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Wednesday - May 27, 2015

Annual Stockholders’ Meeting

Address by Dr. Marijn Dekkers

Chairman of the Board of Management

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Ladies and gentlemen,

“Science For A Better Life”: I can still clearly remember my first visit to Bayer. It was 2009 for my first job interview in Leverkusen. Of course, I was familiar with the Bayer Cross. Who isn’t? But in the company’s headquarters building, I saw this mission for the first time in large letters: “Science For A Better Life.” That made a tremendous impression on me. I came to Leverkusen five times for interviews. And each time, I had this mission right before my eyes.

As a scientist, I myself have spent a lot of time in the laboratory. I have conducted research and filed patent applications. And here I was, at a global company focused on exactly that: Science. For a better life. This blew me away. (Please excuse this colloquialism, but that’s how it was!)

And I’m equally impressed by the film we just saw: Bayer on its way to becoming a Life Science Company: This is a company that brings the science of life to people. A company that conducts research and makes research useful. A company whose products help a lot of people to have a better life. I am therefore very proud to stand here before you as a representative of this company. On behalf of the Board of Management, I would like to sincerely welcome you, valued stockholders, to the Annual Stockholders’ Meeting of Bayer AG.

2014 was a year of important strategic positioning for us. It was the first year following our 150th anniversary and we used it to continue successfully shaping the future of our company. We saw it as an opportunity to expand our strengths even more than we have in the past.

We strengthened both Life Science subgroups through important acquisitions. Here I’m talking about our health (HealthCare) and agriculture (CropScience) businesses. At the same time we decided to demerge MaterialScience, our high-tech polymer materials business. I’ll talk more about this transformation into a pure Life Science company later on.

2014 wasn’t just a year of important strategic decisions for us, it was also a very successful year operationally.


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The entire Bayer Group posted record sales of EUR 42.2 billion. You can see sales on the left side of the slide. They increased by 5.2 percent compared with the prior year. Excluding the effects of currency shifts and portfolio changes, sales rose by an even more substantial 7.2 percent. This figure reflects Bayer’s improved sales capability. These record sales were driven in particular by growth in our Life Science businesses. And MaterialScience also registered encouraging sales gains.

The Group operating result before interest and taxes, EBIT, climbed to EUR 5.5 billion. This is an increase of 11.6 percent. Clean EBITDA, which additionally excludes depreciation, amortization and special items, advanced by 4.9 percent to EUR 8.8 billion. This too is an all-time high, despite negative currency effects of about EUR 410 million. Core earnings per share of the Bayer Group rose by 7.3 percent to just over EUR 6.

Ladies and gentlemen, these are very good figures for us. We are facing tough global competition. And we are becoming stronger. One aspect is particularly important to me: our record figures in 2014 were not attained at the expense of our long-term growth perspectives. On the contrary, as in previous years we once again invested substantially in our future.

We considerably boosted spending on research and development, with an increase of 4.9 percent last year alone. We also raised selling expenses. And incidentally, we lowered our general administration expenses relative to sales. Our success is based on both aspects: the development of new products and marketing these to customers. It often takes a number of years for a product to be developed to market maturity. Marketing needs to be much quicker. We aim to get even better at integrating these two processes and made important progress as a result of this approach over the last year.


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The main growth drivers in the Pharmaceuticals business were our recently launched products: the anticoagulant Xarelto; the eye medicine Eylea; the cancer drugs Stivarga and Xofigo; and Adempas to treat pulmonary hypertension. These five recently launched products have played a crucial role in making us one of the fastest-growing large companies in the pharmaceutical industry, generating combined sales of EUR 2.9 billion. This was nearly twice as much as in the previous year. We are anticipating even higher sales of more than EUR 4 billion in 2015. (You can see this development on the right side of the slide.) Eylea and Xarelto both achieved especially strong sales growth in 2014, increasing by around 130 percent and some 80 percent respectively. I’d like to briefly talk to you about Eylea. It is a good example of how our products can improve people’s lives in concrete terms.


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In the human eye, a special section of the retina – the macula – is responsible for visual acuity. A swelling of the macula, known as macular edema, is usually a complication of diabetes. In industrialized countries, diabetic macular edema is the most frequent cause of blindness in people of working age. And the number of patients is growing worldwide as the incidence of diabetes rises.

In the picture you can see typical visual impairment at a late stage of the disease. There is an image of two hands. The field of vision is blurry and is clouded by dark spots. I’m sure you’re familiar with the letter chart for eye tests at the ophthalmologist. If macular edema is left untreated for a period of two years, most patients will be able to read two lines less on the chart than they could before.

Our medicine Eylea is a specially designed molecule to inhibit growth factors. This in turn can reduce swelling. Our studies showed that patients’ visual acuity improved as a result. On average, they were again able to read two more lines on the chart after just one year of treatment with Eylea. Two additional lines of letters: that is a considerable improvement in quality of life. It can mean that a patient can read again. It can mean that he or she is allowed to drive a car again and regain a measure of independence in daily life.

Eylea has been administered more than four million times overall for various eye ailments. We launched this eye medicine in 2012. We are pleased that it has already helped many people to achieve a better quality of life. And we are pleased about its commercial success.

I would like to give you an example of our current research activities.


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As you know, there are many different types of cancer. The non-Hodgkin lymphomas - NHL for short - are various malignant diseases of the lymphatic system. Some 386,000 new cases were diagnosed around the world in 2012. This makes NHL the tenth most common type of cancer worldwide. The prognosis for certain forms of NHL is very poor. About 200,000 patients die each year.

A specific signaling pathway plays a central role in the development of the disease. Signaling pathways regulate the growth and metabolism of cells. If such a mechanism is overactive, this can result in cancer. Our researchers are therefore concentrating on influencing this special signaling pathway. They have studied enzymes that play a key role in the dysregulation of this signaling pathway. And they have created a molecule that specifically blocks these enzymes. This molecule, copanlisib, has shown promising activity in initial clinical studies.

These images show tumor development in the lumbar region. Prior to treatment with copanlisib, many tumors can be seen. These are the pale shadows on the left image. The image on the right was taken three months later. Following treatment, the tumors have disappeared almost completely. (The white spot at the center of the image was due to surplus contrast agent and not to a tumor.)

We hope its therapeutic effectiveness is confirmed in the last trials prior to market authorization. Ideally we could file for the first authorization next year. It would represent crucial progress in cancer treatment. And for many people, it would be an inestimable improvement in life expectancy and quality of life.

Ladies and gentlemen, following these examples from the health business, I would now like to turn to our agriculture business.


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As in the Pharmaceuticals business, new products were the main drivers of growth in Crop Protection as well. Products we have introduced to the market since 2006 achieved combined sales of EUR 1.9 billion. On the chart, you can see the significant growth in recent years. We are targeting a further increase to EUR 2.8 billion by 2017.

These new products contributed some 70 percent to absolute sales growth at Crop Protection last year. That shows how important it is in this area as well to maintain a high level of investment in research and development. Only through innovation can we continue to strengthen our competitive position. We must recognize the needs of the market at a very early stage. And we must also proceed with long-term research projects.

Allow me to present an example from our seed research that is of tremendous importance for global nutrition. People have been eating wheat for thousands of years. Through conventional breeding, different varieties have been gradually improved to provide the best yield in a given climate and environment.

However, this development cannot keep pace with the current rapid rate of climate change. It therefore makes sense and is maybe even essential to accelerate the breeding of wheat varieties with the help of leading-edge technologies. Our researchers use the smart breeding approach here. It is a clever breeding method that combines conventional cross breeding with ultra-modern genetic analysis. We have documented this process for you in a short film.

Ladies and gentlemen, wheat research demonstrates how our company can help to solve pressing problems with innovative approaches. At the same time, it is a good example of the long-term orientation of our research projects. Only through a long-term alignment can we sustain and further strengthen our power to innovate in the long run. This innovative capacity is the foundation for organic growth in our Life Science businesses. It is the foundation on which our company’s success is built. This brings me to our strategic priorities for the current business year.


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- First, we will focus on further driving forward the organic growth of HealthCare and CropScience. Earlier you saw how significant the share of innovative products is for growth in both businesses. We want to further enhance the success of these products in the market. At the same time, we are further increasing our spending for research and development in the Life Science businesses. This is the condition for future organic growth with new products. Overall, we plan to invest more than EUR 4 billion in research and development this year.

- Our second priority is the further integration of the non-prescription medicines business acquired from Merck & Co. and of Dihon. With these acquisitions, we have already surpassed Johnson & Johnson and now occupy a strong second place in the market. Our own very successful brands such as Aspirin and Bepanthen have been joined by further well-known names. Claritin and Coppertone, for example, are already established brands, especially in North America. To raise the sales prospects of these products, we will link them as closely as possible with the Bayer umbrella brand. After all, the Bayer Cross is a strong trademark throughout the world. It is a credible symbol of quality and reliability. Moreover, this year we will leverage the acquisitions we have made for further synergy effects.

- Our third area of focus is the demerger of MaterialScience. The planned stock market flotation is targeted for mid-2016 at the latest. We have since completed the design phase. The future legal and organizational structures have been worked out and will be implemented in the coming months. The next important step will be the economic and legal separation of MaterialScience, which we intend to have completed within the Group by September 1, 2015. And we will likely decide in the second half of the year which of the possible options we will use for the subsequent stock market flotation.

We are convinced that MaterialScience has outstanding prospects for long-term success as a separate company. It has a strong global presence that also covers Asia. Its individual product lines hold either first or second place against their competitors. Thanks to long years of technological leadership, production processes are highly cost-efficient. The new enterprise will be the fourth largest chemical company in Europe. It will be able to exercise its strength more effectively, faster and more flexibly in the global competitive arena.

- Parallel to the separation of MaterialScience, we will press ahead with the complete alignment toward the Life Science businesses. This is our fourth strategic priority, which also impacts Bayer’s organizational structure. We are currently examining our corporate structure and developing restructuring proposals. I must emphasize in this connection that it is not about cutting jobs. We continue to anticipate that the number of employees at Bayer will remain stable in the coming years, both worldwide and in Germany.

We also want to reflect our company’s future alignment toward the Life Science businesses in the Articles of Incorporation of Bayer AG. That’s what Item 5 of today’s agenda is about. It contains the proposal to amend the object of the company as is formulated in the Articles of Incorporation.

The Board of Management and the Supervisory Board are convinced that Bayer has outstanding growth perspectives as a pure Life Science company. We will be able to optimally deploy the strengths that make Bayer successful: our outstanding competencies in research and development and in marketing; our dynamic pipeline of innovative products; our strong brands; a diversified portfolio; and a superior presence in the Emerging Markets.

At the same time, we will benefit from major similarities in our business model. I’m talking here about biochemical processes in organisms. As different as people, animals and plants seem to be, molecular mechanisms follow common rules in all life forms. Our understanding of these mechanisms has expanded tremendously, as have the possibilities for inventing and producing new molecules.

Life Sciences are our foundation for “Science For A Better Life.” This mission represents a dual obligation. On the one hand, it means that we aim to address the right problems. We can make life better by solving these problems. On the other hand, “Science For A Better Life” means that we strive to find the right approaches for addressing these problems. It is research with a goal: science that aims to become innovation. Innovation to improve health for the benefit of humankind. This passion for innovation and a better life is our strength. That’s our motivation. It shows us the way.

Ladies and gentlemen, I constantly sense this passion when I talk with our employees. In our laboratories, I encounter enthusiastic scientists. Each day they do what our mission communicates: “Science For A Better Life.” And their colleagues around the world apply the same enthusiasm in bringing our products to customers.


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Our employees contribute to Bayer’s success with a high level of expertise and tremendous dedication. I would like to take a moment to sincerely thank all of our employees for this. The passion for innovation is at the core of our employer profile. Under the slogan “Passion to innovate – power to change,” we last year introduced a new employer brand that we are using around the world to attract highly qualified and motivated employees. Bayer already enjoys tremendous standing as an employer. The German magazine “Focus” named us Germany’s best employer in our industry for the second consecutive year.

Our internal feedback is also good. According to the most recent employee survey, identification with our values and goals has further increased. This is a good basis for high motivation and dedication. Our profile as an employer also includes preparing young people for their careers. This summer again, some 900 school graduates will start their vocational training at our German sites.

We also consider this to be affirmation of our social responsibility, which is integral to Bayer’s corporate strategy. Around the world, we support projects and are committed to charitable causes.


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For Bayer as an innovation company, the overarching criteria for providing support are initiative and pioneering spirit. Through our foundations, we foster leading-edge research, talented young scientists as well as sustainable education and social projects.
The renowned Hansen Family Award can even serve as a springboard to Stockholm. Our 2011 award winner, Professor Stefan Hell from Germany, last year won the Nobel Prize in Chemistry. The Hansen Family Award was presented this year to the French Humboldt Professor Emmanuelle Charpentier, who has done outstanding research in the area of genome editing.

The foundations also support school projects designed to promote new methods of teaching natural science, for example. We support projects at all levels. The deciding factor is that they make sense and are successful. Each year, the Bayer Group provides funding totaling almost EUR 50 million to charitable initiatives. Of this figure, science and education most recently accounted for EUR 13 million, health and social needs for EUR 17 million and sports and culture for EUR 19 million.

One of the biggest donation packages in Bayer’s history went to people affected by ebola in West Africa. We made available free of charge medicines with a market value of EUR 3.7 million for the treatment of life-threatening subsequent infections.

Ladies and gentlemen, Bayer’s inclusion in various indices shows how seriously we take social responsibility and sustainability. We were represented for the 15th consecutive time in the Dow Jones Sustainability World Index. And we were included for the first time in the STOXX® Global ESG Leaders Index. The criteria for inclusion in these indices are environmental protection, social needs and corporate governance. We are very pleased that here as well, we were listed among the leading companies.

As a sustainably operating company, we also support initiatives such as the U.N. Global Compact and the chemical industry’s Responsible Care program. We believe that sustainability and social responsibility are key aspects of our mission “Science For A Better Life.”

Valued stockholders, I know that many of you stand behind Bayer out of a sense of tremendous conviction. This does not rule out critical questions. But you have confidence in our company and its potential, its business strategy, goals and values. On behalf of the entire Board of Management and our employees, I would like to sincerely thank you all for this continued confidence.


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Of course, your confidence and investment in our company should also be rewarded financially. We intend our stockholders to appropriately participate in the company's success. Together with the Supervisory Board, therefore, we are proposing to the Annual Stockholders’ Meeting that the dividend be increased to EUR 2.25 per share. This represents another substantial increase compared with the prior year.

We are therefore continuing our stable dividend policy. And under the Group-wide bonus program, we paid a total of some EUR 900 million to our employees last year. That was a record amount. Many of our employees also hold stock in our company and thus benefit from the very gratifying development of our share price like all other stockholders.

At year end, Bayer’s market capitalization was approximately EUR 93 billion, making it the most valuable company in the German stock index. This year the company’s market capitalization has continued to grow to a high of EUR 121 billion.


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As you can see from the table, Bayer stock again significantly outperformed suitable benchmark indices in 2014. The increase in value - including the dividend - amounted to 13 percent. Over the past three years, we have actually seen an increase of 147 percent. And of course we want to sustain this positive value development with good business results.

Ladies and gentlemen, Bayer also got off to a good start in the new business year.


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We raised Group sales from EUR 10.6 billion in the first quarter of last year to EUR 12.1 billion in the first three months of this year. You can see on the left-hand side of the graph that sales grew by 14.8 percent. However, we also benefited here from currency effects and portfolio changes. Without these effects, sales increased by 2.7 percent.

EBIT was diminished by special charges of EUR 244 million and moved back by 4.7 percent to EUR 2.0 billion. EBITDA before special items rose by 9.6 percent to EUR 3.0 billion. And core earnings per share of the Bayer Group improved by 7.7 percent to EUR 2.10.

In view of this business development and much more favorable exchange rates, we raised our guidance for 2015 following the first quarter.


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For the Group as a whole, we expect full-year sales to increase to between EUR 48 billion and EUR 49 billion. Adjusted for currency and portfolio effects, this corresponds to a low-single-digit percentage increase. We assume that EBITDA before special items will move forward by a high-teens percentage, as will core earnings per share.

As you can see, ladies and gentlemen, we aim to be operationally successful this year as well. At the same time, we are strengthening our innovative capability as the foundation for our long-term success. Bayer has continuously created new products. And we have repeatedly opened up new fields of business and new markets.

In the future we will focus on our highly innovative businesses. We will continue to press ahead with this transformation in 2015. Bayer's transformation into a Life Science company – with “Science For A Better Life.”


Forward-Looking Statements
This release 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.