4. Research, Development, Innovation

Group target 2015:

increase in R&D investment to over €4 billion

Scientifically founded innovations and the skills of our employees form the basis for our success as a company. To drive innovation in the future as well, we continuously develop new molecules, technologies and business models in the research-intensive fields of medicine and modern agriculture, invest in research and development projects and expand our activities through targeted acquisitions and collaborations with external partners (open innovation). We plan to invest around €4.5 billion in research and development in 2016 alone. We also promote our culture of innovation in all areas of the company to face the challenges of our time and safeguard profitable growth for our company.

Bayer maintains a global network of research and development locations in which 14,673 researchers around the world focus on improving the health of people, animals and plants. The focuses of the research projects are determined by the R&D strategies of the subgroups. On this basis, projects are set up that are managed in the development pipeline through defined processes and targets. The budgets requested for this purpose are checked annually and allocated per area. In 2015, we raised our research and development spend by 15.9% (Fx adj.) to €4,281 million. Adjusted for special items of €67 million (2014: €2 million), this represented a 14.1% increase (Fx adj.) and was equivalent to 9.1% of sales. The following table shows the development of R&D key data in the individual segments:

Research and Development Expenses Full Year 2015

 

 

Research and development expenses

 

Research and development expenses before special items

 

Share of R&D expenses

 

R&D expenses before special items / sales

 

R&D employees

 

 

2014

2015

 

2014

2015

 

2014

2015

 

2014

2015

 

2014

2015

 

 

€ million

€ million

 

€ million

€ million

 

%

%

 

%

%

 

FTE

FTE

2014 figures restated

1

Sum of the segments plus reconciliation

HealthCare

 

2,264

2,834

 

2,260

2,768

 

64.0

66.2

 

11.8

12.1

 

7,968

8,594

Pharmaceuticals

 

1,878

2,333

 

1,876

2,285

 

53.1

54.5

 

15.6

16.6

 

7,066

7,741

Consumer Health

 

386

501

 

384

483

 

10.9

11.7

 

5.5

5.3

 

902

853

CropScience

 

974

1,089

 

974

1,089

 

27.5

25.4

 

10.3

10.5

 

5,004

5,073

Covestro

 

210

262

 

213

261

 

5.9

6.1

 

1.8

2.2

 

923

1,005

Group1

 

3,537

4,281

 

3,535

4,214

 

.

.

 

8.6

9.1

 

13,900

14,673

We augment our own research capacities through collaborations and strategic alliances with industrial and academic research partners around the world. These include leading universities, public research institutes, partner and start-up companies, and science and innovation centers established by Bayer to give young companies access to features such as suitable laboratory and office infrastructure in the direct vicinity of Bayer’s own research facilities. These are supplemented by our crowdsourcing platforms through which researchers around the world can offer their expertise for collaboration with Bayer. With the newly established strategic innovation unit, the Bayer LifeScience Center (BLSC), we additionally want to drive the development of decisive interspecies research with the aid of a network of external partnerships. On the initiative of BLSC we signed an agreement at the end of 2015 with the biotech company CRISPR Therapeutics AG based in Basel, Switzerland, with the goal of discovering, developing and marketing new treatment methods for blood disorders, blindness and heart disease based on the CRISPR-Cas9 technology for gene editing.

We also invest in venture capital funds that finance promising Life Science start-up companies, among other projects. In this way we support the development of new therapies in areas with a high unmet medical need and drive innovation in the Life Sciences Field of activities comprising particularly health care and agriculture; at Bayer this refers to the activities of the Pharmaceuticals, Consumer Health and Crop Science divisions and the Animal Health business unit. .

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Scientists from our company are involved in constant dialogue with renowned research institutes and support partnership projects in the public and private sectors. Of these, more than 50 projects worldwide were supported in 2015 by public funding worth around €5 million. This is equivalent to roughly 0.1% of our annual R&D expenses.

We also participate in industry associations, hold professorships at universities worldwide and regularly invite scientists, university students and schoolchildren to attend events such as symposiums on health topics or research days for school students. We view this as an investment in the future, because as a research-based company, we rely on the availability of talented and highly trained people and on society’s acceptance of technology.

We promote our innovation capability not just by increasing our research and development budget and expanding external collaborations, but also by strengthening our internal innovation culture, which promotes fascination, creativity, willingness to experiment, customer centricity and cooperation among all disciplines. In this connection, we have launched a number of programs and initiatives in recent years to honor the achievements of our scientists and provide them with suitable platforms and projects for scientific discourse and cross-subgroup cooperation in scientific matters, as well as to give employees throughout all organizational units the opportunity to help jointly generate ideas or solve problems.

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The following table lists the most important programs/initiatives for strengthening the innovation culture at Bayer:

Programs / Initiatives for Strengthening Bayer’s Innovation Culture

Program
Objective
Approach

Life Sciences Fund

Strengthen interdisciplinary research in the Life Sciences

Since 2012, supports scientists at HealthCare and CropScience involved in interdisciplinary projects aimed at achieving a better understanding of diseases, identifying mechanisms of action, individualizing therapies or explaining resistance mechanisms

Expert Career

Strengthen recognition for scientific success

Initiative by the Board member responsible for Innovation aimed at fostering the cross-company scientific exchange between leading experts in research and development

Otto Bayer Medals

Awards for scientific success

Research prize for outstanding development work that is awarded biennially to teams of Bayer scientists

Hype

Collaborative definition of ideas in information technology

Intranet-based platform for the collaborative generation of ideas by our employees; the most promising ideas are allocated an initial budget which is used by an interdisciplinary team to elaborate the concept within just a few weeks.

WeSolve

Collaborative problem-solving

Current problems in research and development, marketing and production are publicized via the internal WeSolve platform for discussion by employees from all subgroups and service companies; the best solutions are then identified.

Bayer Ideas Pool employee suggestion program and Ideas Forum

Promotion of innovative ideas from the working environment

Application and honoring of employee suggestions for the improvement of processes, occupational safety and health protection. In total, 5,446 ideas were submitted in 2015. Around 46 % of the suggestions for improvement evaluated in 2015 were implemented. In the first year of implementation alone, more than €9 million was saved through those improvements that allowed calculation. In 2015, Bayer distributed bonuses of around €2 million to employees for the implemented proposals.

Globally reliable protection of intellectual property rights is essential for an innovation company like Bayer. The Bayer Group endeavors to obtain patent protection for its products and technologies in the major markets. The degree of protection a patent provides varies from one country to another and depends on the type and scope of the patent claim and the options available for enforcing our rights. At the end of 2015, we owned approximately 66,700 valid patent applications and patents worldwide relating to some 7,200 protected inventions.

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limited assurance

Patent terms vary according to the laws of the country granting the patent. In view of the high investment required for product research and development, the European Union member states, the United States, Japan and some other countries extend patent terms or issue supplementary protection certificates to compensate for the shortening of the effective patent protection period due to regulatory approval processes for new drugs. We endeavor to obtain such extensions wherever possible.

The term of a patent is normally 20 years. Since it takes an average of 12 years to develop a new medicine, for example, only eight years of patent protection generally remain following the product’s approval. In most cases it would be impossible to cover the substantial costs incurred in the research and development of innovative medicines or of new indications or dosage forms for existing drugs without patent protection. We are therefore committed to protecting both the international patent system and our own intellectual property worldwide. Further details are given in the political positions posted on our website.