"It started with a kiss, never thought it would come to this"

A few months ago, Bayer revealed they had thrown in the towel in Sub-Saharan Africa and declared they had decided "to hand the business back to a distributor" - whatever that means as I asked in a previous article on that decision. Were they not using a distributor in those four key markets of Africa?

With hands held up high in defeat, they admitted that success in Africa remained an enigma, despite numerous senior executives sent in to "sort out the mess" as we might say. I posted about this at that time and it attracted a huge number of LinkedIn "impressions" or hits.

But that article on Africa was just the tip of a corporate restructuring.

Slowly, the picture emerged of a major corporate shakeup at Bayer to try and sort out their myriad of issues. This article by Fierce Pharma I shared in a post with readers last week reports that the Bayer 'overhaul' is taking shape.

Take a moment to read it. The link to the article is below:

https://www.fiercepharma.com/pharma/bayers-transformation-pharma-sector-begins-take-shape

My thoughts on reading it?

New commercial unit, new head of this and new head of that. Encouraging.

Will it sort out the issues? I have no idea. Only time will tell.

Dismantling bureaucracy is always a good thing. Organisations 'creep' in size, often by stealth. It is important to thin them down periodically.

There are some eminently qualified staff in this overhaul placed in key roles. An observation is that there seems to be a bias on folk heading up key roles with US experience.

In my view, the world pharma business comprises the US and the Rest of the World. I might have been tempted to put someone from the Rest of the World (RoW) in these key roles given that the world outside the US is so different.

But these US candidates seem to have international (RoW) experience (albeit a while ago) that probably made them strong contenders for the roles. I can only wish them well.

Many of the top global pharma companies recognise a need to be stronger in emerging markets. For some, their % of global sales from emerging markets has grown over the past decade from high single digits to high double-digit figures.

Take for instance my former employer, AstraZeneca. It declared sales in its 2023 annual results for Emerging Markets + Established Rest of World (RoW) as just over $17 billion from a total of $46 billion at constant currency. This equates to around 37% of sales from Emerging Markets and Established RoW (everything outside of the US, and Europe).

The Emerging Market sales including China but excluding Established RoW were $12 billion (26% of global sales).

Bayer appears to lack Emerging Market's experience in this shakeup. There may be a narrow bandwidth of the know-how and experience of how to succeed in distributor markets. Such distributor models form a large chunk of business in emerging markets. And emerging markets still present some good growth opportunities when compared to developed markets.

In my personal opinion, having a senior Board member or Advisor with significant emerging markets international experience can be of immense value. Especially distributor commercial model know-how and experience. There is a scarcity of folk with a deep and broad cognitive bandwidth of distributor models - those that work and those that don't. I cover these in my forthcoming book.

Things seem to have worked out very badly for Bayer in Africa for them to join other companies to throw in the towel. Africa is one of the largest emerging markets comprising many of the world's Low-to-Middle Income Countries (LMICs).

Even a shift to a different portfolio - possibly a specialist portfolio in high-price immunology and oncology products can appeal to some of the major emerging markets such as China and India. The go-to-market models for these two countries are very different to the US and European countries.

The article states that Bayer will reduce dividend payments to rock-bottom minima. However, this needs to be balanced by early quick wins to give confidence to shareholders that a new team can deliver returns in the future.

But quick wins in this context are like a magician pulling rabbits out of a hat.

No mean feat.

I ponder on three things in my mind about all these issues that Bayer is facing:

1. How did the Executive Board allow the business to get into such a shape? The job of the Board is to be a radar mechanism looking out ten years scanning the horizon, identifying big ticket threats and issues that are looming and steer a path appropriately to avoid the threat or mitigate its impact.
2. I have an impression the Board appears to have been caught sleeping behind the wheel of this juggernaut. How else can one explain this collective set of challenges they have declared? They are now taking drastic actions to put the juggernaut back on track.
3. I cannot help but think that splitting up the business units now, may be a stronger option than doing it down the road when more disruption is going to happen.

Of course, choices remain the prerogative of the Company and I cannot interfere.

They know much more internally about their businesses than me as an outsider and therefore they deem their decisions to be the right ones at this moment in time.

But I speak as someone who has seen how ICI in the 1990s split up the business to create a focused pharma company called Zeneca. Unshackling the pharma business from the different cyclical drivers of a chemicals business was, in my view, the best thing that ever happened for Zeneca.

"You are the best thing that ever happened to me" is a song sung by Glady Knight. It resonates with me on the demerger to create Zeneca.

Could a split-up of the business units in Bayer now be "the best thing that ever happened to Bayer?"

Is it time to fire up the chainsaw and cleave the mighty entwined oak trees from each other rather than doing it a few years down the line?

About Samkoman Consulting Ltd (SCL)

Amit Vaidya is the Director and owner of SCL based in North West England. He set up the company after a successful career at AstraZeneca for more than 20 years of which the last seven years he was Territory Director Africa based out of England.

SCL works exclusively with clients across Africa to help with international expansion into new markets; address performance issues in current markets; and develop strategies with companies that set an ambition to be more successful but need help with "how to close the gap between where they are today and where they aspire to be in the future".

If you want to address some of these issues in your Sub-Saharan Africa or any emerging markets or distributor model business, you can reach out to me and explore in a free 'discovery' Teams or Zoom call by booking a slot directly into my calendar using the link below:

https://www.calendly.com/amitvaidya2021/