Most investors would intuitively assume that in the wake of the COVID-19 pandemic in Q1 this year, a multinational German pharmaceuticals and life sciences company might be expected to have been one of the stock market winners during 2020 in terms of Bayer shares.
Indeed, the icing on the cake for the Bayer share price should have been recent newspaper reports that because of its anti-blood clotting properties, aspirin could be used in the fight against COVID-19, particularly given how the virus can cause blood clots in the lungs.
However, so far even this potentially quite spectacular piece of newsflow for the inventor of aspirin has not prevented a decline for Bayer shares from a pre-pandemic high in February at €78 to a recent brief dip below €40.
Monsanto woes for the Bayer share price
But rather than focusing on potential miracle cures for COVID-19, investors understandably focused more on a Q3 net loss of €2.7 billion versus a profit of €1.05 billion the same time last year.
The fact that the market was expecting a €798 million profit made the occasion of the latest Q3 results very much an update from hell. In fact, we are looking at a company in a legal nightmare, as it is embroiled in accusations that links Bayer’s glyphosate weedkiller with cancer.
Rather sadly, the more that Bayer tries to extricate itself from this collateral damage which resulted from its acquisition of Monsanto, the deeper it digs itself and the Bayer share price into a financial hole. For instance, even after making a legal provision of some €9bn, it may have to allow for another €650m.
Unfortunately, even without legal wrangles, Bayer shares are something of a leaky boat with new holes springing up all the time.
For instance, the company has already had to issue a 2021 profits warning and fresh write downs regarding its agricultural business. This was due to the double whammy of falling crop prices and falling demand in key crops such as soybeans.
2020: The year of biotech
Of course, given that 2020 has been the year of the biotech / life science space off the back of the pandemic, one would have hoped that at least as far as Bayer’s pharma division there may be some good news on tap.
Unfortunately, even here the sales over the year were down 1.8%. But this is almost a win as compared to the 11.6% decline in the agricultural part of the business.
For investors looking for the bright spots in terms of the BAYN share price, it was simply a case of following its blockbuster drugs. The first is anticoagulant Xarelto up 9.4% versus the same quarter last year, and a 2.2% rise for macular degeneration treatment Eylea.
Bayer share price: a bottom fishing opportunity?
Ordinarily, investors would be looking at Bayer shares as a bottom fishing opportunity. It is usually the case that an unloved or unlucky company in a strong sector will re-rate once the market has factored in all the negatives, or at least can see estimates where closure might be.
In the case of the Bayer share price we have the hope that it can maximise its blockbusters, and settle its legal issues. We may be near the end of the legal provisions, but it might be that bargain hunters near €40 wish to see more strength in the pharma area, for example positive sales growth, before entering the stock.
The latest purchase of cell and gene therapy specialist AskBio could be a way of accelerating the pipeline of new products to potentially boost the Bayer share price, with a relatively modest $4bn price tag.
BAYN share price: daily chart
Although there has been a recent recovery for the Bayer share price, from just below €40, what may be key to possibly reverse the downtrend in the stock is a break back above former March support at €44.85.
How to trade Bayer shares
1. Register for an account or log in to your existing account
2. Open MT4 either on your desktop or mobile
3. Search for Bayer share in the market watch or symbols window
4. Choose your position size
5. Hit buy or sell, and then confirm the trade