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Prof. Dr. Hanno WildBayer Schering Pharma AGHead of Global Lead Generation & Optimization

Basle, October 08, 2009

Successful innovation within a post-merger environment

• , Prof. Wild, Basle, October 08, 2009

Challenges for the entire pharmaceutical industryUnprecedented change around the globe

• Regulatory and safety concerns

• Generics often first line therapy

• Pricing pressures

• Payers eclipsing doctors as decision makers

• Shifting portfolios from primary care to specialist-driven therapies

• Current economic crisis is reinforcing the trends in the markets

Environmental Pressures

• Outsourcing and labor reduction to reduce costs

• Entry into new markets – biosimilars, services

• Focus on pharmerging markets

• M&A to enhance the pipeline and reduce cost

• Redesigning the commercial model

Industry Challenges

• Continuously rising investments

• Higher attrition rates = lower number on NMEs

• Increasing hurdles regarding efficacy & safety

• Low hanging fruits have been picked

Innovation crisis?

Challenges for R&D


Challenges for R&DKey reactions of Bayer/Bayer Schering Pharma - strong need for continuous steering

• Portfolio adjustments Bayer Pharma 2002-2005

• Mergers & Acquisitions Schering Integration 2006 - 2008

• Efficiency Internal program 2009 - 2012- Further increase R&D productivity and innovation,

- Optimize internal processes and resource allocation

- Complement internal activities by innovation sourcing

SpecialtyMedicine

DiagnosticImaging

GeneralMedicine

Women’sHealthcare

* USA/Canada: Bayer HealthCare Pharmaceuticals

Among the top 10 specialtypharma companies worldwide

Focus on 4 majorbusiness units

Sales 2008:EUR10,704 million

Investments in R&D:mid term 15 – 17 % of totalnet sales

Bayer Schering Pharma* Key Data


Bayer Schering Pharma’s R&D strategy Key factors to increase Productivity

Proof-of-Concept approach and strict project progression criteria

3 … better quality:

4 therapeutic research areas with activities from target discovery up to launch (reduced from 8)

1 … more focus:Increase in development candidate output at decreased cost per NME (global use of platforms, stringent resource allocation, site consolidation)

2 … higher efficiency:

Common mechanism approachto utilize opportunities

4 … value maximization:

NME: New Molecular Entity


Bayer Schering Pharma’s R&D StrategyFocus on Four Therapeutic Research Areas

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June 2005

Oncology

Cardiology

Hematology

Oncology

Gynecology

Immunology

Dermatology

Andrology

Diagnostic Imaging

Bayer Schering PharmaJune 2007

Cardiology

Diagnostic Imaging

Women’s Healthcare

Oncology

June 1999

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Oncology

Cardiology

Hematology

Oncology

Gynecology, FC MM

Immunology/Inflam.

Dermatology

Andrology

Cardiology

Diabetes/Obesity

COPD/Asthma

Gene Therapy

Diagnostic Imaging


Bayer Schering Pharma’s R&D StrategyFocus combined with selected opportunities

• Focus indications

• Research centered in Germany: Berlin & Wuppertal

• Core competencies (e.g. Screening, MedChem, Pharmacology, Toxicology)

• Specialty indications

Focus• Common mechanism research

• Innovation centers US & China

• Strategy for innovation sourcing

• Expansion from specialty to larger indications

• R&D for pharmerging markets

Opportunities

Berlin Wuppertal US West Coast

Main Sites Employees in R&D 5,912 (as of Dec. 31, 2007)

Beijing

Global Drug Discovery Innovation Centers


Status as of July 2009

Phase II (17) Phase III (18)

New MolecularEntities (NME)

Life CycleManagement (LCM)

Medical illXarelto®

SPAFXarelto®

VTE TreatmentXarelto®

wet AMDVEGF Trap-EyeCRVOVEGF Trap-EyePAHRiociguat(sGC Stimulator)CTEPHRiociguat(sGC Stimulator)ACSXarelto®

Acute Heart FailureCinaciguat(sGC Activator)DMEVEGF Trap-EyePH in COPD / ILDRiociguat(sGC Stimulator)2nd line Breast CancerLonaprisan (ZK-PRA)Lung / Ovar / ProstateSagopilone (ZK-EPO)Alzheimer PET ImagingBAY94-9172 (AV1 / ZK)CancerDAST Inh. (BAY73-4506)

Liposomal FormulationKogenate®

Breast CancerNexavar®

Ovarian or PeritonealCancerNexavar®

Colorectal CancerNexavar®

Additional IndicationsNexavar®

Lung InfectionCipro® inhaleOral ContraceptionE2+DRSPOral ContraceptionOC+DHEAOral ContraceptionValette plusGram-neg. PneumoniaAmikacin inhale

NSCLCNexavar®

Multiple SclerosisAlemtuzumabBone Met. Prev.Breast CancerBonefos®

Dysmenorrhea (J)YAZ®

Oral ContraceptionYAZ® FlexOral ContraceptionYasmin® plus / YAZ® plusMenopause ManagementAngeliq low-lowContraceptionLCS (ULD LNG)ACSAspirin® i.v.ContraceptionFC Patch Low

Bayer Schering Pharma’s R&D PipelineA balanced mix of NME and LCM opportunities

Phase I (8)PH in COPDElastase InhibitorCancerL19-SIPColorectal CancerL19-TNFalphaGastro IBDLipoxinCancer MNImmunoconjugateCancerPI3K InhibitorCancerMEK- InhibitorHemophiliarec. Factor VII

Despite the challenges to R&D, Bayer Schering Pharma brought a constant flow of NMEs to the market while reducing its cost basis


At the end, however, this is not a numbers game…

… more focus:• Stringent quality criteria

• Consistency of strategies

• Flexible responses to new findings

• Transparent decision making and communication

• Talented people

…it is about


Forward-Looking Statements

This presentation may contain forward-looking statements based on current assumptions and forecasts made by Bayer Group or subgroup management.

Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. These factors include those discussed in Bayer’s public reports which are available on the Bayer website at www.bayer.com.

The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.

Bayer Schering PharmaTop 10 Products

Product[EUR million]

2007 2008

YAZ® / Yasmin®

/ Yasminelle® (Women’s Healthcare) 1,042 1,222

Betaferon® / Betaseron® (Specialty Medicine) 1,028 1,144

Kogenate® (Specialty Medicine) 818 848

Adalat® (General Medicine) 614 626

Avalox® / Avelox® (General Medicine) 445 462

Nexavar® (Specialty Medicine) 270 462

Mirena® (Women’s Healthcare) 361 462

Levitra® (General Medicine) 332 341

Cipro® / Ciprobay® (General Medicine) 383 338

Glucobay® (General Medicine) 298 304

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