the TDI utilization right, so I was wondering whether you could also do that for MDI and polycarbonates?

Then a question on Betaseron, quite a stepdown in the momentum in the fourth quarter in the US, so just wondered what's driven that? And then lastly, moving the Diagnostics Division into Consumer Health, I just wondered how from an operational perspective that makes sense; it doesn't seem to be a large overlap between that and diabetes care?

Marijn Dekkers

Okay, so Patrick.

Patrick Thomas

Yeah, Michael the MDI full year utilization at an industry levels is round about 85%, and that was against the background of seeing full year growth as around about 7% in 2011 versus 2010. So MDI was actually quite strong in growth last year. And then on polycarbonates the overall utilization rate is probably is around about top 80s, so dropping back a little bit from 90% we saw in 2010 because of the new capacity that came on stream in the Middle East.

Marijn Dekkers

Okay. And then Betaseron.

Jörg Reinhardt

Yeah, so the most significant decline that we had in the fourth quarter came actually out of Spain, which shouldn’t be a surprise to anybody, I mean given the situation in Spain now for a year or so. I mean we see a pressure on products like Betaseron, but it's not only in Spain, also in the US we had a decline by 10% which to a larger extent is driven by Extavia sales which was strong, but we’ve also seen some impact of Gilenya. So overall, I mean forecast is still that Betaseron is going to have mid to high single digit decline in the years to come.

Marijn Dekkers

And then the move of?

Patrick Thomas

Yeah, the move. Well, you need to look a little bit deeper than what you just described in Medical Care, because it does not only consist of the Betaseron and they are agreed, it’s not much of an overlap. But we also do have our MEDRAD business in Medical Care and there is a strong overlap between MEDRAD and our diagnostic business.

Essentially, there has been cooperating already in the past, but coming from two different divisions and we thought it makes a lot of sense to bring these two groups together, not only from a top line perspective, because they are talking to the same channel and to the same customer, but also from an R&D perspective because both of these businesses MEDRAD and our Diagnostic business do work on, for example computer based analysis systems for radiologists, where a significant overlap in terms of what they are doing there. So that together with the sales channel overlap made us to come to this decision which makes a lot of sense.

Operator

The next question comes from Christian Faitz from Macquarie. Please state your name, company name followed by your question.

Christian Faitz - Macquarie

Yes sir, Christian Faitz, Macquarie. Just quickly on MaterialScience, we talked a lot about volumes, can you talk about current pricing trends i.e. going into the year 2012 season?

And then CropScience question for Sandy; the start of the season, how was pricing developing at the moment and do you see any volume discounts by competitors at the moment in the market and any also fee indications?

And then just quickly on HealthCare; Levitra and Avelox, can you elucidate a bit on the restructured contracts regarding the US distributions; it seems like you have lost sales for that; have you gain profitability instead from your marketing partner? Thanks.

Marijn Dekkers

Okay. BMS pricing trends, Patrick.

Patrick Thomas

Yeah, all trends Christian on MDI, we would expect to see increase continue with primarily the driver being high utilization rate and increasing feedstock cost. On TDI we think the selling price dropped to lowest level at the end of 2011. So we would hope to see some improvement through quarter one and quarter two.

On the polyols, we have seen the pricing actually up last year and that continues to pass on the material costs. And then on polycarbonates the (inaudible) facility which came on-stream and softer demand then we saw declining prices. So quarter four was actually below quarter three and that we will hope to start pushing through as we get the raw material price increase effect compensated during the first half of this year.

Marijn Dekkers

Okay. Sandy, pricing?

Sandra Peterson

So, the start of the season it’s still probably about a month to really give you a good sense of it, but generally speaking I think that in the North America and West European markets, people are feeling relatively positive about the marketplace in general and we have not yet seen a lot of volume discount scenes and our customers have not been saying the others have been doing them.

My only caution in all of that is because it is so early you never know whether it’s a back half of the season depending upon how developed whether there will be some rebate associated with volume that kicks in at the end of the second quarter, but at the moment the season in general is starting off relatively well.

The one soft spot which will impact probably the market a little bit is the vegetable market, probably because of some the issues in the Middle East and the hangover from last year, the problems that happened in Western Europe. But even there, in general, that market should be pretty good. So we’re feeling pretty good at the moment.

Marijn Dekkers

To Jörg, on Levitra and Avelox.

Jörg Reinhardt

Yeah, with regard to Levitra and Avelox you are absolutely right with your assumption that yes we lost sales, but we had a benefit in profit. Actually, both products Levitra and Avelox do grow outside of the US, Avelox even double-digit. You would have to expect still a negative impact in the first quarter of this year on sales given the fact that this transition in deal, and this deal only happened, I believe it was in March last year. But after that, the strong decline that you have seen so far will disappear for both products.

Operator

The next question comes from Mr. Andrew Baum of Citi. Please state your name, company name followed by your question.

Andrew Baum - Citi

Hi, it’s Andrew Baum from Citi. I heard you, Mr. Dekkers, I heard you mention complexity a number of times, and again, previously; perhaps you could share with us some of the measures you are putting in place as examples of reducing complexity that are feeding into both the P&L and cash flow? My assumption is much of those benefits are actually going to be reinvested in the business, if you could again confirm that?

And finally, you outlined I think the EUR 541 million annual savings as a result of these measures; could you give us some idea of how much more there is to come from rooting out residual complexity inside Bayer?

Marijn Dekkers

Yes. Thanks for the question. You know, we have announced a program back in November of 2010, so about a year and a half ago, restructuring programs, where we said we were going to under the sort of motto and more innovation and less administration, try to bring down the administrative burden that the company has to free up resources to invest in our innovation capability and also in driving growth in the growth countries.

We said at the time we will eliminate 4,500 positions in total and then add 2,500 for a net reduction of 2,000. And this is what I am talking about here with these programs and at the time we also said we will have annual savings rate out of those restructuring programs of EUR 800 million and then we’ll reinvest EUR 400 million of that in innovation and growth countries and the other EUR 400 million we’ll take to the bottom line as EBITDA and cash flow.

So a reinvestment indeed and the EUR 800 million and then the EUR 500 million you mentioned, we are sort of half way realizing the savings of these restructuring programs, except those are particularly on the administration side and more simplicity and standardization in how in the many countries where we are and the world support our businesses as with back office support, so financial, IP, legal, communication, HR that is all being standardized rather than being done differently in each different country and that helps savings.

We also have a program where we are trying to overall reduce our accounting savings in the company significantly till 2015. We spent quite a lot of money also when we benchmark ourselves. Accounting and there is nothing wrong with good accounting, but it comes at a cost and we think we can be more efficient there. So just to give you a few examples, but there are many programs across the company where we are trying to decrease the complexity of our particularly administrative functions.

Andrew Baum - Citi

Perhaps I could have just one follow-up. I didn't want to ask at the same time. Regarding the tax rate and the trend that we have seen across your peers, is the effective tax rate looking like it’s coming down due to either more aggressive tax avoidance or optimization structures together with the adoption of patent boxes in many European countries, but you just outlined directionally where you see trends for Bayer going forwards?

Werner Baumann

Yes we have a different guidance for 2012 that we see our tax rate and the ETR in the range of 26% to 27% which is somewhat lower than the tax rate we had in prior years. 2010 was an exception in that regard because of the atypical regional distribution of our tax payments and our ETR.

Overall we are also aiming at further improving our ETR by a multitude of different tax planning instrument and measures. Patent boxes are a part of this as well as international financing companies. But you also have to look, if you take a horizontal view and benchmark with ETR, you also and always have to look at the domiciliation of the companies which means we are kind of okay with where we are going comparing ourselves to Germany headquartered companies, we will never ever reach the tax rates of (inaudible) based companies.

Operator

The next question comes from Mr. Jo Walton from Credit Suisse.

Jo Walton - Credit Suisse

Just a few questions please. Looking at the pharma business, R&D as a percentage of sales, on the new restated basis went down exactly the same amount as the EBIT before special charges went up. So presumably there was no significant change in the marketing cost in 2011. Can you help us just understand the timeframe for an improvement in the overall margin for the pharma business given the large number of launches, not just of Xarelto, but of other products that comes through.

So what sort of timeframe of launch investment we should be thinking of? And I wonder if you can also just confirm for us what the impact of austerity measures in Europe was last year. And what your expectation is going forwards? In Chemicals, I have just a question on the TDI market. You’ve talked about some people retiring capacity, you’ve obviously added capacity yourself, I understand BASF has another 200,000 odd tons to come by 2014. Do you think that over the next couple of years the balance between new capacity and demand will be able to sustain the TDI price or could we have a real risk of some further weakness?

And a short one on crop protection, you are investing a lot in seed trades, but you still don’t have much germplasm so to get that seed investment to the market, can you see any way of doing that going forward?

Jörg Reinhardt

Joe as you know, P&L does not only exists of R&D and marketing and sales, I mean you’re right that we did control our R&D expenditure well last year. But at the same time we were working on cost of goods, we were working on G&A where we did also see movement into P&L which then helped to support marketing and sales expenses that were higher. So overall we keep on working in this direction and as we’ve discussed before, we see simplification measures do have an impact especially on G&A, but to some respect also on costs.

So from that perspective, don’t just look at R&D and M&S. Now going forward, I mean, as we’ve guided for this year, obviously all these launches as you pointed out plus the generic competition that we get now for Yaz and Yasmin in Europe will have an impact and whatever we do from a productivity perspective may not be able to fully compensate for that. So that’s why we guided for a slight increase in EBITDA. I mean going forward obviously the situation will depend on how well our product will perform and whether all these launches are in time and whether they are all successful, but it is certainly our mid-term expectation and hope and we are going to strive for it to keep on improving the margin in pharma, but also in HealthCare.

So, Jo, we had an impact of EUR 300 million in 2011 on a worldwide basis. In Europe, it was an impact of 140 million. This was all cumulative. So, that’s not only in 2011, that has been building over the last, actually two to three years. Then we look at 2012, there is an incremental impact that we see at the level of another EUR 150 million. Out of that, would be EUR 40 million coming from Europe. That’s our current expectation.

Marijn Dekkers

Thank you Jörg and then, TDI capacity, what's going to happen over the next few years. How does it affect price?

Patrick Thomas

Yeah, Jo, there is some fairly clear announcements out there, but they need some clarification I think. We announced an increase of 300,000 tons capacity in Dormagen, which will come onstream or which just got project approval, that will come onstream in about two and half, three years. Net, that’s only 95,000 tons of capacity because we will close a 145 in Brunsbüttel and 60 in Dormagen. So a lot of these new facilities that are being announced including the other one that you mentioned are also reflecting the older assets.

Now, what's the driver for that? That’s all about efficiency. The program that we’re running will use our new gas phase technology that we have already pioneered in China in Dormagen and that will then give us three wholescale units in the world, one in America, one in Asia, one in Europe and we will have then closed all of our other TDI plants globally. That gives us a very strong cost position.

If you look at the number of the other announced facilities, you will find a lot of the smaller ones in Asia and in India, now appear to have also been delayed partly because of the current pricing levels. So I am reasonably confident with the 4% to 5% growth rate that we see in TDI normally than these additional plants will mean that we will be able to operate more efficiently without having significant capacities, so I expect the pricing position to return to normal.

Marijn Dekkers

Good thank you and them Sandy trades and germplasm?

Sandra Peterson

So Jo I think that clarifies we actually in the crops in which we currently compete, we think we’ve got actually the broadest germplasm pool in those crops. So in canola and in cotton, part of our success is not just the technology, but it’s actually the quality of the germplasm and the breeding that we have done with those and that’s why we have been able to continue to grow share and grow those business significantly. The same thing is true with our vegetable business as well as our rice business which is a hybrid rice business and last year we also I think as you know did a small germplasm acquisition deal that actually broadened that germplasm pool.

So that’s those core set of crops and then we’ve also made a significant investment and acquired significant numbers of germplasm for wheat in the last twelve months and so we now probably have the broadest germplasm pool than any of our core competitors and we are now working through that to and sort through it and start really doing some breeding programs on wheat.

And the last crop area that’s a focus of ours is soybean and we are in the early stages through an acquisition in the United States, (inaudible) back and a few other gene pool in North America and Latin America to broaden our germplasm pools and soybeans. That one today is the smallest all of them, but the other ones we actually think we have got world class germplasm pools and our customers actually say that that’s part of why we are very competitive because of that.

So one area where we have consciously deciding we are not going to be in the germplasm seed part of the business, is in corn. We are a trait provider to others but we actually are not in the corn seed business itself and we don't have any plans to be in that business.

Operator

The next question comes from Peter Spengler from DZ Bank. Please state your name, company name, followed by your question.

Peter Spengler - DZ Bank

I have two questions, one on polycarbonates, polyurethanes and one on pharma. I will start with the MaterialScience question and you mentioned that you are trying to go back to normal growth rates or that the market is going back to normal growth rates for 2012. So could you specify what do you think the market could grow in this year?

And the second question is on pharma. Do you expect the positive EBITDA contribution from EYLEA and Xarelto or the whole group of four new products in 2012? Thank you.

Marijn Dekkers

Okay. Patrick.

Patrick Thomas

On the market growth I am talking here of totally industry expectations based upon our analysis which suggest that [MDI] will grow slightly slower in 2012 from the 7% we saw in 2011. [CPI] will grow only about 1% growth during 2011 and we expect that to increase during 2012. On the oligopoly markets we expect a growth rate of somewhat about 5%, that's driven by the combination of (inaudible) and then polycarbonates we’ve got a combination of effects going on. We’re seeing quite strong (inaudible) drive and some contraction in the short-term on electronics because there was a kind of stock out over Christmas on a lot of electronics goods. For example in Germany to meet to (inaudible) of flat screen TV. So we are running their inventory at such low levels. People are actually stocking out. It was also the shortage of (inaudible) in Thailand following the flooding which affected the electronics industry dramatically. But assuming that comes back to normality and certainly the Japanese affected now come out of the system following the Tsunami and we expect to see a normalized growth rate for these at around about 6% up to 7%).

Peter Spengler - DZ Bank

Okay, good. [Piles of] money you’re going to make them in late 2012?

Patrick Thomas

We will make piles money but not in 2012. So my answer is that if we stay forward, I mean none of this four products will have a positive EBITDA or EBITS contribution in 2012, I mean EYLEA is only going to be launched towards the end of the year the other products maybe towards the end or early 2013 and Xarelto is not yet making a positive contribution either.

Operator

The next question comes from Florent Cespedes of Exane BNP Paribas. Please state your name, company name, followed by your question.

Florent Cespedes - Exane BNP Paribas

Good afternoon gentlemen. Florent Cespedes from Exane BNP Paribas. Thank you for keeping my question. Three quick ones on healthcare; first and the one product on Kogenate, could we have an update on your long-acting program and second one which is a follow up on the austerity measures impact, could you confirm that for 2012 that impact in Europe should be EUR 40 million, which is a rather small a relative item versus the impacting Europe for 2011, could we know why and the last one on the guidance, would you consider giving a long-term guidance as you did few years ago, as you have many transforming products emerging or do you believe the consensus is right, so there is no reason to adjust the forecast? Thank you?

Jörg Reinhardt

Okay. So maybe I will start with the Kogenate. As you know we have spoken for long-acting Kogenate in developments since now for quite a number of years. We have changed the formulation several time and now end of that last year with the formulation that actually created very good Phase I, II results. So we are now planning to start a Phase III program with our long acting Kogenate formulation this year within the next few months.

Regarding austerity measures, yes it is corrected. Depends, it always a little bit on what you call Euro and for example in my EUR 40 million number for 2012, we don’t have Turkey in there, which we have in a different bucket but if you add Turkey, the overall impact will be higher than 40 million. But in general the expectation is that price cuts that was really dramatic that we saw especially in countries like Spain in 2012 may not come to the same extent in 2012. But it of course is just speculation at the moment but we are little bit more optimistic for Europe in 2012 than 2011.

Marijn Dekkers

Okay. I don’t think the question of the guidance going forward, Tim. We’re planning to discuss the longer term guidance at our management meeting later in March and we will talk then, somewhat more extensively about it. So, and stay tuned for that meeting.

Florent Cespedes - Exane BNP Paribas

Good. Thank you very much. Looking forward to discuss that with you.

Operator

The next question comes from Damien Conover from Morningstar. Please state your name, company name, followed by your question.

Damien Conover - Morningstar

Yes, hi. Thanks for taking the question. Damien Conover with Morningstar. Just a question on Betaseron. Following up on your longer term outlook there for mid-to-high single-digit decline. Just wondered your thoughts on the margin impact of losing this product and the level of marketing support on the product right now and how that might shift given the dynamics going on in the MS market.

And then also a follow up question on Xarelto. Just kind of want to gauge a little bit more granularity on your expectations of over EUR 2 billion. Just wondering if you could talk to how you see the contributions coming from the different indications as well as within the atrial fibrillation indication, your thoughts on market share versus overall growth within that therapeutic class? Thanks a lot.

Marijn Dekkers

Jörg

Jörg Reinhardt

Okay. So, regarding Betaseron, I mean, obviously, you can assume that Betaseron after many years of market introduction is a relatively high margin product, which of course, is also supported by the fact that we have been reducing overall marketing impact on marketing support for the product over the last few years. So going forward we do not intend to continue to invest significantly in the product. This is a franchise where we are loosing share and we are almost dependent of how much support we actually give to them perhaps. Having said that we of course fight for what we have got and it seems to be growing sales in the number of countries. We are under pressure especially in the US but we do for example see growth in Germany. So we will be very select this year and support the product in those markets that has a good share and good standing and where we still see high or flat sales of growth.

Regarding Xarelto, yes we speak to our more than two billion projection and giving the launch that is just going to the beginning of the call, we are confident that number is achievable. We see a very good uptick in it atrial fibrillation in Germany .We assume that will be similar in rest of Europe and rest of world. We do also see growth in orthopedic surgery. I mean we see that in Europe and we also see growth in the US and from other markets where there is certain [Hilo] effects that supports the plan in this indication as well and then don’t forget we have justified for a review for ACS in the US. This is an indication where you know it is overlap between AF and ACF patients. We can debate forever that overlap is 20% or 30% or 40% but it is there and our expectation is that once we get approval in ACS but again that will be [Hilo] affect also on the atrial fibrillation indication and also believe that a significant part of these patients that overlap between the two indications made and the switched or put on Xarelto.

But having said that, overall certainly we expect the most significant share of these EUR 2 billion coming from the Atrial Fibrillation market, but one should not totally disregard the orthopedic surgery indication; the ACS indication and I didn’t mentioned is the VTE treatment indication which we have got in Europe and other parts of the world, but not yet in the US. So there is more to come for Xarelto and overall I think that the EUR 2 billion is absolutely reachable.

Operator

The next question comes from Ronald Köhler of MainFirst. Please state your name, company name followed by question?

Ronald Köhler - MainFirst

Yes hello, it’s Ronald Köhler from MainFirst and I have several questions. First question on restructuring program, you provided kind of a chart on your progress here, but could you give us a number how much P&L influence you had positively from the restructuring program in 2011? If possible net of your investments, how you calculate that and a little bit give an indication how the further EUR 800 million if they will, will come through in 2012-2013?

And second question on Bayer MaterialScience, you’re quite cautiously guiding for EBIT flattish and on the other side on the market assumption you have in mind relatively positive assumption like the construction market growing by 6%, furniture by 5%, electronics by 5%.

So obviously, if I would look at these assumptions, at these growth rates, I would assume you should have a chance to increase earnings actually if I put that volume assumption into my model. What would keep that lower, is it really the higher raw material prices, but obviously you mentioned you could almost pass them on in 2011, so is there an additional risk on that side or what makes you so cautious?

And for Diagnostic Imaging, you obviously now moved it to OTC and we just see the headline products unfortunately which are let’s say the major product are declining; I believe Diagnostic Imaging is overall a kind of a flat developing part of your business in 2011. Could you a little bit confirm that how was your overall growth and how is let’s say the outlook, is that diminishing sales growth in OTC from let’s say previously around 5% or what would you expect from the contribution of Diagnostic Imaging?

Marijn Dekkers

Okay. On the financial impact of the restructuring program, Werner Baumann, please.

Werner Baumann

Yeah Ronald, let me first talk in growth numbers and that will be somewhat difficult. We achieved annualized savings of EUR 543 million, so that means there is roughly EUR 260 million still to come in 2012 to be realized.

Looking at how much of that has become bottom line effective in 2011 it’s actually next to impossible to quantify that. But let me say so much, that if you look at original expectations for 2011 and where we ended up, we generated significant bottom line dynamics, specifically in HealthCare where we improved by 1.4 percentage points in the margin and that would not have been impossible without the significant contributions of the restructuring programs, likewise we saw an even higher margin improvement in CropScience which was heavily supported by roughly EUR 115 million contribution out of the restructuring programs.

So there is somewhat more to come in 2012, of course the last part of that will go into the financing of our further launch and marketing expenses for our new products in HealthCare and then to a certain extent also to fend off some of the inflation cost increases in (inaudible).

Ronald Köhler - MainFirst

Just to get that clear, if you mentioned annualized, I guess that is let’s say rolling forward program for the next 12 months, but obviously what I would like to get is the effect in 2011 not on an annualized basis, but what you just had in the P&L so to say?

Werner Baumann

I can only give you annualized and annualized which is rolling that’s absolutely correct, that’s EUR 540 million by the end of 2011.

Marijn Dekkers

Okay. Question BMS, flattish EBITDA outlook?

Patrick Thomas

Yeah, I think Ronald your comment is perfectly fair and the question is a good one. We have given flat guidance based upon the time at which we put the guidance together. As I look at what’s actually happening in the market in January and February, I guess I would be more optimistic, but I think we have to be cautious here because with oil price volatility and the impact that has on our raw materials and also on all capacity levels, because we are not convinced we have seen all of the new capacity back on fully on-stream yet.

So that gives us a concern around our pricing power to spike our success. I am not convinced that the capacity levels will tighten fast enough for us to get the pricing that we really may need in the case of the higher oil prices.

Marijn Dekkers

And the outlook for Diagnostic Imaging?

Patrick Thomas

I mean you are absolutely correct with your expectation that it is a business that is not growing that much however it has been growing over the last two years in the low single digits and that’s also the forecast going forward between flat and low single digits.

And however, I mean the combination that we have now done with the MedCare business, we’ll not have an impact immediately, but in the mid-to-long term, we will expect better service that we can provide to our customers given this combination of the two businesses; it may have some positive effect on that growth rate as well.

And then also I believe that long-term the improved capability that we have some research and development in the combined business may help us to support the business as well. So short-term relatively flat, long-term hopefully better.

Operator

The next question comes from Matt Lowe from JPMorgan. Please state your name, company name followed by your question.

Matt Lowe - JPMorgan

Hi there, it’s Matt Lowe from JPMorgan. Thank you for taking my question. Just wondering if you could provide a geographic breakdown in Euros for the fourth quarter of Nexavar sales; it’s basically breakdown of the EUR 205 by geographies? Thank you.

Marijn Dekkers

We were expecting that question and are fully prepared to answer it.

Werner Baumann

Still need to look for it. So, sales in the fourth quarter in France were EUR 13 million, it Italy EUR 15 million, in Germany EUR 11 million and in Spain EUR 7 million, and the rest is flat around a number of countries. In China, sales for Nexavar in the fourth quarter were EUR 17 million and in Japan EUR 34 million.

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

Thank you, Claire. And ladies and gentlemen, also on behalf of my colleagues, I would like to say thank you for being with us on the call and also for your questions. We all hope that we can meet with you again during our Meet Management conference which will take place on March 13th and 14th here in Leverkusen. Goodbye and (inaudible).

Operator

Ladies and gentlemen, this concludes Fiscal Year and Fourth Quarter 2011 Results, Investor and Analyst Conference Call of Bayer AG. Thank you for participation. You may now disconnect.

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