Pharma Reorganization

Bayer Chief Executive’s Big Gamble

Dekkers DPA
Bayer's CEO has a lot to prove.
  • Why it matters

    Why it matters

    If Marijn Dekker’s restructuring of Bayer succeeds, he will have created an innovative model for the life sciences industry.

  • Facts

    Facts

    • Marijn Dekkers is a Dutch-American chemist and has been chief executive of Bayer since October 2010.
    • He has decided to spin off its plastics division and integrate its life sciences business.
    • The new plastics business Covestro will be floated as a seperate business this year.
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    Audio

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The first time Bayer’s current chief executive, Marijn Dekkers, came to the company headquarters in 2009 for a job interview, he was deeply impressed. Bayer’s mission, “Science For A Better Life,” was prominently displayed in large letters. Mr. Dekkers is passionate about science. He remembers being “bowled over” that a company had perfectly summed up the concepts that drive him.  A short time later, he was chairman of the executive board.

You have to keep this scene in mind to fully understand the deeper meaning of the now-confirmed reorganization of Bayer AG. Mr. Dekkers is leading Bayer down an extraordinary path in the healthcare industry. He has decided to focus on the deeply unfashionable life science division. This move presents all sorts of opportunities but is also incredibly risky. 

With its recent restructuring Bayer has proven that it is no longer a ponderous monolith. The company, based in Leverkusen on the eastern bank of the Rhine in North Rhine-Westphalia, has long been considered to be strongly committed to tradition and the past. Now the company has, within a year, announced it is cutting off its roots and then done it.

The plastics business has been spun off under the name Covestro and is soon to go public.  And at the same time Bayer is launching its most profound reorganization in 14 years.

By giving Covestro its independence, Bayer is withdrawing from its last classic chemical business.

Both moves are connected to each other. By giving Covestro its independence, Bayer is withdrawing from its last classic chemical business. The company no longer needs to watch over independent subgroups that have little in common with each other. The pharma business has long been playing by a different set of rules than the production of plastics. The organization had outlived itself.

Bayer could have continued to operate with a holding model after seperating out its  plastics division. It would have been the simple solution, because it would have required little reorganizing work. But it wouldn’t have resulted in the new beginning that Mr. Dekkers has in mind.

The Dutchman with the American passport is creating a strongly integrated company that will be led centrally, with three divisions – pharma, consumer health (over the counter drugs) and crop science (plant insecticides) – which are meant to mutually strengthen each other.

There are big opportunities for employees, who for many years had been working cut off from each other in the holding structure, to be moved closer together. That could unleash a new force for product development. A holding structure with independent subsidiaries can lead to bureaucratization and the accompanying multiple, perhaps unnecessary, approval processes.

Such a reorganization is a daring gamble. It gets employees riled up and, for many of them, holds nothing but disappointment. At the same time, Bayer needs a hard-hitting workforce that chases a common goal. The company has to keep its tried and tested chain running, starting with successful research projects and ending with a skillful marketing campaign.

Mr. Dekkers’ main goal is to get more out of Bayer’s remaining businesses. They are supposed to stimulate each other. The executive, a passionate researcher, sees great opportunities in exploiting the fact that all living beings share basically the same molecular mechanisms. That means the research into pesticides can also help drive the development of drugs and the same holds true for animal health care. The extensive molecular banks of the crop science and pharma divisions will become the common basis for new Bayer products in all segments.

That is the big gamble that Mr. Dekkers is taking. And it certainly won’t be an easy road to success, because the life science concept has its pitfalls. Insecticides and pharmaceuticals are far too widely separated in regard to marketing conditions and customer bases for them to follow common rules.

Mr. Dekkers must inject life into the new unifying structure; otherwise, Bayer’s path will be quickly questioned by financial investors. He must prove that an integrated life science company can in fact offer added value that others haven’t yet discovered. That will be the most difficult task in his last year in Leverkusen.

 

To contact the author: froendhoff@handelsblatt.com

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