Bayer AG rose to a record after Bank of America Merrill Lynch put the the German drugs and chemicals maker on its list of top European stocks, citing confidence in its drug pipeline and agriculture unit.
The shares rose as much as 5 percent, the steepest intraday gain since June 29, and traded 4.5 percent higher at 75.71 euros as of 12:50 p.m. in Frankfurt. Bayer has returned 48 percent in the past 12 months, including reinvested dividends, amid a series of drug-development successes for the Leverkusen-based company’s health-care unit.
“Strong execution” as Bayer begins to sell new medicines this year will probably boost investors’ confidence that Bayer will get more than 5.5 billion euros ($7.4 billion) in annual sales from the drug introductions, Sachin Jain and Graham Parry, the London-based analysts at Merrill Lynch, wrote in a note to investors today. Average analyst expectations are for 3 billion euros in 2016 sales from new drugs, the analysts wrote.
Investors may be underestimating the potential of its CropScience division this year, the analysts also wrote. Their estimate for the unit’s earnings before interest, taxes, depreciation and amortization is about 15 percent higher than the average, they said.
Bayer made progress last year with blood thinner Xarelto, eye drug Eylea, lung treatment riociguat, colorectal cancer medicine Stivarga and prostate cancer drug Alpharadin. The company gave its peak annual sales forecast of 5.5 billion euros for the new drugs in November.
Bayer announces fourth-quarter earnings on Feb. 28.