Bayer AG

Earnings Release • Apr 30, 2015

First quarter of 2015

Strong start to the year for Bayer

• // Significant sales and earnings growth at HealthCare
• // CropScience performance steady in a weaker market environment
• // MaterialScience posts earnings growth
• // Group sales €12.1 billion (+14.8%; Fx & portfolio adj. +2.7%)
• // EBITDA before special items €3.0 billion (+9.6%)
• // EBIT €2.0 billion (–4.7%)
• // Net income €1.3 billion (–8.4%)
• // Core earnings per share €2.10 (+7.7%)
• // Guidance for full year 2015 raised due to currency effects

Bayer once again improved its operating performance in the first quarter of 2015. At HealthCare we continued to benefit from the positive development of our recently launched pharmaceutical products and the gratifying expansion of business in all Consumer Health divisions, particularly Consumer Care, where the products acquired from Merck & Co., Inc., United States, also contributed to growth. Despite a weaker market environment, our CropScience business slightly exceeded the strong prior-year quarter. However, earnings were down year on year. MaterialScience registered a slight decline in sales (Fx & portfolio adj.) as expected, with lower raw material prices causing a fall in selling prices. Earnings before special items improved. Preparations for the stock market flotation of MaterialScience are on schedule. As before, we plan to carry out the flotation by mid-2016 at the latest. In light of the business development in the first quarter of 2015 and the considerably more positive exchange rates prevailing on March 31, 2015, we are raising our Group guidance for the current year.

1. Overview of Sales, Earnings and Financial Position

FIRST QUARTER OF 2015

	Bayer Group Quarterly Sales													[Graphic 1]
		€ million													Total
Q1	2014 2015	1,371 1,385							9,184 10,732						10,555 12,117
Q2	2014 2015	1,259							9,199						10,458
Q3	2014 2015	1,220							8,967						10,187
Q4	2014 2015	1,131							9,908						11,039
	Germany	0	1,000	2,000 Other countries	3,000	4,000	5,000	6,000	7,000	8,000	9,000	10,000	11,000	12,000

Sales of the Bayer Group moved ahead in the first quarter of 2015 by 2.7% after adjusting for currency and portfolio effects (Fx & portfolio adj.) to €12,117 million (reported: + 14.8%; q1 2014: €10,555 million). HealthCare sales improved by 7.2% (Fx & portfolio adj.) to €5,742 million (reported: + 25.6%; q1 2014: €4,572 million). CropScience raised sales by 1.0% (Fx & portfolio adj.) against the prior-year quarter to €3,092 million (reported: + 6.6%; q1 2014: €2,900 million). As expected, sales of MaterialScience decreased by 2.1% (Fx & portfolio adj.) to €3,014 million (reported: + 7.5%; q1 2014: €2,803 million).

	Bayer Group Quarterly EBIT	[Graphic 2]		Bayer Group Quarterly EBITDA Before Special Items	[Graphic 3]
		€ million			€ million
Q1	2014 2015	Q1 2,096 1,998		2014 2015	2,738 3,000
Q2	2014 2015	1,473	Q2	2014 2015	2,217
Q3	2014 2015	1,376	Q3	2014 2015	2,011
Q4	2014 2015	561	Q4	2014 2015	1,846
	0 1,000 500 1,500 2,000 2,500 3,000			0 1,000 500 1,500 2,000 2,500 3,000

ebit of the Bayer Group fell by 4.7% to €1,998 million (q1 2014: €2,096 million). Earnings were held back by net special charges of €244 million (q1 2014: net special gains of €7 million) that mainly comprised €91 million for the integration of acquired businesses, €77 million for the consolidation of production sites and €41 million for additional efficiency improvement measures. ebit before special items rose by 7.3% to €2,242 million (q1 2014: €2,089 million).

ebitda before special items climbed by 9.6% to €3,000 million (q1 2014: €2,738 million). This good sales development was accompanied by higher r&d and selling expenses. Positive currency effects buoyed earnings by about €50 million. At HealthCare, ebitda before special items rose by a considerable 24.1% to €1,615 million (q1 2014: €1,301 million). This was chiefly attributable to the very good development of business at Pharmaceuticals and Consumer Health, as well as the contribution from the acquired consumer care businesses. ebitda before special items of CropScience fell by 5.3% to €1,040 million (q1 2014: €1,098 million), due particularly to negative currency effects and lower volumes. ebitda before special items of MaterialScience advanced by 15.8% to €424 million (q1 2014: €366 million), mainly because of lower raw material costs. Earnings of the reconciliation declined largely on account of higher expenses for long-term stock-based compensation.

After a financial result of minus €274 million (q1 2014: minus €159 million), income before income taxes was €1,724 million (q1 2014: €1,937 million). After tax expense of €415 million (q1 2014: €512 million) and non-controlling interest, net income in the first quarter of 2015 came to €1,303 million (q1 2014: €1,423 million). Earnings per share were €1.58 (q1 2014: €1.72). Core earnings per share advanced by 7.7% to €2.10 (q1 2014: €1.95), calculated as explained in Chapter 7 "Core Earnings Per Share."

	Quarterly Gross Cash Flow	[Graphic 4]	Quarterly Net Cash Flow			[Graphic 5]
		€ million				€ million
Q1	2014 2015	2,048 2,060	Q1	2014 2015		163 724
Q2	2014 2015	1,705	Q2	2014 2015		1,601
Q3	2014 2015	1,492	Q3	2014 2015		1,816
	2014 2015 Q4	1,575	Q4	2014 2015		2,230
	0 1,000 500 1,500	2,000 2,500		0 1,000 500	1,500 2,000 2,500

Gross cash flow was level year on year in the first quarter of 2015 at €2,060 million (q1 2014: €2,048 million). Net cash flow rose sharply to €724 million (q1 2014: €163 million) due to a reduction in cash tied up in working capital. We paid income taxes of €444 million in the first quarter of 2015 (q1 2014: €375 million).

Net financial debt rose by €1.7 billion against December 31, 2014, to €21.3 billion, mainly on account of negative currency effects. The net defined benefit liability for post-employment benefits – the difference between benefit obligations and plan assets – increased from €12.2 billion to €13.6 billion over the same period, mainly due to a decline in long-term capital market interest rates for highquality corporate bonds.

2. Economic Outlook

Economic Outlook		[Table 1]
	Growth1 2014	Growth1 forecast 2015
World	+ 2.7%	+ 2.9%
European Union	+ 1.3%	+ 1.9%
of which Germany	+ 1.6%	+ 2.1%
United States	+ 2.4%	+ 3.0%
Emerging markets2	+ 4.4%	+ 4.0%

1 real growth of gross domestic product, source: IHS Global Insight

2 including about 50 countries defined by IHS Global Insight as emerging markets in line with the World Bank

as of March 2015

The global economy will probably grow more quickly in 2015 than in the previous year, supported by a generally expansionary monetary policy and the sharp decline in oil prices. We expect the economic recovery in the European Union to continue. The German economy in particular is likely to grow more rapidly than initially predicted. The United States economy is anticipated to grow considerably faster than in 2014. By contrast, the rate of expansion in the emerging countries is likely to weaken again slightly on average.

Economic Outlook for the Subgroups		[Table 2]
	Growth1 2014	Growth1 forecast 2015
HealthCare
Pharmaceuticals market	+ 8%	+ 7%
Consumer care market	+ 4%	+ 4%
Medical care market	– 3%	– 1%
Animal health market	+ 5%	+ 5%
CropScience
Seed and crop protection market	+ 6%	≤ 3%
MaterialScience (main customer industries)
Automotive	+ 3%	+ 3%
Construction	+ 4%	+ 4%
Electrical / electronics	+ 4%	+ 5%
Furniture	+ 4%	+ 4%

1 Bayer's estimate; except pharmaceuticals. Source for pharmaceuticals market: IMS Health, IMS Market Prognosis. Copyright 2015. All rights reserved; currency-adjusted; 2014 data provisional

as of April 2015

The pharmaceuticals market is likely to grow rather more slowly in 2015 than in the previous year, especially because of the slightly lower growth rate predicted for this market in the United States. Following double-digit growth in the u.s. last year, which was driven by new product introductions and health system reforms, this market will probably expand at a somewhat slower rate in 2015, partly as a result of patent expirations and launches of new generic products. We expect demand to be stable in the emerging economies.

Growth in the consumer care market in 2015 is likely to be level with the previous year. We expect the medical care market to stabilize, with the diabetes care market weakening and the market for contrast agents and medical equipment (Radiology business unit) expanding slightly. The animal health market is anticipated to grow at about the same rate as in 2014.

The global seed and crop protection market will likely continue to expand in 2015. However, we anticipate a much slower rate of growth than in the previous years, mainly as a result of the low price level for agricultural commodities. The benefit to farmers of lower energy and fertilizer costs is likely to support demand.

In line with the recovery of the global economy, we expect the business climate for the main customer industries of MaterialScience to continue improving during 2015.

3. Sales and Earnings Forecast

BAYER GROUP

Based on the operational performance in the first quarter of 2015 and our expectations for the future business development, and taking into account the potential risks and opportunities, we are raising our guidance for 2015, mainly in view of the considerably more positive exchange rates prevailing on March 31, 2015 (see page 43).

We are now planning sales in the region of €48 billion to €49 billion (previously: in the region of €46 billion). This corresponds to a low-single-digit percentage increase on a currency- and portfolioadjusted basis. We expect currency effects to boost sales by approximately 9% (previously: approximately 3%) compared with the prior year. We now plan to raise ebitda before special items by a highteens percentage (previously: low- to mid-teens percentage), allowing for expected positive currency effects of about 8% (previously: about 2%). We now aim to increase core earnings per share (calculated as explained in Chapter 7) by a high-teens percentage (previously: low-teens percentage), allowing for expected positive currency effects of around 7% (previously: around 3%).

	Forecast 2015	Revised	Currency effects allowed for
	(February 2015)	forecast 2015	in the forecast 2
Group sales	Low-single-digit percentage increase1	Low-single-digit percentage increase1
	Approx. €46 billion	€48 billion to €49 billion	Plus approx. 9% (previously: plus approx. 3%)
ebitda	Low- to mid-teens	High-teens percentage	Plus approx. 8%
before special items	percentage increase	increase	(previously: plus approx. 2%)
Core earnings	Low-teens percentage	High-teens percentage	Plus approx. 7%
per share	increase	increase	(previously: plus approx. 3%)

1 currency- and portfolio-adjusted

2 forecast for currency effects in 2015 computed by comparing exchange rates as of March 31, 2015, to full year 2014 rates

We continue to expect to take special charges in the region of €700 million, with the integration of the acquired consumer care businesses and the planned stock market listing of MaterialScience accounting for most of this amount.

We continue to anticipate the financial result to come in at around minus €1 billion and the effective tax rate at around 25% in 2015. We expect net financial debt at year end to be below €20 billion (previously: below €18 billion).

Further details of the business forecast are given in Chapter 20.2 of the Annual Report 2014.

HEALTHCARE

At HealthCare we now expect sales to rise to over €24 billion (previously: approximately €23 billion). This corresponds to a mid-single-digit percentage increase on a currency- and portfolio-adjusted basis. We predict positive currency effects of about 9% (previously: about 3%) compared with 2014. We now plan to raise ebitda before special items by a low-twenties percentage (previously: mid-teens percentage).

In the Pharmaceuticals segment, we now expect sales to move ahead to approximately €14 billion (previously: approximately €13 billion). This corresponds to a mid- to high-single-digit percentage on a currency- and portfolio-adjusted basis. Here we anticipate positive currency effects of about 9% (previously: about 2%) compared with 2014. We intend to raise sales of our recently launched products to over €4 billion (previously: toward €4 billion). We plan to raise ebitda before special items by a mid-teens percentage (previously: low-teens percentage), allowing for an additional €350 million (previously: €300 million) of investment in research and development. As a result of the dilutive currency effects, we expect the ebitda margin before special items to be slightly below the prior-year level (previously: slightly improve).

In the Consumer Health segment, we expect sales to increase to over €10 billion (previously: toward €10 billion), including those of the acquired consumer care businesses. We plan to grow sales by a midsingle-digit percentage on a currency- and portfolio-adjusted basis and anticipate positive currency effects of around 9% (previously: around 3%) compared with 2014. We expect to raise ebitda before special items by a mid-thirties percentage (previously: a mid- to high-twenties percentage), with the acquired consumer care businesses contributing to the increase.

CROPSCIENCE

At CropScience we expect to continue growing faster than the market and now aim to raise sales to approximately €11 billion (previously: approximately €10 billion). This corresponds to a low- to midsingle-digit percentage increase on a currency- and portfolio-adjusted basis. We anticipate positive currency effects of about 11% (previously: about 4%) compared with 2014. In line with the clearly positive currency changes, we now plan to improve ebitda before special items by a low- to mid-teens percentage (previously: a low- to mid-single-digit percentage).

MATERIALSCIENCE

At MaterialScience we continue to plan further volume growth in 2015 accompanied by declining selling prices. This will lead to lower sales on a currency- and portfolio-adjusted basis. However, we expect to see a significant increase in ebitda before special items, partly due to lower raw material costs. We aim to return to earning the full cost of capital in 2015.

We expect sales and ebitda before special items in the second quarter of 2015 to come in at least at the level of the first quarter of 2015.

RECONCILIATION

For 2015 we continue to anticipate sales on a currency- and portfolio-adjusted basis to be level with the previous year. We expect ebitda before special items to be roughly minus €0.3 billion.

4. Corporate Structure

Bayer AG, headquartered in Leverkusen, Germany, is the strategic management holding company for the Bayer Group. Business operations are conducted by the HealthCare, CropScience and MaterialScience subgroups.

2014 in parentheses

Our subgroups are supported by the Business Services, Technology Services and Currenta service companies, which are reported in the reconciliation as "All Other Segments" along with "Corporate Center and Consolidation."

Key Data by Subgroup and Segment						[Table 3]
		Sales		EBIT	EBITDA before special items1
	1st Quarter 2014	1st Quarter 2015	1st Quarter 2014	1st Quarter 2015	1st Quarter 2014	1st Quarter 2015
	€ million	€ million	€ million	€ million	€ million	€ million
HealthCare	4,572	5,742	962	1,040	1,301	1,615
Pharmaceuticals	2,782	3,200	641	691	873	988
Consumer Health	1,790	2,542	321	349	428	627
CropScience	2,900	3,092	988	874	1,098	1,040
MaterialScience	2,803	3,014	219	219	366	424
Reconciliation	280	269	(73)	(135)	(27)	(79)
Group	10,555	12,117	2,096	1,998	2,738	3,000
1 For definition see Chapter 6 "Calculation of EBIT(DA) Before Special Items."

5. Business Development by Subgroup, Segment and Region

5.1 HealthCare

			[Table 4]
1st Quarter	1st Quarter		Change
			Fx & p adj.
€ million	€ million	%	%
4,572	5,742	+ 25.6	+ 7.2
+ 8.9%	+ 6.7%
0.0%	+ 0.5%
– 6.9%	+ 7.8%
+ 0.9%	+ 10.6%
2,782	3,200	+ 15.0	+ 7.2
1,790	2,542	+ 42.0	+ 7.2
€ million	€ million	%	Fx. adj. %
1,757	1,924	+ 9.5	+ 11.6
1,132	1,797	+ 58.7	+ 39.0
1,070	1,283	+ 19.9	+ 6.9
613	738	+ 20.4	+ 15.3
962	1,040	+ 8.1
16	(145)
946	1,185	+ 25.3
1,317	1,492	+ 13.3
16	(123)
1,301	1,615	+ 24.1
28.5%	28.1%
881	1,102	+ 25.1
659	1,264	+ 91.8
	2014	2015

Fx & p adj. = currency- and portfolio-adjusted; Fx adj. = currency-adjusted

1 For definition see Chapter 6 "Calculation of EBIT(DA) Before Special Items."

2 For definition see Chapter 8 "Financial Position of the Bayer Group."

Sales of the HealthCare subgroup increased by 7.2% on a currency- and portfolio-adjusted basis (Fx & portfolio adj.) to €5,742 million (reported: + 25.6%) in the first quarter of 2015. This growth was driven by the continuing strong development of our recently launched pharmaceutical products and a significant expansion of business in the Consumer Health segment. The considerable reported increase was chiefly attributable to sales of products acquired from Merck & Co., Inc., United States, and currency effects.

ebit of the HealthCare subgroup rose by 8.1% in the first quarter of 2015 to €1,040 million, reflecting net special charges of €145 million (q1 2014: special gains of €16 million). ebit before special items improved considerably by 25.3% to €1,185 million (q1 2014: €946 million). ebitda before special items increased by a substantial 24.1% to €1,615 million (q1 2014: €1,301 million). The improvement in earnings resulted mainly from the favorable development of business at Pharmaceuticals and Consumer Health, the contributions from the acquired businesses, and positive currency effects of about €50 million. Earnings were held back by higher selling expenses in both segments, which at Consumer Health were particularly due to the acquired consumer care businesses, and by an increase in research and development expenses at Pharmaceuticals.

	HealthCare Quarterly EBIT			[Graphic 8]	HealthCare Quarterly EBITDA Before Special Items					[Graphic 9]
						€ million							€ million
Q1	2014 2015					962 1,040	Q1	2014 2015					1,301 1,615
Q2	2014 2015					966	Q2	2014 2015					1,355
Q3	2014 2015					1,091	Q3	2014 2015					1,402
Q4	2014 2015					562	Q4	2014 2015					1,426
	0	400 200	600	800	1,000 1,200			0		1,000 500	1,500	2,000

PHARMACEUTICALS

Key Data – Pharmaceuticals				[Table 5]
	1st Quarter 2014	1st Quarter 2015		Change
				Fx & p adj.
	€ million	€ million	%	%
Sales	2,782	3,200	+ 15.0	+ 7.2
	€ million	€ million	%	Fx adj. %
Sales by region
Europe	1,035	1,131	+ 9.3	+ 10.1
North America	591	761	+ 28.8	+ 10.3
Asia / Pacific	801	915	+ 14.2	+ 1.5
Latin America / Africa / Middle East	355	393	+ 10.7	+ 6.5
EBIT	641	691	+ 7.8
Special items	16	(24)
EBIT before special items 1	625	715	+ 14.4
EBITDA1	889	964	+ 8.4
Special items	16	(24)
EBITDA before special items 1	873	988	+ 13.2
EBITDA margin before special items 1	31.4%	30.9%
Gross cash flow 2	574	690	+ 20.2
Net cash flow 2	447	752	+ 68.2

Fx & p adj. = currency- and portfolio-adjusted; Fx. adj. = currency-adjusted

1 For definition see Chapter 6 "Calculation of EBIT(DA) Before Special Items."

2 For definition see Chapter 8 "Financial Position of the Bayer Group."

Sales of our Pharmaceuticals segment rose by 7.2% (Fx & portfolio adj.) to €3,200 million in the first quarter of 2015. The main contributing factor here was the persistently dynamic sales growth of our recently launched products. Xarelto™, Eylea™, Stivarga™, Xofigo™ and Adempas™ posted combined sales of €898 million (q1 2014: €598 million). Our Pharmaceuticals business grew in all regions on a currency-adjusted basis. Development was particularly gratifying in North America and Europe.

Best-Selling Pharmaceuticals Products [Table 6]

	1st Quarter 2014	1st Quarter 2015		Change
				Fx adj.
	€ million	€ million	%	%
Xarelto™	342	482	+ 40.9	+ 38.4
Kogenate™	270	261	– 3.3	– 9.8
Eylea™	157	253	+ 61.1	+ 55.1
Mirena™ product family	178	232	+ 30.3	+ 14.2
Betaferon™ / Betaseron™	190	208	+ 9.5	– 1.0
Nexavar™	183	196	+ 7.1	– 3.7
YAZ™ / Yasmin™ / Yasminelle™	181	181	0.0	– 3.3
Adalat™	140	162	+ 15.7	+ 2.9
Aspirin™ Cardio	115	136	+ 18.3	+ 8.3
Glucobay™	102	130	+ 27.5	+ 8.3
Avalox™ / Avelox™	108	110	+ 1.9	– 8.2
Stivarga™	54	71	+ 31.5	+ 14.0
Xofigo™	36	54	+ 50.0	+ 28.0
Levitra™	62	53	– 14.5	– 17.5
Cipro™ / Ciprobay™	47	41	– 12.8	– 18.9
Total	2,165	2,570	+ 18.7	+ 9.8
Proportion of Pharmaceuticals sales	78%	80%
Fx adj. = currency-adjusted

Xarelto™ expanded its leading position among the new oral anticoagulants, particularly in Europe. Business with Xarelto™ also developed very positively in the United States, where it is marketed by a subsidiary of Johnson & Johnson. We again posted robust gains for our eye medicine Eylea™, particularly in Europe and Japan, where Eylea™ was approved in additional indications. Sales of the cancer drug Stivarga™ increased mainly in the United States. Further positive contributions to sales development came from the cancer drug Xofigo™ and from Adempas™, our innovative product to treat pulmonary hypertension (Adempas™ sales: €38 million; q1 2014: €9 million).

Sales of the hormone-releasing intrauterine devices of the Mirena™ product family – Mirena™ and Jaydess™ /Skyla™ – rose mainly as a result of higher volumes in the United States. Adalat™ for the treatment of hypertension and coronary heart disease, Aspirin™ Cardio for secondary prevention of heart attacks and our oral diabetes treatment Glucobay™ registered rising demand, especially in China.

Sales of our blood-clotting medicine Kogenate™ were below the prior-year level as a result of capacity shortages caused by the use of production capacities to develop the next-generation hemophilia medicines. Lower sales of our multiple sclerosis product Betaferon™ /Betaseron™ in Europe, Japan and other geographies were nearly offset by gains in the United States. Sales of our cancer drug Nexavar™ declined overall, particularly in China and Japan. Receding sales of our yaz™ /Yasmin™ /Yasminelle™ line of oral contraceptives resulted from lower demand in the United States and Europe, while business developed positively in the Emerging Markets. Despite higher volumes in China, sales of the antibiotic Avalox™/Avelox™ declined overall due mainly to the expiration of the patent in Europe and the United States.

ebit in the Pharmaceuticals segment climbed by 7.8% in the first quarter of 2015 to €691 million, reflecting net special charges of €24 million (q1 2014: special gains of €16 million). ebit before special items rose by 14.4% to €715 million. ebitda before special items improved by 13.2% to €988 million. This earnings growth was primarily attributable to the good development of business, particularly for our recently launched products, and to positive currency effects of about €30 million. Earnings were diminished as expected by increased investment in research and development and higher selling expenses.

CONSUMER HEALTH

Key Data – Consumer Health				[Table 7]
	1st Quarter 2014	1st Quarter 2015		Change
	€ million	€ million	%	Fx & p adj. %
Sales	1,790	2,542	+ 42.0	+ 7.2
Consumer Care	923	1,556	+ 68.6	+ 8.3
Medical Care	537	600	+ 11.7	+ 6.0
Animal Health	330	386	+ 17.0	+ 6.1
	€ million	€ million	%	Fx adj. %
Sales by region
Europe	722	793	+ 9.8	+ 13.7
North America	541	1,036	+ 91.5	+ 70.2
Asia / Pacific	269	368	+ 36.8	+ 23.0
Latin America /Africa /Middle East	258	345	+ 33.7	+ 27.5
EBIT	321	349	+ 8.7
Special items	0	(121)
EBIT before special items1	321	470	+ 46.4
EBITDA1	428	528	+ 23.4
Special items	0	(99)
EBITDA before special items1	428	627	+ 46.5
EBITDA margin before special items1	23.9%	24.7%
Gross cash flow2	307	412	+ 34.2
Net cash flow2	212	512	+ 141.5

Fx & p adj. = currency- and portfolio-adjusted; Fx adj. = currency-adjusted

1 For definition see Chapter 6 "Calculation of EBIT(DA) Before Special Items."

2 For definition see Chapter 8 "Financial Position of the Bayer Group."

Sales of the Consumer Health segment climbed by 7.2% (Fx & portfolio adj.) to €2,542 million in the first quarter of 2015. All divisions contributed to this positive development. Overall, we considerably increased sales in our Consumer Care Division thanks to the acquired products. The acquisitions also contributed to the robust growth in the Emerging Markets.

Best-Selling Consumer Health Products [Table 8]
	1st Quarter 2014	1st Quarter 2015		Change
	€ million	€ million	%	Fx adj. %
Contour™ product family (Medical Care) 1	170	209	+ 22.9	+ 14.5
Claritin™ (Consumer Care) 2	–	202
Advantage™ product family (Animal Health)	130	144	+ 10.8	– 1.3
Aspirin™ (Consumer Care)	102	120	+ 17.6	+ 8.9
Aleve™ (Consumer Care)	74	95	+ 28.4	+ 8.8
Bepanthen™/Bepanthol™ (Consumer Care)	86	94	+ 9.3	+ 14.1
Coppertone™ (Consumer Care) 2	–	83
Ultravist™ (Medical Care)	69	73	+ 5.8	– 0.7
Gadovist™/ Gadavist™ (Medical Care)	53	69	+ 30.2	+ 21.5
Canesten™ (Consumer Care)	60	64	+ 6.7	+ 2.2
Total	744	1,153	+ 55.0	+ 40.5
Proportion of Consumer Health sales	42%	45%
Fx adj.= currency-adjusted

Total sales of Aspirin™ (including Aspirin™ Complex), also including Aspirin™ Cardio, which is reflected in sales of the Pharmaceuticals segment, increased by 18.0% (Fx adj. 8.6%) in Q1 2015 to €256 million (Q1 2014: €217 million).

1 2014 figures restated. Figures for the Contour™ product family include sales of the Contour™, Contour™ TS, Contour™ Next and Contour™ Plus systems.

2 product acquired from Merck & Co., Inc.

Sales of the Consumer Care Division rose by 8.3% (Fx & portfolio adj.) to €1,556 million. Our analgesic Aspirin™ registered pleasing sales gains especially in Europe, due partly to a strong cold season. We achieved higher volumes for our analgesic Aleve™ due to a product line expansion in the United States. Our Bepanthen™ /Bepanthol™ line of skincare products developed positively, especially in the Emerging Markets.

Sales of the products acquired from Merck & Co., Inc., United States, totaled €495 million in the first quarter of 2015 and were in line with our expectations.

Sales of the Medical Care Division improved by 6.0% (Fx & portfolio adj.) to €600 million. This growth was mainly driven by the positive development of the Diabetes Care business, which was primarily due to a stabilized market environment in the United States. Sales of our Contour™ family of blood glucose meters rose substantially, with contributions from all regions. Our Radiology business with contrast agents and medical devices also grew, particularly in the United States. Our mri contrast agent Gadovist™ /Gadavist™ made an encouraging contribution to this development following its approval in further indications.

Sales in the Animal Health Division moved forward by 6.1% (Fx & portfolio adj.) to €386 million. This improvement was driven in particular by considerable sales growth for our Seresto™ flea and tick collar, especially in Europe and the United States. Sales of the Advantage™ product family of flea, tick and worm control products were down slightly against the strong prior-year quarter.

ebit of the Consumer Health segment improved by 8.7% in the first quarter of 2015, to €349 million, after special charges of €121 million (q1 2014: €0 million). The special items included charges of €89 million for the integration of acquired businesses and €32 million for efficiency improvement measures. ebit before special items climbed by a substantial 46.4% to €470 million. ebitda before special items increased by 46.5% to €627 million (q1 2014: €428 million). The gratifying earnings contribution from the expansion of sales in all divisions – particularly Consumer Care – and positive currency effects of around €20 million were partly offset by higher selling expenses that largely resulted from the acquired consumer care businesses.

5.2 CropScience

Key Data – CropScience				[Table 9]
	1st Quarter 2014	1st Quarter 2015		Change
	€ million	€ million	%	Fx & p adj. %
Sales	2,900	3,092	+6.6	+1.0
Change in sales
Volume	+ 10.2%	– 2.2%
Price	+ 1.6%	+ 3.2%
Currency	– 7.0%	+ 5.1%
Portfolio	+ 0.1%	+ 0.5%
Sales
Crop Protection / Seeds	2,734	2,889	+ 5.7	+ 0.8
Environmental Science	166	203	+ 22.3	+ 4.2
	€ million	€ million	%	Fx adj. %
Sales by region
Europe	1,239	1,378	+ 11.2	+ 16.9
North America	954	943	– 1.2	– 15.1
Asia / Pacific	329	360	+ 9.4	– 4.3
Latin America /Africa /Middle East	378	411	+ 8.7	– 3.2
EBIT	988	874	– 11.5
Special items	0	(47)
EBIT before special items 1	988	921	– 6.8
EBITDA1	1,098	998	– 9.1
Special items	0	(42)
EBITDA before special items 1	1,098	1,040	– 5.3
EBITDA margin before special items 1	37.9%	33.6%
Gross cash flow 2	770	705	– 8.4
Net cash flow 2	(722)	(823)	– 14.0

Fx & p adj. = currency- and portfolio-adjusted; Fx adj. = currency-adjusted

1 For definition see Chapter 6 "Calculation of EBIT(DA) Before Special Items."

2 For definition see Chapter 8 "Financial Position of the Bayer Group."

Sales of the CropScience subgroup increased by a currency- and portfolio-adjusted 1.0% (reported: +6.6%) in the first quarter of 2015 to €3,092 million. Crop Protection/Seeds improved slightly against the strong prior-year level despite a weakened market environment, particularly in North and South America. Environmental Science raised sales against the prior-year period.

Sales of Crop Protection/Seeds rose in the first quarter of 2015 by 0.8% (Fx & portfolio adj.) to €2,889 million. Our Fungicides business posted double-digit growth. Sales of our products for use in cereals developed particularly well. We achieved positive development in Seeds, particularly for oilseed rape/canola and soybeans. By contrast, sales were down at SeedGrowth, Insecticides and Herbicides compared with the strong prior-year quarter.

Sales of Environmental Science advanced by 4.2% (Fx & portfolio adj.) to €203 million. Both the consumer business and products for professional users developed positively.

Sales by Business Unit				[Table 10]
	1st Quarter 2014	1st Quarter 2015		Change
				Fx & p adj.
Herbicides	€ million 965	€ million 906	% – 6.1	% – 8.5
Fungicides	662	830	+ 25.4	+ 22.4
Insecticides	352	335	– 4.8	– 12.5
SeedGrowth	252	221	– 12.3	– 16.7
Crop Protection	2,231	2,292	+ 2.7	– 0.9
Seeds	503	597	+ 18.7	+ 8.2
Crop Protection / Seeds	2,734	2,889	+ 5.7	+ 0.8
Environmental Science	166	203	+ 22.3	+ 4.2
Fx & p adj. = currency- and portfolio-adjusted

The sales development of CropScience varied by region:

Sales in Europe came in substantially ahead of the prior-year period (Fx adj. + 16.9%), at €1,378 million. Herbicides and Fungicides registered strong, double-digit growth. Sales at Insecticides were down against a strong prior-year quarter. Seeds and Environmental Science posted significant gains.

Sales in North America came in at €943 million in the first quarter of 2015, down 15.1% on a currencyadjusted basis. Sharp declines in sales at Herbicides, particularly for products used in cotton or corn, and at SeedGrowth were only partially offset by the pleasing increase at Insecticides and the successful expansion of our Seeds business, particularly for oilseed rape / canola, cotton and soybean seed. Environmental Science developed favorably as a whole. There was an overall sales decline in the United States, while business in Canada was on a par with the prior-year period.

Sales in the Asia /Pacific region receded by 4.3% (Fx adj.) to €360 million. This development was largely attributable to a decline in business in the Herbicides and Insecticides units. Environmental Science also registered a decline in sales. By contrast, business at SeedGrowth and Seeds expanded.

Sales in theLatin America /Africa /Middle East region receded by 3.2% (Fx adj.) to €411 million. The lower sales at Crop Protection /Seeds largely resulted from a decline in the Insecticides unit, particularly in Brazil, where sales were weakened by lower pest pressure. Herbicides sales and those of cotton seed were also down. The substantial growth of the Fungicides business and higher sales of vegetable seed were not sufficient to offset this trend. We achieved a double-digit growth rate at Environmental Science.

ebit of CropScience receded by 11.5% in the first quarter of 2015, to €874 million. This figure reflected special charges of €47 million (q1 2014: €0 million) that resulted mainly from the consolidation of production sites. ebit before special items declined by 6.8% to €921 million. ebitda before special items came in 5.3% below the strong prior-year quarter at €1,040 million (q1 2014: €1,098 million). Contributing to this decrease was a negative currency effect of about €40 million. While higher selling prices had a positive effect, volumes were lower and selling expenses increased.

1. Business Development by Subgroup, Segment and Region

5.3 MaterialScience

Key Data – MaterialScience				[Table 11]
	1st Quarter 2014	1st Quarter 2015		Change
				Fx & p adj.
	€ million	€ million	%	%
Sales	2,803	3,014	+ 7.5	– 2.1
Change in sales
Volume	+ 7.6%	+ 2.3%
Price	– 2.8%	– 4.4%
Currency	– 3.2%	+ 9.6%
Portfolio	– 0.6%	0.0%
Sales
Polyurethanes	1,510	1,551	+ 2.7	– 6.6
Polycarbonates	659	764	+ 15.9	+ 3.9
Coatings, Adhesives, Specialties	469	534	+ 13.9	+ 4.9
Industrial Operations	165	165	0.0	– 4.2
	€ million	€ million	%	Fx adj. %
Sales by region
Europe	1,141	1,093	– 4.2	– 4.0
North America	596	718	+ 20.5	– 0.7
Asia / Pacific	736	856	+ 16.3	– 1.6
Latin America / Africa / Middle East	330	347	+ 5.2	+ 0.9
EBIT	219	219	0.0
Special items	(2)	(42)
EBIT before special items 1	221	261	+ 18.1
EBITDA1	364	403	+ 10.7
Special items	(2)	(21)
EBITDA before special items 1	366	424	+ 15.8
EBITDA margin before special items 1	13.1%	14.1%
Gross cash flow 2	285	312	+ 9.5
Net cash flow 2	(44)	163

Fx & p adj. = currency- and portfolio-adjusted; Fx adj. = currency-adjusted

1 For definition see Chapter 6 "Calculation of EBIT(DA) Before Special Items."

2 For definition see Chapter 8 "Financial Position of the Bayer Group."

In the MaterialScience subgroup, sales in the first quarter of 2015 fell as expected. The decline of 2.1% (Fx & portfolio adj.) to €3,014 million (reported: +7.5%) was attributable to lower selling prices for Polyurethanes and Polycarbonates. Raw material prices were down sharply in both these business units. Volumes rose overall. This development was evident in the Europe, Asia /Pacific and North America regions, where we registered lower price levels and an increase in volumes. In the Latin America /Africa /Middle East region, on the other hand, both selling prices and volumes were level year on year.

Bayer Interim Report 21

The Polyurethanes business unit saw sales fall by 6.6% (Fx & portfolio adj.) to €1,551 million. This decline resulted from lower selling prices. Volumes remained at the level of the prior-year quarter overall. Both selling prices and volumes were down for diphenylmethane diisocyanate (mdi). Volumes of polyether (pet) and toluene diisocyanate (tdi) improved, while selling prices receded.

The Polycarbonates business unit raised sales by 3.9% (Fx & portfolio adj.) to €764 million. This growth was the result of higher volumes in all regions except Latin America /Africa /Middle East. This resulted particularly from greater demand in the automotive industry. Selling prices were down overall compared with the prior-year period.

Sales in the Coatings, Adhesives, Specialties business unit moved forward by 4.9% (Fx & portfolio adj.) to €534 million. This increase resulted mainly from higher volumes in Asia /Pacific and North America. Selling prices were level with the prior-year quarter.

Sales of Industrial Operations receded by 4.2% (Fx & portfolio adj.) to €165 million due to a drop in volumes. On the other hand, selling prices were up slightly year on year.

ebit of MaterialScience in the first quarter of 2015 was level year on year at €219 million. Reflected here were net special charges of €42 million (q1 2014: €2 million) for restructuring measures, mainly attributable to the consolidation of production sites. ebit before special items climbed by 18.1% to €261 million. ebitda before special items improved by 15.8% to €424 million (q1 2014: €366 million). This increase resulted mostly from significantly lower raw material prices that more than offset the decline in selling prices. Earnings were additionally buoyed by positive currency effects of approximately €50 million.

6. Calculation of EBIT(DA) Before Special Items

Key performance indicators for the Bayer Group are ebit before special items and ebitda before special items. These indicators are reported in order to allow a more accurate assessment of business operations. The special items – comprise effects that are non-recurring or do not regularly recur or attain similar magnitudes – are detailed in the following table. ebitda, ebitda before special items and ebit before special items are not defined in the International Financial Reporting Standards (ifrs) and should therefore be regarded only as supplementary information. ebitda before special items is a meaningful indicator of operating performance since it is not affected by depreciation, amortization, impairment losses, impairment loss reversals or special items. By reporting this indicator, the company aims to give readers a clear picture of the results of operations and ensure comparability of data over time. The ebitda margin before special items, which is the ratio of ebitda before special items to sales, serves as a relative indicator for the internal and external comparison of operational earning power.

Depreciation, amortization and impairments rose by 24.2% in the first quarter of 2015 to €806 million (q1 2014: €649 million), comprising €427 million (q1 2014: €348 million) in amortization and impairments of intangible assets and €379 million (q1 2014: €301 million) in depreciation and impairments of property, plant and equipment. The impairments are reflected net of a €9 million (q1 2014: €0 million) impairment loss reversal. Impairments totaled €57 million (q1 2014: €4 million), of which €48 million (q1 2014: €0 million) was included in special items.

Sales by Region and Segment (by Market)

				Europe				North America				Asia /Pacific			Latin America / Africa/Middle East					Total
	1st Quarter 2014	1st Quarter 2015			1st Quarter 2014	1st Quarter 2015			1st Quarter 2014	1st Quarter 2015			1st Quarter 2014	1st Quarter 2015			1st Quarter 2014	1st Quarter 2015
	€ million	€ million	%	Fx. adj. %	€ million	€ million	%	Fx. adj. %	€ million	€ million	%	Fx .adj. %	€ million	€ million	%	Fx. adj. %	€ million	€ million	%	Fx. adj. %
HealthCare	1,757	1,924	+ 9.5	+ 11.6	1,132	1,797	+ 58.7	+ 39.0	1,070	1,283	+ 19.9	+ 6.9	613	738	+ 20.4	+ 15.3	4,572	5,742	+ 25.6	+ 17.8
Pharmaceuticals	1,035	1,131	+ 9.3	+ 10.1	591	761	+ 28.8	+ 10.3	801	915	+ 14.2	+ 1.5	355	393	+ 10.7	+ 6.5	2,782	3,200	+ 15.0	+ 7.2
Consumer Health	722	793	+ 9.8	+ 13.7	541	1,036	+ 91.5	+ 70.2	269	368	+ 36.8	+ 23.0	258	345	+ 33.7	+ 27.5	1,790	2,542	+ 42.0	+ 34.1
CropScience	1,239	1,378	+ 11.2	+ 16.9	954	943	– 1.2	– 15.1	329	360	+ 9.4	– 4.3	378	411	+ 8.7	– 3.2	2,900	3,092	+ 6.6	+ 1.5
MaterialScience	1,141	1,093	– 4.2	– 4.0	596	718	+ 20.5	– 0.7	736	856	+ 16.3	– 1.6	330	347	+ 5.2	+ 0.9	2,803	3,014	+ 7.5	– 2.1
Group (incl. reconciliation)	4,400	4,643	+ 5.5	+ 8.0	2,684	3,460	+ 28.9	+ 10.9	2,140	2,503	+ 17.0	+ 2.1	1,331	1,511	+ 13.5	+ 6.7	10,555	12,117	+ 14.8	+ 7.4
Fx. adj. = currency-adjusted

[Table 12]

Special Items Reconciliation [Table 13]

	EBIT¹	EBIT¹	EBITDA²	EBITDA²
	1st Quarter 2014	1st Quarter 2015	1st Quarter 2014	1st Quarter 2015
	€ million	€ million	€ million	€ million
Before special items	2,089	2,242	2,738	3,000
HealthCare	16	(145)	16	(123)
Restructuring	–	(41)	–	(19)
Litigations	–	(13)	–	(13)
Integration costs	(19)	(91)	(19)	(91)
Settlement of pre-existing relationship	35	–	35	–
CropScience	–	(47)	–	(42)
Litigations	–	(1)	–	(1)
Divestitures	–	(46)	–	(41)
MaterialScience	(2)	(42)	(2)	(21)
Restructuring	(2)	(42)	(2)	(21)
Reconciliation	(7)	(10)	(7)	(10)
Restructuring	(7)	(10)	(7)	(10)
Total special items	7	(244)	7	(196)
of which cost of goods sold	–	(186)	–	(143)
of which selling expenses	(4)	(26)	(4)	(21)
of which research and development expenses	–	(2)	–	(2)
of which general administration expenses	(10)	(20)	(10)	(20)
of which other operating income / expenses	21	(10)	21	(10)
After special items	2,096	1,998	2,745	2,804

1 EBIT = earnings before financial result and taxes

2 EBITDA = EBIT plus amortization and impairment losses on intangible assets, plus depreciation and impairment losses on property, plant and equipment, minus impairment loss reversals

7. Core Earnings Per Share

Earnings per share according to ifrs are affected by the purchase price allocation for acquisitions and other special factors. To enhance comparability, we also determine core net income after eliminating amortization and impairment losses /impairment loss reversals on intangible assets, impairment losses / impairment loss reversals on property, plant and equipment and special items, and the related tax effects.

From this core net income we calculate core earnings per share in the same way as earnings per share. Core earnings per share form the basis for our dividend policy. Core earnings per share in the first quarter of 2015 rose by 7.7% to €2.10 (q1 2014: €1.95).

Core Earnings per Share		[Table 14]
	1st Quarter 2014	1st Quarter 2015
	€ million	€ million
EBIT (as per income statements)	2,096	1,998
Amortization and impairment losses /loss reversals on intangible assets	348	427
Impairment losses / loss reversals on property, plant and equipment	–	36
Special items (other than amortization and impairment losses / loss reversals)	(7)	196
Core EBIT	2,437	2,657
Financial result (as per income statements)	(159)	(274)
Special items in the financial result	(44)	(3)
Income taxes (as per income statements)	(512)	(415)
Tax effects related to amortization, impairment losses / loss reversals and special items	(107)	(222)
Income after income taxes attributable to non-controlling interest (as per income statements)	(2)	(6)
Core net income	1,613	1,737
	Shares	Shares
Number of issued ordinary shares	826,947,808	826,947,808
Core earnings per share (€)	1.95	2.10

Core net income, core earnings per share and core ebit are not defined in ifrs.

8. Financial Position of the Bayer Group

Bayer Group Summary Statements of Cash Flows		[Table 15]
	1st Quarter 2014	1st Quarter 2015
	€ million	€ million
Gross cash flow1	2,048	2,060
Changes in working capital/ other non-cash items	(1,885)	(1,336)
Net cash provided by (used in) operating activities (net cash flow)	163	724
Net cash provided by (used in) investing activities	(2,180)	(596)
Net cash provided by (used in) financing activities	3,019	(410)
Change in cash and cash equivalents due to business activities	1,002	(282)
Cash and cash equivalents at beginning of period	1,662	1,853
Change due to exchange rate movements and to changes in scope of consolidation	(33)	36
Cash and cash equivalents at end of period	2,631	1,607

1 Gross cash flow = income after income taxes, plus income taxes, plus financial result, minus income taxes paid or accrued, plus depreciation, amortization and impairment losses, minus impairment loss reversals, plus / minus changes in pension provisions, minus gains / plus losses on retirements of noncurrent assets, minus gains from the remeasurement of already held assets in step acquisitions. The change in pension provisions includes the elimination of non-cash components of EBIT. It also contains benefit payments during the year.

OPERATING CASH FLOW

Gross cash flow in the first quarter of 2015 was level year on year at €2,060 million. Net cash flow rose sharply to €724 million due to a reduction in cash tied up in working capital. Net cash flow reflected income tax payments of €444 million (q1 2014: €375 million).

INVESTING CASH FLOW

Net cash outflow for investing activities in the first quarter of 2015 amounted to €596 million. Disbursements for property, plant and equipment and intangible assets were 3.4% lower at €345 million (q1 2014: €357 million). Of this amount, HealthCare accounted for €110 million (q1 2014: €101 million), CropScience for €96 million (q1 2014: €115 million) and MaterialScience for €89 million (q1 2014: €98 million). The €33 million (q1 2014: €1,857 million) in outflows for acquisitions related mainly to the purchase of Thermoplast Composite GmbH. The cash outflow for noncurrent and current financial assets amounted to €254 million (q1 2014: cash inflow of €2 million).

FINANCING CASH FLOW

In the first quarter of 2015, there was a net cash outflow of €410 million for financing activities, including net loan repayments of €323 million (q1 2014: net borrowings of €3,078 million). Net interest payments were 41.4% higher at €82 million (q1 2014: €58 million).

LIQUID ASSETS AND NET FINANCIAL DEBT

Net Financial Debt		[Table 16]
	Dec. 31, 2014	March 31, 2015
	€ million	€ million
Bonds and notes / promissory notes	14,964	15,842
of which hybrid bonds1	4,552	4,544
Liabilities to banks	3,835	3,916
Liabilities under finance leases	441	476
Liabilities from derivatives	642	1,254
Other financial liabilities	1,976	1,943
Positive fair values of hedges of recorded transactions	(258)	(400)
Financial liabilities	21,600	23,031
Cash and cash equivalents	(1,853)	(1,607)
Current financial assets	(135)	(132)
Net financial debt	19,612	21,292
1 classified as debt according to IFRS

Net financial debt of the Bayer Group increased by 8.6%, from €19.6 billion on December 31, 2014, to €21.3 billion on March 31, 2015, mainly as a result of negative currency effects arising from the financing of the acquisition of the consumer care business of Merck & Co., Inc. in u.s. dollars.

Financial debt included three subordinated hybrid bonds reflected at a total of €4.5 billion. Net financial debt should be viewed against the fact that Moody's and Standard & Poor's treat 75% and 50%, respectively, of the hybrid bond with a nominal volume of €1.3 billion issued in July 2005 as equity. Moody's and Standard & Poor's treat 50% of the hybrid bonds issued in July 2014 with nominal volumes of €1.75 billion and €1.5 billion, respectively, as equity. The hybrid bonds thus have a more limited effect on the Group's rating-specific debt indicators than conventional borrowings. The other financial liabilities as of March 31, 2015 included commercial paper totaling €1.4 billion. Our noncurrent financial liabilities declined in the first quarter of 2015 from €18.5 billion to €16.9 billion. At the same time, current financial liabilities increased from €3.4 billion to €6.5 billion. We have decided to early redeem the hybrid bond with a nominal volume of €1.3 billion issued in July 2005. This bond is therefore no longer reflected in noncurrent liabilities but in current liabilities instead.

Standard & Poor's gives Bayer a long-term issuer rating of a– with stable outlook, while Moody's gives us a long-term rating of a3 with stable outlook. The short-term ratings are a-2 (Standard & Poor's) and p-2 (Moody's). These investment-grade ratings document good creditworthiness.

ASSET AND CAPITAL STRUCTURE

Bayer Group Summary Statements of Financial Position		[Table 17]
	Dec. 31, 2014	March 31, 2015
	€ million	€ million
Noncurrent assets	48,007	51,689
Current assets	22,227	24,951
Total assets	70,234	76,640
Equity	20,218	21,863
Noncurrent liabilities	34,513	34,514
Current liabilities	15,503	20,263
Liabilities	50,016	54,777
Total equity and liabilities	70,234	76,640

Total assets rose by €6.4 billion against December 31, 2014 to €76.6 billion. Noncurrent assets increased by €3.7 billion to €51.7 billion, largely due to currency effects. Total current assets rose by €2.7 billion to €25.0 billion due to a mainly operational €2.4 billion increase in trade accounts receivable.

Equity increased by €1.6 billion to €21.9 billion, lifted by income after income taxes of €1.3 billion and currency effects of €1.3 billion but diminished by the €0.8 billion increase – recognized outside profit or loss – in post-employment benefit obligations and changes of €0.2 billion in the cash flow hedges. The equity ratio (equity coverage of total assets) as of March 31, 2015 was 28.5% (December 31, 2014: 28.8%).

Liabilities rose by €4.8 billion in the first quarter of 2015 to €54.8 billion. Provisions for pensions and other post-employment benefits increased by €1.4 billion, while other provisions rose by €1.3 billion. The €1.6 billion increase in financial liabilities was largely the result of currency effects amounting to €1.2 billion.

Net Defined Benefit Liability for Post-Employment Benefits		[Table 18]
	Dec. 31, 2014	March 31, 2015
	€ million	€ million
Provisions for pensions and other post-employment benefits	12,236	13,594
Net defined benefit asset	(41)	(41)
Net defined benefit liability for post-employment benefits	12,195	13,553

The net defined benefit liability for post-employment benefits rose in the first quarter of 2015 from €12.2 billion to €13.6 billion, mainly due to a decline in long-term capital market interest rates.

9. Growth and Innovation

Our expenses for research and development rose by 11.0% (Fx adj.) in the first quarter of 2015 to €956 million (q1 2014: €820 million). Capital expenditures for property, plant and equipment and intangible assets amounted to €345 million (q1 2014: €357 million).

Subgroup shares in parentheses

The Emerging Markets once again accounted for a disproportionate share of currency-adjusted sales growth in the first quarter of 2015. For reporting purposes we have defined the Emerging Markets as Asia (excluding Japan), Latin America, Eastern Europe, Africa and the Middle East.

Sales in the Emerging Markets advanced by 11.4% (Fx adj.) in the first quarter of 2015 to €4,168 million (q1 2014: €3,538 million). All regions contributed to this development. The Emerging Markets' share of total sales was slightly higher than in the previous year at 34.4% (q1 2014: 33.5%).

Sales Development in the 1st Quarter of 2015 [Graphic 18] 34% (Fx adj. +11%) 66% Emerging Markets (Fx adj. +5%) Industrialized countries

currency-adjusted changes in parentheses

9.1 HealthCare

RESEARCH AND DEVELOPMENT

Expenses for research and development at HealthCare rose by 14.7% (Fx adj.) in the first quarter of 2015 to €628 million (q1 2014: €530 million). We made further progress with our research and development pipeline.

The most important drug candidates in the approval process are:

Products Submitted for Approval1 [Table 19]

Indication Aflibercept Japan; treatment of macular edema secondary to branch retinal vein occlusion (BRVO) Aflibercept E.U., treatment of myopic choroidal neovascularization (mCNV) Bay 81-8973 E.U., U.S.A.; treatment of hemophilia A Rivaroxaban2 U.S.A.; secondary prophylaxis of acute coronary syndrome (ACS) Rivaroxaban Japan; treatment of deep vein thrombosis and pulmonary embolism, prevention of recurrent venous thromboembolism

1 as of April 16, 2015

2 submitted by Janssen Research & Development, LLC

The following table shows our most important drug candidates currently in Phase ii or iii of clinical testing:

Research and Development Projects (Phases II and III) ¹

	Indication	Status
Amikacin Inhale	Treatment of pulmonary infection	Phase III
Damoctocog alfa pegol (BAY 94-9027, long-acting rFVIII)	Treatment of hemophilia A	Phase III
Ciprofloxacin DPI	Treatment of pulmonary infection	Phase III
Copanlisib (PI3K inhibitor)	Treatment of various forms of non-Hodgkin's lymphoma (NHL)	Phase III
LCS-16 (ULD LNG Contraceptive System)	Intrauterine contraception, duration of use: up to 5 years	Phase III
ODM-201 (AR antagonist)	Treatment of prostate cancer	Phase III
Radium-223 dichloride	Combination treatment of castration-resistant prostate cancer	Phase III
Regorafenib	Treatment of refractory liver cancer	Phase III
Riociguat	Pulmonary arterial hypertension (PAH) in patients who do not sufficiently respond to PDE-5i/ ERA	Phase III
Rivaroxaban	Prevention of major adverse cardiac events (MACE)	Phase III
Rivaroxaban	Anti-coagulation in patients with chronic heart failure2	Phase III
Rivaroxaban	Long-term prevention of venous thromboembolism	Phase III
Rivaroxaban	Prevention of venous thromboembolism in high-risk patients after discharge from hospital2	Phase III
Rivaroxaban	Embolic stroke of undetermined source (ESUS)	Phase III
Rivaroxaban	Peripheral artery disease (PAD)	Phase III
Sorafenib	Treatment of kidney cancer, adjuvant therapy	Phase III
Tedizolid	Treatment of pulmonary infection3	Phase III
Anetumab ravtansine (Mesothelin ADC)	Cancer therapy	Phase II
BAY 1067197 (partial adenosine A1 agonist)	Heart failure	Phase II
BAY 98-7196 (intravaginal ring)	Endometriosis	Phase II
Copanlisib (PI3K inhibitor)	Treatment of recurrent/resistant non-Hodgkin's lymphoma	Phase II
Finerenone (MR antagonist)	Chronic heart failure	Phase II
Finerenone (MR antagonist)	Diabetic nephropathy	Phase II
Molidustat (HIF-PH inhibitor)	Anemia	Phase II
Radium-223 dichloride	Treatment of bone metastases in cancer	Phase II
Refametinib (MEK inhibitor)	Cancer therapy	Phase II
Regorafenib	Cancer therapy	Phase II
Regorafenib (ophthalmology)	Treatment of wet age-related macular degeneration (AMD)	Phase II
Riociguat	Pulmonary hypertension (IIP)	Phase II
Riociguat	Raynaud's phenomenon	Phase II
Riociguat	Diffuse systemic sclerosis	Phase II
Riociguat	Cystic fibrosis	Phase II
Rivaroxaban	Secondary prevention of acute coronary syndrome (ACS)2	Phase II
Roniciclib (CDK inhibitor)	Treatment of small-cell lung cancer (SCLC)	Phase II
Sorafenib	Cancer therapy	Phase II
Vericiguat (BAY 1021189, sGC stimulator)	Chronic heart failure	Phase II
Vilaprisan (S-PRM)	Treatment of uterine fibroids	Phase II
Vilaprisan (S-PRM)	Endometriosis	Phase II

1 as of April 16, 2015

2 sponsored by Janssen Research & Development, LLC

3 Phase III for the treatment of complicated skin infections is completed; first submissions have been made

The nature of drug discovery and development is such that not all compounds can be expected to meet the pre-defined project goals.

It is possible that any or all of the projects listed above may have to be discontinued due to scientific and/ or commercial reasons and will not result in commercialized products. It is also possible that the requisite Food and Drug Administration (FDA), European Medicines Agency (EMA) or other regulatory approvals will not be granted for these compounds.

In February 2015, Adempas™ (active ingredient: riociguat) received marketing authorization from the Japanese Ministry of Health, Labor and Welfare (mhlw) for treatment of patients with pulmonary arterial hypertension (pah). Following its approval in Japan in January 2014 for the treatment of inoperable chronic thromboembolic pulmonary hypertension (cteph) or persistent or recurrent cteph after surgery, Adempas™ is now the first drug approved in Japan to treat two forms of pulmonary hypertension. The development and commercialization of riociguat is part of the global strategic pharmaceutical collaboration with Merck & Co., Inc., United States, in the field of soluble guanylate cyclase (sGC) modulation.

In February 2015, the European Commission extended marketing authorization for Eylea™ (active ingredient: aflibercept for injection into the eye) to include the treatment of patients with visual impairment due to macular edema secondary to branch retinal vein occlusion (brvo). Together with the indication approved some time ago for central retinal vein occlusion (crvo), Eylea™ can now be used in Europe by all patients with visual impairment due to macular edema resulting from retinal vein occlusion (rvo). Furthermore, in March 2015 we submitted an application to the European Medicines Agency (ema) for marketing authorization of aflibercept for the treatment of myopic choroidal neovascularization (mCNV).

In March 2015, we suspended enrollment in a Phase iii trial with regorafenib (trade name: Stivarga™) due to insufficient patient recruitment. Due to the low number of trial participants, it will not be possible to assess the study endpoints. The trial is investigating regorafenib as an adjuvant treatment option for colorectal cancer following resection of liver metastases with curative intent.

In April 2015, we announced the expansion of our global clinical development program for researching the cancer drug copanlisib. Various therapeutic options for different forms of non-Hodgkin's lymphoma (nhl) are to be investigated in two Phase iii trials and a Phase ii trial. The new trials are provisionally scheduled to begin recruiting patients in mid-2015 and investigating the safety and effectiveness of copanlisib in patients with recurring indolent nhl and diffuse large B-cell lymphomas (dlbcl), an aggressive subtype of nhl.

In January 2015, Gadovist™ (active ingredient: gadobutrol) was approved in the United States as the first contrast agent in magnetic resonance imaging (mri) for use in children under two years of age. In March 2015, we received approval in Japan for Gadovist™ injection for use with mri. Gadovist™ is thus the first high concentration/high relaxivity gadolinium-based contrast agent to be made available in Japan.

CAPITAL EXPENDITURES, ACQUISITIONS AND COOPERATIONS

In March 2015, we expanded our partnership with the Broad Institute at the Massachusetts Institute of Technology (mit) and Harvard University to include collaboration on cardiovascular genomics and drug discovery.

EMERGING MARKETS

HealthCare raised sales in the Emerging Markets by 17.4% in the first quarter of 2015 to €1,823 million (q1 2014: €1,479 million). The largest increase in absolute terms was recorded in China. In addition to the positive development of our pharmaceutical products, we especially benefited from the acquired consumer care businesses. We lifted sales in both segments in Russia as well. Business in Latin America developed positively, primarily in the Consumer Care Division. The Emerging Markets accounted for 31.7% (q1 2014: 32.3%) of total HealthCare sales.

9.2 CropScience

RESEARCH AND DEVELOPMENT

Expenses for research and development at CropScience rose by 4.2% (Fx adj.) in the first quarter of 2015 to €240 million (q1 2014: €214 million).

In January 2015, CropScience received regulatory approval for the new insecticide Sivanto™ from the u.s. Environmental Protection Agency (epa). It controls sucking pests on fruits and vegetables as well as most broad-acre crops and will be available for the 2015 growing season. Based on the active ingredient flupyradifurone, Sivanto™ is a novel systemic insecticide with effective action against all development stages of sucking insects.

CAPITAL EXPENDITURES, ACQUISITIONS AND COOPERATIONS

In February 2015, representatives of Bayer CropScience and globalg.a.p. signed an agreement to further intensify their collaboration. The partners aim to implement sustainable growing methods and help fruit and vegetable growers worldwide to meet globalg.a.p. certification standards.

EMERGING MARKETS

CropScience raised sales in the Emerging Markets by 15.3% (Fx adj.) in the first quarter of 2015 to €1,038 million (q1 2014: €898 million), with the strongest gains being recorded in Eastern Europe. Sales in Africa and the Middle East also posted double-digit growth. Asia likewise developed favorably. Sales in Latin America declined against the strong prior-year quarter, especially in Brazil. The Emerging Markets accounted for 33.6% (q1 2014: 31.0%) of total CropScience sales.

9.3 MaterialScience

RESEARCH AND DEVELOPMENT

Expenses for research and development at MaterialScience decreased by 11.7% (Fx adj.) in the first quarter of 2015 to €59 million (q1 2014: €60 million). This investment went mainly to explore new areas of application and improve process technologies and products. MaterialScience also invested an additional €21 million in joint development projects with customers in the first quarter of 2015 (q1 2014: €18 million).

CAPITAL EXPENDITURES, ACQUISITIONS AND COOPERATIONS

In March 2015, we acquired Thermoplast Composite GmbH (tcg), Germany, a technology leader specializing in the production of thermoplastic fiber composites. MaterialScience will use the acquisition to expand the range of polycarbonate materials for major industries – such as the it and automotive sectors – to include composites made from continuous fiber-reinforced thermoplastics. These composites represent a new class of particularly thin and lightweight materials with properties that are superior in many respects to existing solutions based on aluminum, for example.

EMERGING MARKETS

In the Emerging Markets, MaterialScience had sales of €1,288 million in the first quarter of 2015 (Fx adj.: +0.4%; q1 2014: €1,146 million). The strongest currency-adjusted growth was recorded in Eastern Europe. Business also expanded in Latin America. Sales in Africa, the Middle East and Asia were slightly down against the prior-year period. The Emerging Markets' share of total MaterialScience sales in the first quarter of 2015 was 42.7% (q1 2014: 40.9%).

10. Employees

On March 31, 2015, the Bayer Group employed 119,478 people worldwide (December 31, 2014: 118,888). The workforce thus grew by 590 (+0.5%).

HealthCare employed 60,607 people (December 31, 2014: 60,716). The number of employees at Crop-Science increased to 23,662 (December 31, 2014: 23,060). There was an increase at MaterialScience to 14,594 employees (December 31, 2014: 14,122). The remaining 20,615 (December 31, 2014: 20,990) employees mainly worked for the service companies. Due to the planned separation of MaterialScience, 350 employees from the service companies were transferred to the subgroup in the first quarter of 2015.

Personnel expenses rose by 20.7% (Fx adj. 12.8%) year on year to €2,924 million (q1 2014: €2,423 million), partly due to portfolio changes.

11. Opportunities and Risks

As a global enterprise with a diversified portfolio, the Bayer Group is exposed to a wide range of internal or external developments or events that could significantly impact the achievement of our financial and non-financial objectives.

Bayer regards risk management as an integral part of corporate governance. Our risk management process and the opportunities / risks outlined in detail in the Annual Report 2014 (Combined Management Report, Chapter 20.3) are materially unchanged. No risks have currently been identified that could endanger the Bayer Group's continued existence. There are also no risks with mutually reinforcing dependencies that could combine to endanger the Group's continued existence.

Significant developments that have occurred in respect of the legal risks since publication of the Bayer Annual Report 2014 (Note [32] to the Consolidated Financial Statements) are described in the Notes to the Condensed Consolidated Interim Financial Statements under "Legal Risks." The Bayer Annual Report 2014 can be downloaded free of charge at www.bayer.com.

12. Events After the End of the Reporting Period

After the end of the reporting period – on April 2, 2015 – Bayer AG issued a hybrid bond with a nominal volume of €1.3 billion.