Earnings Call: Q4 2016

Feb 22, 2017

Ladies and gentlemen, thank you for standing by. Welcome to Bayer's Investor and Analyst Conference Call on the full year and fourth quarter 2016 results. Throughout today's recorded presentation, all participants will be in the listen-only mode. The presentation will be followed by a question and answer session. If you need operator assistance, please press star followed by zero. I would now like to turn the conference over to Mr. Jürgen Beunink, Head of Investor Relations at Bayer AG. Please go ahead, sir. Thank you, Emma. Ladies and gentlemen, good afternoon and welcome, also on behalf of my colleagues, to our Quarter 4 Conference Call. Today, we'd like to review our 2016 figures with you and to discuss our 2017 outlook. With me on the call are Werner Baumann, our CEO, and Johannes Dietsch, our CFO. Pharma is represented by Dieter Weinand, Consumer Health by Erica Mann, and Crop Science as well as Animal Health by Liam Condon. Werner will start off with an overview of the highlights in 2016, give a brief summary of the developments in the fourth quarter, and then elaborate on the outlook for 2017. We assume you've all received and reviewed our annual report, the briefing document, and the presentation slides, so Werner will focus his presentation on the main points. Before handing over to Werner, I'd like to draw your attention to the safe harbor statement. Thank you. Werner. Thank you, Jürgen. Also on behalf of my colleagues, good afternoon, ladies and gentlemen. It's my pleasure to welcome you to our conference call. 2016 was another record year for Bayer. We performed well in our markets, delivered growth, and again, higher margins. Pharma achieved substantial sales and earnings increases, Consumer Health grew with competition, and Crop Science was successful in a difficult market environment. Strategically, the year was characterized by the agreed acquisition of Monsanto. With this move, we plan to further strengthen Bayer as a life science company and create substantial value for all our stakeholders. In 2016, we also achieved major innovation milestones. As we had gained greater visibility on the profile for a number of assets, we released an aggregate peak sales potential for selected pharma pipeline assets of at least EUR 6 billion. For our five key growth products at Pharma, we raised the estimate of the combined annual peak sales potential from previously at least EUR 7.5 billion to now more than EUR 10 billion. Our midterm aspirations, as presented in September, emphasized the attractive growth and margin potential for all our life science businesses. As our financial outlook for 2017 projects further growth and higher earnings. Against this background, we are proposing a dividend of EUR 2.70 per share for fiscal 2016, which represents an 8% increase over the prior year. The resulting payout ratio of 37% of core EPS lies within our targeted 30%-40% dividend payout range. Let me now briefly review some of our key figures outlining the performance in Q4. Group sales increased organically by 5% over the prior year to EUR 11.8 billion, driven by all business segments except Crop Science. Reported EBIT declined by 14% to EUR 789 million, mainly due to higher special charges versus the prior year quarter. Adjusted EBITDA of EUR 2.2 billion was 14% above the previous year, predominantly driven by the business expansion at Pharma and Covestro. Currencies added around EUR 85 million in the quarter. Core earnings per share in Q4 advanced by 10% to EUR 1.19. Moving to the next slide, let's take a look at some key fourth quarter figures for the individual businesses. When referring to sales growth, please note that this is portfolio and currency adjusted data. Pharma sales grew 7% with our key growth products driving this performance. Following the strong business development, EBITDA before special items increased by 12% to EUR 1.2 billion. Consumer Health sales advanced by 4% versus the prior year, with growth in all regions. EBITDA before special items declined by 3% to EUR 372 million, following higher cost of goods as well as higher marketing costs, mainly supporting the newly acquired brands. In an ongoing weak market environment, especially in Latin America, Crop Science sales receded by 2% to EUR 2.4 billion. While crop protection had to register a slight decline, seeds grew a remarkable 10%, mostly driven by strong development in soybean. EBITDA before special items at Crop Science increased slightly by 1% to EUR 351 million, helped by positive currency effect of about EUR 80 million, but diminished by lower selling prices and higher investment in R&D. In Animal Health, sales advanced 3% compared to the prior year period, thanks to Seresto, which performed again strongly. EBITDA before special items diminished by 7%, mainly due to higher marketing costs. Covestro added EUR 3 billion to group sales and EUR 373 million of adjusted EBITDA to the group performance. The operating cash flow from continuing operations improved noticeably by 39% to approximately EUR 2.7 billion as a result of a sharp decrease in additional cash tied up in working capital. Capital expenditures came in at around EUR 970 million. As we changed our value management system from CFROI to ROCE, we no longer report raw cash flow. Net financial debt at the end of the quarter stood at EUR 11.8 billion, a decrease of EUR 4 billion from the end of Q3 as a result of strong cash inflows from operating activities and the proceeds from the issuance of the mandatory convertible notes in November. Let me now very briefly review some of our key figures for the full year 2016 and compare them against our original guidance. Sales grew organically by 3% to EUR 46.8 billion. Nominal sales were held back by a negative currency impact of around EUR 0.9 billion. We over-delivered on our earnings promise with adjusted EBITDA rising 10%, and we exceeded our mid-single digit percentage increase guidance on core EPS by achieving more than 7% growth in 2016, or 8% growth if adjusted for the mandatory convertible notes issued in November. This success was particularly driven by the strong performance of Pharma and strong earning contribution from Covestro. In delivering core EPS, Covestro's contribution accounts for EUR 0.71 per share. In 2016, we incurred EUR 1.1 billion of special charges on EBIT level. These mainly comprised around EUR 560 million for impairment losses on intangible assets, including EUR 391 million for Essure, charges of roughly EUR 240 million in connection with efficiency improvement programs, and EUR 100 million in costs for the integration of acquired businesses. Further special charges of EUR 94 million were related to provisions for defense costs, while EUR 86 million were connected to the agreed acquisition of Monsanto. Let me elaborate on the operational highlights in some more detail, beginning with Pharma. Driven by the continued success of our key growth products, Pharma sales advanced a remarkable 9%, significantly above market growth of about 6% in 2016. Collectively, our key growth products generated EUR 5.4 billion in sales, up 29% versus prior year. Xarelto ended 2016 with EUR 2.9 billion in sales, mostly driven by volume increases in Europe and Japan. According to IMS, Xarelto has become a top 10 Pharma brand globally and is now the biggest cardiovascular brand worldwide. As announced at the beginning of this month, our phase III COMPASS study in patients with coronary or peripheral artery disease shows overwhelming efficacy. It met its primary endpoint ahead of time. The study was stopped early following a planned interim analysis conducted by the independent Data Monitoring Committee. A complete data analysis from this study is expected to be presented at an upcoming medical meeting in 2017, and just as much as you, we can't wait for it. We are very excited. With Eylea, we generated sales of EUR 1.6 billion in 2016, an increase of 33% over the prior year. In particular, Europe, Canada, and Japan showed a successful business development. Xofigo ended the year with EUR 331 million in sales, up 29%, mainly driven by very solid business expansion in the U.S. and Europe. Stivarga finished the year with EUR 275 million in sales. Intensified competition in the U.S. held back global top-line development with a global minus 12%, significantly below prior year levels. We aim for growth again in 2017, driven by the new indication of second-line liver cancer, which we filed in the major jurisdictions at the end of 2016. Adempas sales attributable to Bayer amounted to EUR 254 million in 2016. In light of the very positive business development, adjusted EBITDA of Pharma showed a substantial 14% improvement over the prior year period to over EUR 5.2 billion, despite negative currency effects of around EUR 65 million and a disproportionately high investment in research and development. In line with expected growth profile of our main competitors, Consumer Health increased sales by 4% in the year, driven by strong growth in Latin America and Asia-Pacific, whereas North American business came in on prior year level. In the region Europe, Middle East, and Africa, we achieved a slight increase in sales. Further progress was achieved in continuously developing our top brands. On an annual basis, aspirin sales, including pharma, were up 5%, achieving EUR 1 billion in annual sales for the first time. Following a line extension, Aleve showed growth of 2%. Bepanthen generated an improvement of 9%, mainly driven by sales development in France, Germany, and Russia. Our Claritin business, however, declined by 3% in 2016. The successful launch of the product line extension Clarispray in the U.S. could not compensate the sales decline in Asia-Pacific, mainly driven by intensified competition and price controls in Japan. Despite positive top-line development and cost synergies, adjusted EBITDA of Consumer Health showed a 3% decline over the prior year period to EUR 1.4 billion. Higher cost of goods sold and negative currency effect of roughly EUR 65 million weighed on earnings development. These were partly compensated by the positive development of sales and cost synergies. In 2016, sales of our Crop Science business came in on prior year level despite the persistently weak market environment. Whereas we recorded a solid 4% growth in both our fungicides and SeedGrowth business, herbicides and insecticides had to face top line regressions. Especially insecticides, down 13%, suffered from low pest pressure and the weak market environment in Brazil. Our seeds business, on the other hand, delivered 8% growth over the prior year, with gratifying increases in especially soybeans and vegetables. From a regional perspective, Crop Science developed well in Europe, Asia-Pacific and North America, but had to face a decline of 7% in Latin America. Favorable weather conditions and high inventories of crop protection products in Brazil. Adjusted EBITDA of Crop Science came in on prior year level at around EUR 2.4 billion. The positive currency impact of about EUR 140 million, mostly resulting from hedging losses booked in 2015, and higher selling prices were offset by lower volumes, higher R&D expenses, and higher write-downs on inventories and receivables. In 2016, sales of our Animal Health business advanced by 5% to EUR 1.5 billion. This successful development followed increased demand, in particular in North America and Asia-Pacific. Seresto, our flea and tick collar for dogs, continued its successful growth path, thanks to higher demand in the U.S. and Europe. Sales of our Advantage product family remained on prior year level. Adjusted EBITDA of Animal Health came in on prior year level at around EUR 350 million. The positive impact from our sales expansion was absorbed by higher marketing and selling expenses, as well as higher cost of goods sold and a negative currency effect of around EUR 10 million. In summary, and despite some operational as well as strategic challenges, we had a successful 2016 for our Life Science businesses. On the next slide, I'd like to give you an overview on our outlook on 2017. Our guidance for 2017 is based on December 31, 2016 exchange rates, including a euro-U.S. dollar rate of 105. That stated, we plan to grow our Life Science sales organically by a mid-single digit percentage to approximately EUR 37 billion and to improve EBITDA before special items by a mid to high single digit percentage. In our group guidance, including Covestro, we have assumed an increase in Covestro sales and an adjusted EBITDA for Covestro on or above prior year level. Consequently, we expect to report group sales to exceed EUR 49 billion in 2017. This corresponds to a currency and portfolio-adjusted growth in the low to mid-single digit percentage range. Group EBITDA before special items is expected to improve in the mid-single digit percentage range. Full year core earnings per share is anticipated to also improve by a mid-single digit percentage. It includes our 64% stake in Covestro and a higher number of shares as a result of the issuance of the mandatory convertible notes. We expect special items in the EBITDA of around EUR 0.5 billion. We are guiding for a financial result of minus EUR 1.4 billion for fiscal 2017, which includes bridge financing costs in the context of the Monsanto transaction. The effective tax rate is expected to come in at about 23%. Now let's look at the outlook for our divisions. We expect sales to exceed EUR 17 billion at Pharmaceuticals. This corresponds to a mid-single digit percentage increase on a currency and portfolio adjusted basis. For Xarelto and Eylea, we expect a currency adjusted growth rate in the mid-teens percentages each. We plan to raise combined sales for our key growth products, Xarelto, Eylea, Xofigo, Stivarga, and Adempas, to more than EUR 6 billion. We expect a high single digit percentage increase in EBITDA before special items, together with a margin improvement. In the Consumer Health division, we expect sales to come in at more than EUR 6 billion. This corresponds to a low to mid-single digit percentage increase on a currency and portfolio adjusted basis, in line with expected market growth. EBITDA before special items is anticipated to improve by a low to mid-single digit percentage. At Crop Science, we expect sales to come in at more than EUR 10 billion. This corresponds to a low single digit percentage in increase on a currency and portfolio adjusted basis. We plan to keep EBITDA before special items on prior year level. At Animal Health, we expect sales to advance in the low to mid-single digit percentage range and EBITDA before special items to increase by a high single digit percentage. During 2017, we will continue to invest in organic growth. We plan to increase research and development expenditures to EUR 4.8 billion with the largest proportion invested in our Pharma division, followed by Crop Science. In addition to R&D, we are continuing to build new production capacity for our products. Fixed asset investments are planned at around EUR 2.5 billion and investments in intangible assets with around EUR 400 million. Before opening the line for Q&A, let me finalize with an update on the next steps for the agreed Monsanto acquisition. We are making good progress in obtaining antitrust approvals for the transaction. We have already applied for clearance from some two-thirds of around 30 authorities. Bayer and Monsanto are working closely with the authorities. We are currently responding to a second request from the U.S. Department of Justice. In mergers of this magnitude, it is not unusual for the authorities to conduct a second, more in-depth discovery procedure. We had been expecting this to happen. We have also submitted an application to CFIUS, the Committee on Foreign Investments in the United States, for approval of the acquisition. In Europe, we are currently preparing our submission. As the European Commission has requested further documents in advance, we now intend to file the submission in the second quarter of 2017. As our businesses are highly complementary in terms of both product and geographical focus, we remain confident that we will be granted all the necessary clearances. We are aware that certain overlaps exist in the combined product portfolio, so we will be collaborating with the authorities in this regard in order to find appropriate solutions. This process is still at an early stage. Nonetheless, we are making all appropriate preparations to facilitate successful completion of the acquisition and the integration of the two companies. We made good progress with the financing of the Monsanto transaction in Q4 through the successful placement of EUR 4 billion mandatory convertible notes. Further takeout financing is planned to be based on senior and hybrid debt, as well as new equity via rights issue with subscription rights. However, should we identify options to further optimize financing structures, instruments, and also the timing of financing steps in the context of this transaction, we will consider these. Overall, we remain confident of closing the transaction before the end of 2017. Ladies and gentlemen, this concludes my remarks and we are now happy to take your questions. Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press star followed by one on your telephone. If you wish to cancel your request, please press star followed by two. Your question will be answered in the order they are received. If you are using speaker equipment today, please lift the handset before making your selections. One moment for the first question, please. Your first question comes from the line of Mr. Jain. Please state your name, company name, followed by your question. Hi, it's Sachin Jain from Bank of America. Three questions please. Firstly, on your last comments, Werner, on optimizing financing options, could you give a little bit more color what you mean? Do you still expect the equity component to be $19 billion as you've previously highlighted, or do you now think that's going to be smaller? Secondly, on consumer health and for full year 2017, clearly flagging no margin leverage and continued investment in the brand that you acquired. Could you give a little bit color as to how much longer you think it's going to take to turn those brands, where you are with the original synergy target, and then just touch on the weakness in both Dr. Scholl's and Coppertone in the U.S. And then final question on the Xarelto COMPASS headline release. The headline release comments on safety being in line with the existing profile. Could you clarify what that means, particularly on the bleed profile, given that with Xarelto, we have seen excess bleed risk in ACS, but a similar bleed profile to comparator in the AF setting. Which of the two is it comparable to? Thank you very much. Okay. Thanks, Sachin, for the question. The first question on financing timing and equity check is going to be answered by Hanno Dietsch, followed by Erica, who is going to take your question on Consumer Health, product portfolio, Scholl's and Coppertone, and then last but not least, Dieter Weinand on COMPASS. Yeah, good afternoon, Sachin. Thank you for the question. We have a plan to finance the Monsanto acquisition with 19 billion US dollar in equity. This plan is unchanged. We are now concentrating within the equity piece on the rights issue. With the rights issue, as anticipated before, that will create the major cornerstone of the remaining equity piece to be done. We also remain in line with what we said before, that we want to do the equity first before we enter the bond market. With regard to timing, it is also clear that if we go for a larger or very large rights issue, we need to have certainty on the deal to close in order to do that issue. So we concentrate on the rights issue and equity, but we want to keep options available if we can optimize the structure and the timing. This also goes with the bond piece here. We want to keep our options base to ensure in various currencies, maybe in EUR or sterling or other currencies than also into US dollars. Okay, thank you, Anna. Erica? Yeah. Thank you. When you look at 2017, this is very much a consolidation year for us. We continue to invest behind brands like Coppertone and Dr. Scholl's, which you've asked more specifically about. You know that it does take about three to five years to really build these brands. We're already starting to see some early signs on Coppertone and some of the new products that we've introduced for this season. On Dr. Scholl's, the high competitor activity that took the category into grooming is now being reset and restaged into mobility and health, and that should start showing some improvements, but probably in the back end of this year. Okay. Thank you, Erica. So Dieter, on COMPASS. Sachin, thank you for the question. Obviously, we are extremely excited about the fact that not only were we able to demonstrate superior on the primary endpoint of MACE, we were able to do so significantly earlier than previously anticipated. As you can imagine, that being the largest of our lifecycle management indications that we're looking at, approximately the size of the SPAF indication, our currently largest indication, significantly de-risks our lifecycle management program that we have in place. As you know, we also make our data or publishing our data for GEMINI and EINSTEIN CHOICE at March ACC. We're making good progress on our lifecycle management. Owing to the magnitude of the effect that we have seen in the primary endpoint MACE and the confirmation of the existing safety profile, we will offer rivaroxaban to the study participants in an open-label extension, because otherwise it would probably not be ethical for us to continue the study. I think those facts speak for themselves, and there is no other competitor currently active in that same space. I could not be more excited about this, but I hope as we understanding that at this point, we just got the top-line data in, and I cannot elaborate on any more details at this point. But we will aim to make the data available at an upcoming medical meeting as soon as we can. Thank you, Dieter. Okay. Thank you. Next question comes from line of Mr. Verdult. Please state your name, company name, followed by your question. Yes. Good afternoon. It is Pete Verdult here from Citi. Three questions. Dieter on Xarelto, Liam on crop, and Johannes on financing flexibility. Dieter, if you think about the ongoing geographic expansion and increasing penetration of the NOACs in the current indications, it seems like that could itself easily support your EUR 5 billion-plus peak sales target for Xarelto. I realize you are not going to talk about the COMPASS data until we see it at ESC, but could you just remind us or at least help us quantify what you believe the incremental revenue opportunity is if you are successful in expanding the Xarelto label with the current trials ongoing? Secondly, to Liam, hoping you could whip out your crystal ball once again and give us an update on your thoughts about the ag cycle and confidence that we might see a turn at the end of this year. Then lastly, on Johannes on financing flexibility. Is it right to think that a key gating factor to the timing of your Covestro disposal would be gaining regulatory approval from Monsanto in the U.S. and Europe? Thank you. Okay. Thank you, Peter. Dieter is going to start with your question on regional expansion and the perspective on the EUR 5 billion-plus. Peter, I couldn't agree more with you. We always anticipated that the more data we accumulate, not only from our lifecycle management program, but also from the very vast real-life evidence programs that we have ongoing or have recently published, that that geographic expansion will continue, and that we will see a continued erosion of warfarin or VKA occurring. It was also our aim to differentiate Xarelto from other compounds via a significantly larger lifecycle management program, demonstrating the utility of Xarelto in different indications and areas of use to the benefit of patients. We always had included, obviously risk-adjusted, these lifecycle management programs in our aspirational peak sales guidance. You can imagine that at this point where we just have gotten the top-line data, we are not prepared to regard. Give us some time to analyze the full data set and see what it means. But we are highly confident that this represents COMPASS and the other indications that we are pursuing represent significant opportunity in and by themselves. But more important or equally importantly, it will continue to differentiate Xarelto as a clear market leader in putting us in a competitive position with more indications and uses than any other NOAC. Thanks, Dieter. Liam, on the ag cycle. Yeah. Pete, thanks for the question. Give you our perspective looking into our crystal ball at least. I think it is important to highlight always with the ag cycle, that this is really a supply-driven cycle, and demand is increasing relatively constantly due to population increase, dietary changes, climate change, various megatrends. And where the cyclicality comes in is whenever there are supply peaks or troughs. And what we basically had in the last few years is an oversupply due to bumper harvests. And right now going forward, there are, I would say, early indicators that the trough has been reached and that there is hope for a slow return to growth. Those early indicators, the ones that we look at, just to give you a perspective on that, are the key stock-to-use ratios. So stock-to-use ratios of corn, soy, wheat. For the first time in a few years, these have stopped increasing and have now stabilized, with the exception of wheat, but corn and soy have clearly stabilized. Second key indicator for us is also, of course, the future commodity prices. And looking at where we are today and the future commodity prices going forward on the CBOT, they are trending upwards for corn and maintaining above $10 a bushel for soy, which is a price where farmers can have a good profitability. So also here, they are at least stable, if not trending upwards. And a third early indicator for us is the area of SeedGrowth. So this is a portfolio that we have for protecting seeds against insects and against disease. This is an area where farmers will only make the investment in protecting their seed if they are pretty confident that they are going to get a return on that investment. It says a lot about farmer sentiment if farmers are willing to invest in SeedGrowth. We saw solid growth all year last year in SeedGrowth, and that first comes the SeedGrowth. It is planted, it takes a while to grow, and then later on comes crop protection. Clearly, in the fourth quarter, there was a strong pickup here as well. For us, that is a few early indicators. Ultimately, what things depend on now is the quality of the harvest in the southern hemisphere, which is ongoing, which will influence planting decisions in the northern hemisphere, and ultimately result in the overall outlook for the year going forward. For us, there is enough early indicators to indicate that the bottom has been reached and that there is a perspective for a slow return to growth from later this year. Okay. Thanks, Liam. Peter, I am going to take the last question of yours. What we put out there as part of our year-end communication is a clarifying statement in terms of our take-out financing, but absent any, let us say, actual news that we share with you. What is important, I think, for everybody on the call to understand is that we stand by our earlier communication that we will only continue to further move with our take-out financing with substantially more visibility, and/or opportunities that might present themselves that would actually solidify our financing. You should actually not be concerned about one of the earlier questions that Sachin had on the $19 billion. That is the number we have said. We are certainly not thinking about increasing it, but we are looking at further optimization opportunities as we move forward. That can mean a lot of things depending on also on how the other deals are moving forward. There is a bit of news today that supposedly Dow and DuPont clearance in Europe is imminent. Let us see how that goes, because that would certainly be a strong signal also for our combination. Again, that is basically right now that is market talk that was released today, and we remain very confident with the way we are approaching the merger. Thank you. On Covestro there was Peter, I missed, I'm sorry. Peter, you also mentioned about timing of Covestro, whether this is connected to the Monsanto financing. That has nothing to do with the Monsanto financing. Monsanto financing has been put in place last year with the credit line, and it stands by itself. The timing of the Covestro remaining stake disposal is independent from the Monsanto acquisition. Next question comes from the line of Mr. Holford. Please state your name, company name, followed by your question. Hi, it is Jeff Holford here from Jefferies. I think just to clarify the last point on the financing flexibility that you have, just clarify that this is only really being aimed at potentially reducing the debt component. You have no intention of doing anything that would change the size of the rights issue. Then just a final add-on on COMPASS. I wonder if you just might give us some sort of numerical or market figure that you are thinking about for the potential of Xarelto in this indication. Thank you. Good. On the first question, maybe just to clarify what I said earlier, Jeff. We have communicated the debt equity ratios with a number on the equity portion that amounted to $19 billion. What I said earlier is that you can certainly be sure there is not going to be more other than that we are maintaining or retaining some flexibility in optimizing our financing structure. What it is going to be, when it is going to be, how we are going to do that we will communicate in due time. There is absolutely nothing we could share with you absent any further news on how we progress at this point in time. Second question on COMPASS is Peter. Jeff, thank you for the question. What I can tell you is that the latest estimates for the SPAF diagnosed patients is roughly 25 million patients worldwide. When we look at the peripheral and the coronary artery disease patient population that was studied in COMPASS, being the patients that is at high risk For MACE events, that is approximately 30 million diagnosed patients. The total PAD in the CAD patient population is larger, 50 million, but only the high-risk patient population is 30 million. That compares to SPAF 25 million, so a significant opportunity. Thank you. The next question comes from the line of Mr. Cespedes. Please state your name, company name, followed by your question. Good afternoon, gentlemen. It is Florent Cespedes from Societe Generale. Three pharma-related questions. First, on emerging markets, could you give us some color on the performance of the emerging market in Q4 and notably in China, the growth in China, because it is going to see some pressure on your tail portfolio and pricing notably. So if we could have some color on that front would be great. Second question, on the hemophilia market, could you elaborate a bit on your strategy on this market with your portfolio of products, given the fact that some competitors have reported at least headline results? Maybe a last very short one on Xarelto and COMPASS. Is it a fair assumption to believe that the detailed results may be presented at the ESC Congress at the end of the summer? Thank you. Okay, Florent. Thanks for the questions. Dieter is going to take them. Okay. I will start with the emerging markets for pharma. In the latest quarter, we grew currency adjusted 6.1%, and for the year, we grew 11.3%, so continued good growth. You asked about China specifically. We continue to grow well above the market in China with 10.1% for the year, and 7.7% in the fourth quarter, so continued good growth in the emerging markets. With our hemophilia portfolio, let me start with that. We have launched recently Kovaltry, our longer-acting product to compete with these newer or more recently launched longer-acting products such as Eloctate. We are off to a good start. The launch meets our expectations, and we look forward to continued contribution from Kovaltry to our Kogenate franchise. As we mentioned before, we are also obviously looking at damoctocog alfa, our once weekly product, the recombinant factor VIII. We are still planning a filing mid-2017, and I think that will really be a product that will be positioned very well to compete in that market as we believe factor VIII replacement therapy will continue to be a mainstay in the treatment of hemophilia. You are alluding to other products such as ACE910 potentially. And I would say that initial euphoria with the data that came in to optimism, that optimism with more data coming in turned to realism. And we have continued to say, let us wait for the data to come in and then we see what really fits. So we believe with our near and mid-term pipeline with Kovaltry and damoctocog alfa, we are well-positioned to compete. And as you know, we also have earlier in our development, additional compounds to compete with the newer technologies. I think we are well-positioned. Oh, and with regard to COMPASS data publication, I cannot predict that. We just got the data. Please allow us, understand that we need to analyze the data fully, but we will try to get it out there as soon as we can. Thank you very much. The next question comes from the line of Mr. Race. Please go ahead. Hello, it is Tim Race here from Deutsche Bank. Two questions. First, on the transaction. You have obviously had discussions, according to press reports, with the current President. I just wondered, you made assurances to him in terms of investment R&D, jobs in the U.S., et cetera. I would be interested in a little bit more clarification on what has been indicated and also if there is anything that changes your synergy assumptions in the transaction. Then the second question on the Consumer Health business. You mentioned that this is a consolidation year. Basically, what confidence can you give that this is actually a year where we, beyond 2017, that you will be able to outgrow the market in the future? If not, why not, given your scale? Thank you. All right. Thanks, Tim. You are not the first to ask how the meeting with, at the time, President-elect Trump went. Here is the answer. It was a really, really good meeting, and it was very much about it was educational in nature because President Trump was interested in understanding what the combination would do in terms of driving innovation and, of course, high-quality employment in the U.S., and what would it do for American farmers, but also beyond farmers in other jurisdictions. Clearly his main interest was what was it going to do for the U.S. Hugh Grant and I had an opportunity to explain the logic and the hugely attractive value proposition we see in our ability to drive with the, let us say, highly complementary competencies, faster, better solutions that will provide farmers with the option actually to get to, let us say, better yields, better harvest, and with that, better farm economies on one side. On the other side, we essentially confirmed what we had said from the get-go when we first announced that we had come to an agreement on September 14th. These are the points that were mentioned. Number one, the global seeds and biotechnology headquarters of the combined organization is going to sit in St. Louis. That is what we said all along, not to please anybody, because it makes good business sense that where we have the expertise and the best expertise in the combined operation. That was number one. Secondly, the combined company's North American crop headquarters is going to sit in St. Louis. Third, as you would expect from a growing and prospering business, over the next six years, the combined pro forma R&D spend will be around $16 billion, with roughly half of that amount being spent in the U.S. Then what we said is that the combined entity, Bayer, will have more employees in the U.S. compared to where we are today after the completion of the integration. Last but not least, without quantifying it, we said that subsequent to the finishing of the integration work, the combined crop business will create thousands of high-quality jobs in the U.S., predominantly then, of course, in the R&D area, as we move forward with growing our business with the significant strength we are going to have as, let's say, as an innovation engine. That was totally in line with what we'd said all along. There was actually no attempt by President-elect Trump to get anything out of us because I told you earlier that it was very much an educational and actually a very, very constructive and good discussion. Erica, on Consumer Health. To that question, Tim, we maintain our midterm aspirations for 2018 with the following measures. We continue to invest behind the growth opportunities that exist and also making progress in the turnaround efforts behind Dr. Scholl's. In particular, we've seen some early good results on Coppertone. We have also implemented a number of organizational changes that allow us to concentrate our investments better than before on individual brands, growth brands, and in specific countries. On top of that, we have revamped our innovation process. I just would like to remind you that our brands are on average 10 to 120 years old. What we do is create perpetual value. We have a long history of building successful brands. I'll give you an example of Roche, where we've taken a lead in more than doubled sales, and on the Bepanthen, we have more than increased sales by fourfold. It is a journey. We have started that journey, and I'm confident that over this time period, we will get to where we need to be. Thank you, Erica. Thank you. Thanks, Tim. The next question comes from the line of Mr. Leuchten. Please state your name, company name, followed by your question. Thank you. It's Michael Leuchten from UBS. Three questions, please. One, just going back to Liam. If you could help us contextualize your EBITDA guidance for the year, given the early positive signs on the ag cycle that you're seeing. If you could sort of contrast and compare those two. Second question on the regulatory filing, please. In December, you said you would file in Europe in Q1, you're now saying Q2. Just wondering what that slip represents. Thirdly, on your unfunded pension liabilities, the marked reduction at the end of the year versus Q3, what does that mean for you in terms of your debt capacity, if anything? Thank you. Okay. Thanks, Michael. Questions one and two will be answered by Liam, and then Hanno Dietsch is going to shed some light on our pension liability position at the end of the year. Yep. Thanks, Michael. So maybe just a bit of perspective around the EBITDA. If you look back over this last six years, throughout, let's say, the last cycle, the ups and the downs, we basically managed to deliver between 23% and 26% EBITDA, so that's we've never gone below 23% in the last six years. I think if you think of the cyclical business, there's not many businesses that can achieve that kind of an EBITDA in a down cycle. So just to give it a bit of perspective. There's some technical elements that I would just highlight relative to 2017 and then just make a more general statement going forward. So 2017, our guidance is to hold margin. Again, we believe this is at a relatively high level. Of course, can go higher as the cycle picks up. We're forecasting a slow return to growth. If, let's say, our forecast is wrong and there's a faster return to growth, then we would also assume that our margins would, of course, pick up faster. But this is just based on the visibility we have today. Technically, there is a portfolio element in here. We divested our consumer business in 2016. We have a transitional service agreement with the company SBM that we sold the products to. We give them basically the products at cost. So we have a $60 million sales impact that we book, but a zero EBITDA. So that's margin dilutive in 2017 for us. We have an increase in R&D costs because of our commitment to innovation. We had a positive impact in 2016 from some non-recurring effects. This was particularly related to index sales in Brazil, which is about EUR 40 million, which is basically local currency hedging. There are some elements that we need to cycle against to hold margin, and we believe that it would be a solid performance to hold margin given the overall situation. But of course, if the market picks up faster than we expect, we can expect a better margin as well. That is just to try and give you a bit of perspective on the overall. Okay. Thanks, Liam Condon. Hanno Dietsch? Yeah. Regulatory filing EU, we are well advanced in our discussions with the European Commission. We have been discussing with the European Commission since last year. Very, very extensive, very, very constructive discussions. We had been planning to file in March. We got an additional request for more data, which is not unusual given the complexity and size of this deal. It will take us a few more weeks to put that together, so that will push back the filing somewhat. But it does not change the end date because, as you know, the filing process in Europe involves a very extensive preparation so that the authorities can then thereafter come to conclusions more speedily. So it takes an extensive amount of preparation. That does not mean that the end goal is pushed out. This is somewhat different than in the U.S., the DOJ, where you file early and the discussion continues as you go along. So we do not see this influencing our closing date, and we still are confident that we can achieve all approvals by year-end. Okay. Thanks, Liam. Hanno, on pensions? Yeah, pension liabilities. You are right. We saw a dramatic decrease in our net pension liabilities. Actually, the gross pension obligation, PBO, came down by EUR 2.7 billion in the first quarter, and the net pension liability is even by EUR 3.4 billion because of good asset returns and pension contribution. However, we need to compare this level now to the end of 2015. Compared to the end of 2015, we still have an increase in our net pension obligations. In our discussions with the rating agencies, we used actually the pension obligations from the end of 2015, so no additional debt capacity at this point. Thank you. The next question comes from the line of Mr. Faitz. Please state your name, company name, followed by your question. Christian Faitz, Kepler Cheuvreux. Thanks for taking a couple of questions, mostly on Ag Chem. First of all, is it possible for you to give any indication on where we are in the CFIUS process for the Monsanto deal? Second, looking at the available data so far, it seems that in 2016, you lost some market share in insecticides against one of your bigger competitors. Can you confirm this? If so, elucidate why. On the positive side, you seem to have gained some market share in fungicides. Again, can you elucidate why you gained market share? Final question on Covestro. You made it quite clear also in the past that the Covestro disposal decision is independent of the Monsanto deal financing. Yet, can you update us on your current thinking regarding the timing of the Covestro disposal? Thanks. Okay, thanks, Christian. I will take your questions one and four, and then Liam is going to address your questions on insecticides and fungicides. As we mentioned earlier, we have filed for CFIUS review and approval. We have said all along that, given the fact that we are combining two Western companies, actually both with a long U.S. history, us having been around for 150 years in the U.S. with no obvious issues in our product portfolio that would pose a threat to national security in the U.S., our assumption is that the CFIUS approval will be granted. There is no more perspective other than from a process perspective, us confirming that we have filed and we are waiting for the result of the review. Secondly, on Covestro, I can confirm what we said all along. One, the disposal of our remaining position is completely independent of the Monsanto transaction. Secondly, as we said earlier already, I would bring you back to what we mentioned at the time of the initial IPO, that we are going to dispose of the remaining stake in the midterm. That is where we still are. Nothing more to be said here. Thanks. Okay. Okay, I will take the. Thanks, Christian, for the question on insecticides and fungicides. So give you a bit of flavor around what is happening with insecticides. The background for our decline here is twofold. One is related to the U.S., one is related to Brazil. In the U.S., we lost the registration for Belt, one of our insecticides. Had to take it off the market. So that is basically the reason why we have a significant decline in insecticide sales in the U.S. The second area is related to Brazil, where, as you know, there has been a very strong penetration of Intacta from Monsanto, combined with low pest pressure. That has led to a situation that there are very high insecticide channel stocks in the market right now. We've taken a very conscious decision not to further overheat that situation, and rather focus on sell-out and consumption as opposed to sell-in. That's why you're not seeing us selling into the market with insecticides in Brazil. We think this is the more prudent thing to do, given the overall market situation. On the fungicide side, we've had good growth, and this is particularly driven by Brazil. Also here, this is related to our portfolio, particularly for treatment of soybean rust, which is, I think, well acknowledged in the market as a leading portfolio. With that, has given us good growth in a relatively weak market environment. Very helpful. Thank you very much, gentlemen. Thanks, Liam. Next question comes from the line of Mr. Redenius. Please state your name, company name, followed by your question. Hi, it's Jeremy Redenius from Bernstein. Thanks for taking my questions. I've got three. First, on your U.S. filing for the Monsanto deal, can you talk about how the regulators are looking to define the market in this case? I'm wondering if there's any indication if they're planning to include seeds and chemicals in the same market definition, or will they be looking at simply seed overlaps by crop and chemical overlaps in the businesses? Secondly, the Kogenate and Kovaltry sales were flat in the quarter. Should we expect this to be the trend moving forward, or can we expect growth from here, or would you more likely expect declines? Then thirdly, if you could talk about potential risks the business might be facing from the border tax that's being contemplated in the U.S. I'm trying to work out by business where you might be most exposed there and some order of magnitude of that exposure. Thanks very much. Okay. Thanks, Jeremy. The first question on the U.S. filing and how market definitions are being looked at is going to be answered by Liam, followed by Dieter on Kogenate, Kovaltry, and then also Helixate, which is part of the mix here for 2017. Last but not least, Hanno, who's going to shed some light on our perspective on the U.S. border tax. Yeah. Thanks, Jeremy. Please allow me to be very general in this part because, of course, we don't want to preempt any discussion whatsoever with DOJ. We're in the second phase of our negotiation process now with the DOJ. Overall, I think there's a fair recognition that the seeds and the crop protection go-to-market models are very different in the U.S. Seeds can be direct to the farmer, but often through seed-specific companies. Crop protection is usually through distributors. So it's a very unique market setup. When the products are sold, how they are sold is very different per market. So I think that there's a recognition of that within the DOJ and a good understanding of how these markets function. We won't go into any further details, and we won't preempt how the DOJ is going to define these markets, but we're pretty confident that the DOJ has a very good understanding about how uniquely different these markets are. Thanks, Liam. Dieter? Yeah. What I would say with Kogenate and Kovaltry, the growth of the Kogenate family with Kovaltry is expected to be compensated by declining orders from CSL in expectation of the expiration of our supply agreement for Helixate with CSL by the end of 2017. That is the explanation relative to our outlook going forward level with this year. Thanks, Dieter. Hanno on cross-border tax. Yeah. So far as you understand, there is a tax reform proposal which aims particularly at supporting business with strong substance in the U.S. Under this proposal, the tax rate will be lowered to maybe 20%, which is, of course, beneficial for everyone doing business in the U.S. The proposal will also promote exports in the way of only imports being subject to tax while exports are maybe exempted from the tax. In addition, we see also proposals that interest rate expenses might not be tax-deductible anymore in the U.S. So overall, it will promote business in the U.S. with strong substance in the U.S., and there will be positive and not so positive effects on Bayer's tax positions overall. In a nutshell, based on what you can see from today, we are moderately optimistic that the tax reform with especially lowering the official tax rate down to 20% will be ultimately beneficial for Bayer. Sorry, thank you for that. More specifically on the potential border tax, is there much of a, let's say, for example, shipment of products in Crop Science, active ingredients from outside of the U.S. into the U.S. for reformulation? Is that something that you would get caught up in? Well, we have our production sites in the U.S. We have also a number of products which are exclusively produced in the U.S., like our Kogenate from the Berkeley factory. It's too early to say if you want to shift investments now and also redefine our supply chain. Overall, we still believe that it's a good thing to have international trade and international division of labor in order to benefit all parties involved. Therefore, it's too early to say whether we would change our position we have right now with a strong substance in the U.S. and also production in the U.S. Great. Okay. Thank you very much, Philipp. Thank you. The next question comes from the line of Jo Walton. Please state your name, company name, followed by your question. Jo Walton at Credit Suisse. A few pharmaceutical questions, please. In 2016, you increased your R&D as a percentage of sales by about one percentage point. Do you feel that you have now reached the right level of R&D as a percent of sales, or will 2017 also see a disproportionate increase in R&D investment? At what level do you think that that should stabilize? Secondly, if we are looking at expanding materially the indication for Xarelto, do you think that that will have any price implications, particularly in the European market, where when you come along and say that you think it can treat twice as many people, as far as I am aware, the regulators seem to say, "Well, in that case, we will have half the price." I wonder, finally, if you could tell us about the penetration of Eylea and how much of that is now penetrated into the DME market so that we can get some sense of the longer-term sustainable growth for that franchise. Thank you. Thank you, Jo. Dieter is going to take your three questions now. Okay, I will start with R&D. Our R&D investment is really based on the pipeline requirements that we have. We strictly prioritize, as we have mentioned before, and those assets that have the greatest potential value to address unmet medical need and provide value to society in addressing the burden of the disease. We have substantially, as you know, increased our R&D investment, and we have seen the result of that in some of the pipeline, not all the pipeline. Some of the pipeline we have highlighted with those six products that we have highlighted recently for which we have gained greater insights and therefore confidence. We will again this year increase our investment in R&D a bit based on the pipeline that we have and the progress that we are making. I am less bound by ratio per se, but I think we are going to be at the 17% ratio, which I think is a reasonable ratio to be at. But I would say our spend on R&D is really guided by the need to support our pipeline for sustainable success. The pricing implication of Xarelto. I cannot comment on specific pricing implications of Xarelto, in particular in the European market. But as you know, the pricing is fairly regulated in most countries, and as such, relatively stable as a matter of fact. I do not anticipate any negative surprises there other than what one would normally see in regulated markets like in Japan. It is not dependent on the substantial expansion potential that COMPASS holds. Penetration of Eylea. So Eylea has now a market share overall of roughly 33% to 72%, 72% being the highest in Japan. Looking at the split a little bit, in Japan, you have roughly 54% of wet AMD and 18% in DME and then RVO and CNV are smaller. So there is significant opportunity to continue to grow in Japan also with DME. While in Germany, the split is slightly different. You have still 53% in wet AMD, and DME is about 35% already. So it really depends on where you look. But I think there is significant growth potential remaining in expanding our share in wet AMD while enhancing the diagnosis and treatment of DME. So we believe we will see continued momentum with Eylea and substantial growth opportunity. Okay. Thank you, Dieter. The next question comes from the line of Mr. Vosser. Please state your name, company name, followed by your question. Hi, it is Richard Vosser from J.P. Morgan. Thanks for taking my questions. Firstly, just going back to the COMPASS data, perhaps you could comment on the data and the benefits and risks seen in relation to the proxy from the ATLAS phase II trial where this dose was tested on top of aspirin. Secondly on that one, how quickly can you share the data with regulators and bring it to the market? And thirdly, on the COMMANDER trial, could you talk about when the interim analysis have been on that trial, and have you passed the last interim there so that we should expect only the final data in 2018, or could that be earlier as well? Second question or second group of questions just on the bridge financing costs. You have highlighted that they are in the net financial costs for the year, the guidance. Just if you could give us a flavor of that, is that around EUR 200 million for the year or is that too high? Then final question, just on Crop Science. Just an early view of how the Northern Hemisphere season is shaping up. I know we are early, but just some of your thoughts there would be great. Thank you very much. Okay. Thanks, Richard. The first three questions are going to be answered by Dieter, followed by Hanno on bridge financing and total amount that is baked into our 2017 financials and guidance. Then last but not least, Liam on the early perspective on the season in the Northern Hemisphere. All right. Unfortunately, I cannot really elaborate on any further data on the COMPASS trial. We really have to wait until we make the data available. Please understand that I am as excited as you are, and I would love to get the data out there, but we really have to wait until the full data is in. The filing date, we are aiming to get this obviously filed as soon as possible and hope to file sometime in the second half of this year, the COMPASS trial, for the indication. The timing of the interim analysis of COMMANDER would be speculation. I really cannot speculate on that as well. Please understand that I cannot do that. Thank you so much. Okay. Thanks, Dieter. Hanno, on financing. Yeah. Bridge financing costs, we had seen some costs in the magnitude of EUR 15 million in Q4 2016, and we earmarked EUR 230 million for the year 2017 to be put into the financial result. However, Richard, that will be classified as special items and will not impact the core EPS. Okay. Thanks, Hanno. Now the crystal ball. Yeah. Thanks, Richard. Same crystal ball. It is just simply too early to call the Northern Hemisphere. Clearly what's going to happen is, in the Northern Hemisphere, everybody will be looking at what the output of this is now in the Southern Hemisphere, and then they will make their planting choices going forward. Overall, I think it's still fair to say that the grower economics remain tight in North America, and also in Western Europe, we believe the pace of growth will lag behind the overall global development. We rather see growth coming more from Latin America because the farmer economics are more favorable and there will be this larger planting acres anticipated for corn and soybean. Remember last year was impacted by drought in Brazil as well. So we think Latin America would rather be a driver going forward this year. There's continued high soybean demand from China and Asia Pacific, as I mentioned earlier, and Eastern Europe we would consider growing further. So we don't see the Northern Hemisphere as a major growth driver this year. Rather an upturn there, rather coming in more from 2018. Thanks, Liam. Bye. The next question comes from the line of Mr. Jones. Please state your name, company name, followed by your question. Good afternoon. Tony Jones, Redburn, London. I have three questions. Firstly, on raw materials, looking back, the gross margin at Bayer has improved a lot, up about 500 basis points since 2013, 2014. I appreciate a lot of that has come from pharma growth and mix, but in some of the chemical assets, maybe cheaper costs have flattered the gross margin. Are you able to split out even roughly what proportion of that margin expansion has come from growth and mix, things like Xarelto versus price costs? Secondly, maybe second question actually for you, Hanno. It is on CapEx. So you have given guidance for this year, but it looks like Covestro makes up around EUR 0.5 billion of that EUR 2.5 billion. Just thinking about beyond that period, do we just simply exclude that so we can fade down CapEx? Finally, a question for Dieter on pharma and the margin improvement. Is this purely predicated upon volume leverage or is it something else, something relating to the costs? Thank you. Okay. Thanks, Tony. Questions one and two will be answered by Hanno, and your last question is going to be taken by Dieter. Well, actually, when we look at raw material costs and energies, we have to look into Covestro, which is still fully consolidated, and Covestro substantially benefited last year from lower raw material costs. Although they had also given some price concessions and overall pricing were down for the year in Covestro, they had a significant expansion of margin here. That explains mostly the effect on raw materials because Covestro is so dominant in this aspect. Once we will deconsolidate Covestro, once we are not having the majority in the shareholders meeting of Covestro anymore, we will take out all the numbers from Covestro from our financial statements. With that, the CapEx number for the overall group will decrease by roughly the half billion you mentioned. That is rightly correct. Okay. Thank you. Dieter? Yeah. So the margin expansion is influenced by a couple of things. Obviously, we have benefited from continued volume performance, great momentum that we have achieved. But we also, as we have previously discussed, embarked on a program to substantially focus our efforts and resources on those things that have the greatest opportunity and ROI associated with that. With that, we have kept our commercial expenses, our marketing and sales expenses flat, and taken some of the gains that we have made, we invested in R&D. Some of that has been reflected in the margin expansion that we have seen. So we continue to be very prudent as to how we allocate our resources, in the effort that we had already announced that we would try to focus and streamline our expense base. Yeah. Thanks, Dieter. Tony, if you allow, just let me add a couple of sentences to the question of what the 500 basis points margin expansion since 2013, has been driven by. If you look at it in the grand scheme of things and, just doing this back of the envelope, without a lot of details, I would assume that 2013, 2014, as a baseline for the materials business, 200 basis points of the improvement of the company overall, directionally, 170 to 200, I would guess, come from materials. Because we essentially have a flattish top line and significant earnings expansion driven by what Hanno said earlier, which is raw materials and energies, that have significantly helped the case. The rest is actually coming out of the portfolio. Part of it is also mix because pharma has been growing so dynamically, which has been and continues to be our highest margin business, on top of the pharma margin expansion in it by itself. Portfolio, if anything, very minor if you look at the overall company EBITDA margin. That's actually minimal, and the only ones we've really looked at for the last few years was diabetes care, and then the environmental science consumer business, which taken together are about 3% of top line of the company. So not a major impact. Great. Very clear. Thank you very much. Okay. The next question comes from the line of Ms. Hector. Please state your name, company name, followed by your question. Thank you. It's Louisa Hector from Exane. Could you remind us to what extent you have hedged the currency risk in connection with Monsanto? Also on Monsanto, could you just add any color? I noticed in the annual report the date of June 14, 2018, at which point the deal could be terminated if you have not received the regulatory approvals. Can you put any color around that? Does that mean you have had actual rejections? Is it certain approvals in certain regions? Then finally, on the Covestro stake, could you comment on the potential U.S. tax advantages or disadvantages in terms of timing on the disposal of that stake? I believe end of August is a key date. Thank you. Okay. Thanks, Louisa. Questions one and three are going to be answered by Hanno Dietsch, and I will thereafter talk about June 14, 2018. Yes. Thank you, Louisa. First of all, currency risk, we had to pay the purchase price in U.S. dollars, and the debt piece will be financed in U.S. dollars. Even if we go with euro bonds, we absorb it in U.S. dollars. Therefore, we do not have a currency risk on the debt piece. On the equity piece, it's different because we are raising equity with the Bayer AG share here in Europe, and that will be done in EUR terms. Here we are exposed, and negatively opposed, if we have an increase in the dollar rate against the EUR portion. Here we are looking at $19 billion, which translated into EUR 17 billion at the time of announcement last September. We anticipated, of course, the currency risk and had some hedges in place already with more than 50% of the exposure to the level of 1.11 or better. Covestro first or Covestro. Should I do Covestro first? Yeah. Okay, then let me do Covestro. The sale of Covestro stake is being done here in Germany, and this sale will be tax-free mostly. It's 95% tax-free here, and we have no restrictions from the tax point of view at all. Okay, now let me take your question on June 14, 2018. The merger agreement stipulates that should this transaction not be consummated for antitrust reasons, we have to pay Monsanto $2 billion. That statement holds true today, tomorrow, and all the way up and until June 2018. Our perspective is that this is quite some time out. We believe that we are going to be good for a final closing of the deal by the end of 2017. Should we hit this out of date, the question is what is going to happen then? There are different scenarios you could come up with. Number one is, the deal falls apart against the payment of the $2 billion because it would then actually be for antitrust reasons. We don't see any other reason that would materialize by then. Alternatively, if both parties continue to be highly interested, it could also reach into a renegotiation and an extension or an extension. Whatever it might be. This is a hypothetical case to the best of our assessment, but that's actually how you would have to look at the different options that would be out there. The next question comes from line of Mr. Meunier. Please state your name, company name, followed by your question. Hello. Thank you for taking my questions. Vincent Meunier from Morgan Stanley. The first question is on the consumer unit. Thank you for the confirmation of your 2018 aspirational, EBITDA target of 25%. But I would like to better understand the drivers for that margin improvement expected in the near term. You were talking about the Merck synergies, also increased investments to support Coppertone and Scholl and new product introductions in the U.S. Particularly on the latter, can you please give more details on your targets for 2017 and 2018 and the impact on margins, of course. The second question is on anetumab in the pipeline. Can you update on the publication timing for the ovarian cancer and the mesothelioma indication? Also, can you confirm that you still target a launch in 2019? Thank you. Okay. Thanks, Vincent. Before we go into the consumer health questions on margin profile, what's going to contribute, up and out to 2018 and the new product development. We want to come back to the question of the tax position and whether it's going to be an effect that we are going to have in terms of tax-free versus not tax-free. As Hanno mentioned earlier, in Germany, because we are holding, Covestro as a shareholding in Germany, it's tax-free. By and large, tax-free, very low tax quota. Then, depending on the jurisdiction we are, we would have to look at the tax effects that we have with this part of the deconsolidation. But no further color, including the U.S., at this point in time, that would actually then come with the communication of, I guess at the time of deconsolidation, what that would be. Let me now come to consumer health, followed by anetumab on ovarian and mesothelioma. As I mentioned before- Yeah, consumer health, consumer first. As I mentioned before, the focus is really on the growth opportunities that exist in the marketplace. In particular, if you talk about the innovation, this year, we don't get into the exact details of the MPDs that we roll out, but I can tell you that we're planning on 19 new products to go out in this year, and we have over 80 products in our pipeline for further development. That's a real key focus. As you know, consumers depend highly on these brands being fresh and relevant, and that is a key focus for us. In addition, as I've mentioned before, we continue to focus on Scholl's and Coppertone and ensuring that all the issues, in these specific categories are addressed. Can I have a follow-up question on this? You talked about financing flexibility during the presentation. We know that right now in the consumer industry, there is consolidation. Is it fair to assume that if necessary and if opportunities can be presented to you can do something and further increase the size of the business units? Vincent, this is a very good question. I want to come back to what we said during our September Meet Management. That first, second, and third priority right now is to make the acquisitions that we made in 2014. So the Merck OTC business and Dihon productive. Erica and her team are well on their way doing this. It would be very distracting to actually put another acquisition of, let's say, significance on top of it because it automatically leads to distraction rather than the focus we need in order to drive the performance of the brands we have and hold in our hands. It is also not really necessary to look at something at consumer because we do have Actually, by all accounts, critical mass. Our business is one of the three co-leading businesses in the industry. So you have three out there, Sanofi, Boehringer, GSK, Novartis, and us, that have essentially the same market share. So in terms of relative size and punching weight, all of us are at equal footing. If we take a pass on one or the other that might come up, nothing is there right now, but might come up in the next, let's say, immediate future, nothing is going to happen to our competitiveness. Then let's come to anetumab. All right. So you know that I've been very excited about anetumab, and the much more rapid completion of the enrollment in the mesothelioma trial gives me confidence that the oncology physicians must be seeing something to speed up the enrollment so much faster. Now, you know we have initiated a multi-indication, a basket trial in six different tumor types that include certain non-small cell lung cancer, triple-negative breast cancer, gastric cancer, thymic cancer, pancreatic cancer, and cholangiocarcinoma. These trials, as you know, you have to wait for some. First you proceed with signals. The initiation of these trials is now underway, and based on the signals, we may see some of that signals in the time frame of 2018 that would allow us then to make some decisions on where to expand rapidly moving into a phase II trial setting with registrational intent. I would say we have to wait until we see these signals. That will probably be in the 2018 timeframe before we can make further decisions on those. You asked about the confirmation of the 2019 trial, and I'm assuming that is mesothelioma trial, the filing. My sense is that you're asking because we've completed enrollment so much faster than previously anticipated. This is an events-driven trial, and we have to wait for the events to come in now, and that will dictate our filing timeline. So for now, our timeline is unchanged for the first launch in 2019. Should that change, we would update that. But we have to wait for the event. Very good. Thanks, Dieter. Thank you. Next question comes from the line of Mr. Conover. Please state your name, company name, followed by your question. Great. Thanks. This is Damien Conover with Morningstar. Just had a follow-up question on the COMPASS study and the addressable patient population. Talked about 30 million potential patients there. Just wanted to see within that group, how many of them are using aspirin versus Plavix, because I believe Plavix has outperformed aspirin in the PAD setting, but I wasn't sure if you had any market share expectations there. Just really trying to get at generic Plavix pricing versus Xarelto, where you're going to be positioned there when you have a different drug that wasn't used as a comparator in the COMPASS study. And then just one second question, just on the pricing power of drugs in the U.S., it has been an important topic, and while your drugs are sold disproportionately outside the U.S., the overall pricing for the quarter looked to be roughly flat, suggesting that pricing was holding up relatively strongly in the U.S. I was just wondering if you could confirm that. Thank you. Okay. Thanks, Damian. Dieter. Yeah. Let me try to address that first question you had in a different way. There is no long-term use data of antiplatelet other than aspirin. Right? Although the dual antiplatelet therapy compared with aspirin alone further reduce the risk of major cardiovascular events by 15%-20%, if you look at the CURE and PEGASUS studies, in patients with a recent ACS, that is the difference, right? The benefit of the long-term dual antiplatelet therapy beyond 12-18 months in patients such as those with stable coronary or cerebral peripheral artery disease, or in those with high risk of an atherothrombotic vascular event, has not been demonstrated. So that is very important. The patients we have looked at, the dual antiplatelet therapy has not been demonstrated. That is why there is a significantly remaining high unmet medical need. The guidelines, ACC and ESC, only actually go for, only indicate aspirin in that setting. I do not have a breakdown of patients on aspirin versus Plavix, and I think you would be well served waiting for the full data set to come out to then look at what it really means. In pricing in the U.S., for us, as you mentioned yourself, we are relatively underrepresented in the U.S., 20 something percent of our revenue coming there. We have found that our pricing has been relatively stable. We manage it well. So there is nothing unusual that we would have to highlight at this point. Thanks, Dieter. Thank you. Excuse me, Mr. Beunink. There are no further questions at this time. Please continue with any other points you wish to raise. Thanks, Emma. Also, on behalf of my colleagues, I would like to thank you for being with us on the call and thank you for your questions. We hope to see many of you at our upcoming Meet Management conference in London, and now we would like to say goodbye. Ladies and gentlemen, this concludes the full year and fourth quarter 2016 results investor and analyst conference call of Bayer AG. Thank you for participating. You may now disconnect.