Bayer Crop Protection. With Innovation and Investment into the Future. Crop Protection

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1 Bayer With Innovation and Investment into the Future

2 World Market in 2000: Recovery Herbicides: bn Currency 2000 Insecticides: Fungicides: Euro ( ) US$ Source: Bayer Estimates Europe/Intern.: NAFTA: Asia/Pacific: Latin America: Market growth: + 13% in ( + 0.8% in US$ )

3 Market Performance - Key Factors in 2000 Continued low commodity prices and depressed farm incomes Decreasing market in the EU Ongoing decline of Japanese rice area Continuing consolidation process (Industry and Trade) Euro value decline against strong US Dollar Economic improvement in Latin America and East Asia Very modest rise in green biotech crop plantings Market increase of 13% in (0.8% in US$) for Agrochemicals

4 Bayer: Key Factors for Growth in 2000 New Launches Calypso Everest Melody New Products next generation chloronicotinyl insecticide with a new spectrum of activity widens portfolio ensuring long term leadership in this segment new grass herbicide with excellent performance incl. resistant wild oats poised to achieve significant market share in North American wheat market speciality oomycete fungicide already shows outstanding potential in the biggest fungicide segment Win innovative rice fungicide achieves sales of over 50 mio in the third year with further potential Axiom high performance graminicide in corn with strong market acceptance in the US incl. perfect fit in herbicide tolerant crops Teldor Impulse new class botrytis fungicide doubling sales in the second year to over 20 mio speciality fungicide against mildew in cereals and grapes with further 20% sales increase

5 Bayer: Key Factors for Growth in 2000 Outperformers Confidor / Gaucho Folicur / Raxil increased sales again by over 15% to a record high of over 560 mio consolidated sales at 250 mio against fierce competition Seed Treatments sales increase to 285 mio, achieving a market share of 35 % Garden / Prof. Care business unit grew again by 30 % to over 260 mio Strategic Acquisitions Misung Ltd. Bayer-Pursell PBI Home & Garden Flint Mikado successful integration in Korea doubled Bayer market share established as key player in the US Home & Garden market, now 100% owned by Bayer strengthening the European Home & Garden business highly profitable second generation strobilurin fungicide the leading corn herbicide in Europe

6 Breakdown by Business Units 2000 (E) World Market 30.3 bn Bayer 2.46 bn / MS 8.1 % 8% 11% 26% 18% 42% 46% 20% 29% Insecticides Fungicides Herbicides GPC

7 Regional Breakdown 2000 (E) World Market 30.3 bn / + 13% Bayer 2.46 bn / + 13% 15% 14% 24% 14% (14%) 12% (9%) 36% (41%) 16% 31% 13% (14%) 25% (22%) Europe NAFTA International Latin America North East Asia (1999 figures in brackets)

8 Bayer s Operating Margin is Consistently Ahead of the Industry Average Bayer profit 2000 expected to be in the same range as 1999 Operating Margin (%) (excl. special items) E Bayer Ø Top Six Companies* *Calculations based on Reports of - JP Morgan, Lehman Brothers, Credit Suisse First Boston, Dresdner Kleinwort Benson

9 Bayer`s Strength in Insecticides & Fungicides Secures High Profitability Index Insecticides Index Fungicides Index Herbicides Market Development Bayer Sales (Bayer Estimates based on )

10 Bayer`s Strength: Growth by Capturing Opportunities Sales in mio Product Acquisitions New Business and Product Opportunities E 2003 Plan Plan 2001

11 Imidacloprid No.1 Insecticide - Innovative Chemistry and New Applications Boost Sales to Over 560 mio Seed treatment Soil treatment Leaf treatment Stem treatment dressing, pelleting - sugar beet - cereals - corn - sunflower - cotton granules, tablets, liquid applications - rice - vegetables - potatoes - lawns - ornamental plants - tobacco sprays - pome and stone fruits - cotton - grapes brush applications, painting, injection - citrus fruits - hops - pome fruits - ornamental trees

12 The Glassy-Winged Sharpshooter - Evolution Creates New Markets Glassy-Winged Sharpshooter migrates from Citrus to Grapes Uncontrollable bacterial Pierces Disease transmitted by GWSS in Grapes Serious Crop Damage traditionally controlled by Chain Saw Innovate and effective Chemical Control with Imidacloprid

13 FLINT - the New Blockbuster Product Line Trifloxystrobin (TFX) TFX + Propiconazole 1. FLINT product line targeted to reach 300 mio annual sales by 2004, with initial sales in 2001 of mio TFX TFX + Cyproconazole TFX + Cyproconazole 2. FLINT growth supported by growing demand for high performance strobilurin based products TFX + Cymoxanil TFX TFX 3. Strobilurin fungicide sales expected to achieve 1 bn in 2000 and increase further to 1.25 bn in 2005

14 Bayer Regains Technology Leadership in Fungicides Fungicide Business Segment 2000 Main Brands 2005 Main Brands Broad Spectrum (Strobilurin type) Flint / Stratego New Compounds >350 Broad Spectrum (Azole type) Folicur / Raxil Baycor / Sibutrol Bayfidan / Baytan Bayleton > 300 Folicur / Raxil Baycor / Sibutrol Bayfidan / Baytan Bayleton Cyproconazole (EU) New Compounds > 400 High Performance Specialties Melody Teldor Win Impulse Monceren > 150 Melody Teldor Win Impulse Monceren > 250 Basics Antracol Euparen M Others > 150 Antracol Euparen Others < 150

15 Bayer Joins Top League in the European Corn Herbicide Market Acquisition of Sulcotrione (Mikado ) and in-licensing of Metosulam (Tacco ) Axiom Grasses and some broad-leaf Broad-leaf weeds Tacco Broad-leaf weeds Mikado Broad-leaf weeds and some grasses Market share (index) Novartis Zeneca BASF Aventis Bayer Syngenta Bayer BASF Aventis (Source: Agroaccess 1999) (Pro forma based on 1999)

16 Bayer`s Garden Professional Care Business (GPC) Marketing of Products for Non-Agricultural Markets to Consumers (Home & Garden) and Professional Users (Turf, Termites) Home & Garden Termites Turf

17 Bayer`s Rapid Expansion in GPC Continues mio E 2005 % market share World market GPC Bayer sales GPC Market share Bayer GPC

18 Seed Treatment : Win Win Situation for Farmers and Bayer Corn: Seed Treatment Pest: Corn Rootworm Launch: 2001 (USA) Traditional Furrow Treatments New Gaucho /Poncho Seed Treatment Active Ingredient / Acre* Efficacy* Total Costs / Acre* product cost 100 farmer convenience No of Products 5 1 Market Size** Bayer Market Share 12 % 40 % *Based on Indices **Total est. Market Size (USA farmer level, mio US$)

19 Leading Production Know-how at Bayer Dormagen Site Multi-Purpose-Production Investment 110 mio New Powerstation MP Services MP Tankstorage Logistics MP Production Operations Centre / Laboratories and Offices State-of-the-art facility Designed to handle wide range of actives Development of high active substances reduces capacity requirements Streamlined innovative process-development activities Cost effective concentration of smallscale production and pilot plant facilities

20 Pressure on Markets has Led to Consolidation Prices down stagnating markets generics One Strategic Alternative: Industry Consolidation regulatory environment Cost up

21 Consolidation in has Halved the Number of Companies Syngenta Aventis BASF Monsanto Bayer DuPont Dow Makhteshim Sumitomo FMC Rohm & Haas Ishihara Kumiai Uniroyal ISK, Merck, Maag, Stauffer, Sandoz, Ciba Geigy, Zeneca / ICI, Novartis Union Carbide, Schering, Hoechst, RhonePoulenc Celamerck, Shell, Cyanamid Shell USA Elanco Synergies - product portfolio - bundling - market penetration Driving Factors for M&A Critical mass Cost savings - R & D - operations - head count Agrochem Turnover in bn 6

22 Accelerated Innovation in will Secure Growth Prices down stagnating markets generics The Way Forward: Industry Innovation regulatory environment Cost up... in Chemistry... and Biotechnology

23 Milestones from Bayer s Agrochemical Research 2001 Propoxycarbazone (Attribute ) 2000 Iprovalicarb (Melody ) 2002 XXX (Envidor ) 2001 Fentrazamid (Lecspro ) < Herbicides < Fungicides < Insecticides 2000 Thiacloprid (Calypso ) 2000 Flucarbazone (Everest ) 1999 Fenhexamid (Teldor ) 1998 Carpropamid (Win ) 1991 Imidacloprid (Confidor ) 1998 Flufenacet (Axiom ) 1997 Spiroxamine (Impulse ) 1995 Tebupirimfos (Aztec ) 2-3 New Compounds per year

24 Bayer`s Innovative Technology Platform Advanced Seed Treatments Seedling Box Applications Termite Control Genomics Research O-DAT Treatments Gel-Formulations Injector & Paint Applications

25 Aggressive R & D Budget in Comparison to TOP 10 AgChem Companies Secures Future Growth ,4 11,9 12,6 12,5 9,6 10,0 9,9 10,5 11,4 100 mio E 0 Source: Wood MacKenzie Top Ten as % of sales Bayer as % of sales Bayer R&D Spending

26 Shift of Development Spending will Double Innovative Research Investments Index ,7 12,4 11,9 12,6 12,5 11,4 9, E 2004 R-Spending D-Spending R&D-Investment as % of Sales

27 Intelligent Research Brings Bayer Into a Leading Position Goals Milestones Innovative AgChem Products With New Modes Of Action High Efficacy Targeted Resistance Management Lower Dosage per Acre Higher Crop Quality Environmental Improvements Consumer and Applicator Safety

28 Change of Paradigm in Bayer s Research Strategy Innovation through... Conventional Research Goal Compound- Libraries Hits Chemistry New Trade Products 2-3 p.a. Test Systems...New Technology- Platform (U) HTS Action Identification and Optimization Fungi Plants Insects Targets (Mode of Action)

29 Bayer Genomics: Broad Biotechnology Platform Covers All 3 Indications Blueprint of life Genome Cooperation Organism (3 Indications) Plan for building blocks Gene Inhibitor Paradigm (Herbicides) Arabidopsis Instructions m-rna Inhibitor Lion / Prof. Kahmann, TU Munich (Fungicides) Ustilago Building block Protein Genoptera (Insecticides) Drosophila Caenorhabditis Heliothis Essential Function Investment: > 25 mio / year

30 Worldwide Access to Chemical Libraries Conventional Chemistry internal, external Status , ,000 Cooperation Compounds Combinatorial Chemistry Oxford 200,000 internal 100,000 ArQule 250,000 external (Oxford Asymmetry, ArQule, ComGenex, Specs) 525,000 ComGenex Specs 50,000 25,000 Natural Products 15,000 Investment: > 50 mio Total Target ,000 New Test Compounds Multiplied

31 Leading Cutting Edge Research Technology Quantum Leap HTS: 1999 UHTS: ,000-30,000 Compounds/day < 500,000 Compounds/library 96/384-well test plates Cost/Compound: , ,000 Compounds/day >> 500,000 Compounds/library 384/1536-well test plates Cost/Compound: < 0.1

32 Scientific Computation: Intelligent Data Evaluation Bioinformatics Cheminformatics Library design Lead Structure Identification/ Optimization Fungus Plant Insect? Chemical Diversity Analysis of HTS Data Design of Lead Structures in Proteins Co-operation Project with Lion/Tripos: > 25 Mio

33 New High Tech Logistics as Support Tool Bottle store (> 2 Mio spaces) Test plate store (> 100,000 test plates) Test plate replicator Compound bottling Compound bottling Test plate grab arm Test plate replicator Store Robot Investment: > 20 mio

34 The New Route from Idea to Commercial Product Development decision Registration application Lab Field Development Stage Test systems Biological Activity Chemistry Chemical libraries Targets (U) HTS Fungus Plant Insect Compound evaluation for biological toxicological ecological Production costs Market potential Profile Product development Years

35 Research Success Rates Increase Hit Rate New Launches/Year 1:11, > 2 1:20, :38,000 1:46, ?

36 Intelligent Research Multiplies Chances for New Compounds Goals Milestones Innovative AgChem Products With New Modes Of Action Deadline Goal Status End 1999 start routine operations HTS with 12 runs 14 runs Q JV Genoptera integration successful End 2000 start routine operations UHTS with 1 run 6 runs End 2000 Delivery of > 25 assays > 30 Q logistic centre in operation in time End lead structures

37 : New Targets and New Markets Fungicides Herbicides Insecticides Targets Targets Targets total no of targets known whole market 6 bn bn 18 9 bn % of whole market 4 bn 6 11 bn 6 6 bn 2 Due to resistance and environmental concerns new active ingredients with novel mode of action are necessary

38 Europe: Nearly 700 AI s Have to be Re-registered Until 2004 CALL FOR NOTIFICATION TOTAL CALLS EXP. INCLUSION IN ANNEX I (ECPA ESTIMATE) FIRST LIST SECOND LIST THIRD LIST IN TOTAL

39 Bayer Portfolio Europe: Streamlining and Rejuvenation Sales and No. of Bayer Active Ingredients in Europe Total Sales: 890 mio Total Sales: 1250 mio 59 AI s Defense 21 AI s No. AI s 4 12 No. AI s > 50 mio mio < 10 mio 6 AI s > 50 mio mio < 10 mio New Launches 16 AI s

40 Bayer is Well Positioned for the Future Good performance in 2000 Industry leader in profitability Future growth well above industry average Technology leader in Insecticides, Fungicides, Seed Treatments and GPC Young product portfolio 2-3 new products per year from innovative research pipeline Cutting edge genomics research platform Well positioned for future options incl. acquisitions in and Biotechnology