Bayer Aktiengesellschaft (BAYN) Earnings Call Transcript & Summary

Good afternoon, and welcome. I'm Oliver Maier, and I lead Investor Relations here at Bayer. It's a pleasure to be with you today for our Annual Crop Science Research and Development Pipeline Update. Today, we like to solely focus on R&D with presentations and the following Q&A session. We look forward to this update every year as it gives us the opportunity to share with you the progress we are making in our Crop Science pipeline to create value for our growers and owners alike. To lead that specific discussion today, I'm joined by our new President of Crop Science, Rodrigo Santos; as well as Bob Reiter, who leads R&D for Crop Science; and Jeremy Williams, our Head of Climate LLC and Digital Farming. The team will provide a formal presentation and update on the pipeline, and then we will shift into Q&A, approximately 20, 25 minutes. You will find the instructions for participation in the Q&A in the Zoom chat, and I will also remind you later on. You will find today's slides posted in the Investor Relations section of bayer.com. As always, I would like to draw your attention to the cautionary language that is included in our safe harbor statement as well as in the materials that we've distributed today. As -- before I hand it over to Rodrigo to begin with, I'd like to share a few comments as this will be the first time for many of you to meet him. I had the pleasure of first meeting Rodrigo at our 2019 Innovation Showcase field event for investors where he took the opportunity to share the new innovations we had coming to South America, specifically the next generation of Intacta soybean trait technology. Under his leadership of South America, he was instrumental in the broad scale adoption of this technology, a first for the industry and not without its challenges. And more recently, with the creation of the largest digital ag market base in Brazil called Orbia, he has been leading yet another transformational agriculture. This, combined with the double-digit organic growth we've seen annually in Latin America since 2018 and his more than 25 years of experience in the industry, in my mind, is very impressive. I'm really excited to see where Rodrigo will take our global Crop Science business. With that, it's my great pleasure to hand it over to you, Rodrigo.

Thank you, Oliver. Good morning, good afternoon, everyone. Thank you, Oliver, for your kind words, but especially, thank you for you to joining us on this session today. I couldn't think on a better way for me to start my journey with you on this new role than our pipeline review. As you know, our innovation is the heart and the soul of our Bayer Crop Science division. That innovation will help us to shape the future of sustainable and digital agriculture. And that's why we are very excited to share with you today some of that pipeline that we're going to discuss. And to be able to do that, to shape this future, we have 2 priorities in the Crop Science division: to perform and to transform at the same time, and that's enterprise leadership. Of course, about performance, we're going to have a unique opportunity to talk about that on the earnings call on 1st of March, where I will have the opportunity to share with you a lot of the result of 2021, but also the outlook for 2022. But as you can see, of course, the pipeline has an impact not only on our performance, but also our transformation. And today, I would like to invite you to watch the pipeline review, putting yourself -- and that's why you have a picture of a farmer here, to put yourself on the farmer's perspective. When you think about the future of agriculture, when farmers will need a very complete solution, just think about that. And let me share one brief story here. I had the opportunity to talk with one of our customers recently, [ Christian Ovane ]. And I was talking to him, and he was sharing with me that he has now 4 years of data, of field view account. He's a 5-star customer in our Orbia marketplace platform. He's also part of the carbon program, and he has 2 outcome-based models on his operation. A lot of innovation coming to his farm. As a consequence of that, he gave us on return 100% of his corn seed now is planted by with DEKALB. And he's also 80% Intacta. And he has more than 50% of his crop protection products with our products, fungicides, insecticides and herbicides. And that's a little bit what my invitation for you today. Our goal and what we will see here today is really to help the farmers to be successful. If we help them to be successful, we will be successful. And then I'm sure that we're going to be able to grow above market and really return superior for your investments -- superior returns to your investments. And I really hope that you get the same conclusion that [ Christian ] have. When I asked him, and I'd normally do that question to the farmers, how Bayer can help you to be successful? He replied to me saying, I have no doubt that Bayer is the innovation company that can help me the most to be successful. So thank you very much for joining us today. I'll be back with you on the Q&A. And with that perspective, I will pass to Bob Reiter so we can start the pipeline review. Thank you.

Thanks, Rodrigo, and hello, everyone around the world. It's a pleasure to be here with you again and to share with you an update of our terrific pipeline that we have. But I want to start with the topic that's almost as important as our customers, which is the topic of sustainability. Because for me, one of our goals and objectives in terms of our leadership position and our objective of helping to shape agriculture and serve our customers is how we can help agriculture address the global challenges that you see. And so what's very proud for me and I think some of the commitment that we have and the work that my team is doing is our goal at Bayer Crop Science is to help customers not just feed a growing population that's going to exceed 10 billion over time, but also how we address agriculture in terms of making it much more sustainable. Every product that we generate at Crop Science, in my opinion, helps to deliver on this goal of balancing between sustainability and productivity and serves our customers in the very best way, whether they're large or whether they're small. And how do we do that? I think it starts with an incredibly talented organization of over 7,000 employees in Crop Science R&D that help us to deliver on this mission to serving our farmers. Of course, we also have tremendous capabilities within Crop Science that allow us to also do that with unparalleled capabilities in breeding, biotechnology, crop protection, biologicals and, of course, you'll hear later from Jeremy about digital. And it's our committed investment where we invest over EUR 2 million, nearly twice as much as the leading competitor. These are the key facts and these are the key elements of how we can deliver such robust, effective and valuable pipeline. But we don't do it all ourselves. As you saw in the previous slide, we have over 100 key collaborations. Many of those are stand-alone collaborations with various partners, including academia. But in addition to that, we also take advantage of our Leaps capabilities where we're making investments in various categories that we believe are critical to the future of agriculture, and you can see them categorized here on the slide. In fact, in 2021, Leaps made 5 additional investments, which now brings our total to over 21 distinct investments in terms of helping to achieve greater sustainability in agricultural production. I want to highlight just a couple of them for you in terms of some, I would say, really critical important solutions that they've been able to deliver in the last year. The first of those is Earth Bio. We're working with Earth Bio to look at how we can deliver a brand-new solution to the crop protection space. And I'm excited to tell you the fact that we have first proof of concept of the use of protein degradation as a solution in agriculture in terms of controlling various kinds of pests, a very exciting early breakthrough in this space. In addition to that, our joint Bio joint venture has made its first field trial in the nitrogen fixation corn space, also with exciting early results. While these are very early results in our pipeline and very early results with collaborators, I think they point out 2 key elements: first is the harnessing of external innovation; and secondly, leveraging what I consider to be breakthrough opportunities that will serve agriculture and help Bayer be successful in the future. When we look at our own pipeline and the work that we're doing, I'm very proud of the fact that we continue to deliver outstanding value and continue to make tremendous progress in our pipeline overall. I think what's really differentiating this year is the fact that we have some key new launches in important areas across our market spaces that we operate in. And in addition to that, we're continuing to make great progress on some really breakthrough and foundational new technologies that I'll talk about later. But it, of course, starts with the fact that we continue to deliver excellent and outstanding products through our breeding programs with over 500 varieties and hybrids across a broad spectrum of crops, whether those are row crops or vegetables. The multitude of new formulations and registrations that helped our customers in terms of taking advantage of the tremendous capabilities and products that we have in our crop protection space, our biotechnology advancements and, of course, the critical elements in terms of how we can harness and bring all these pieces together with digital, it all adds up to nearly EUR 30 billion in peak sales potential when we look at our pipeline. But it's not back loaded because, as you can see from the slide, nearly 80% of it will be delivered by 2035. I want to start and talk about the space of breeding. And here, you've got a beautiful shot of one of our new design centers in Petrolina, Brazil. These design centers which we have around the globe are very critical to helping us in terms of accelerating our breeding processes, whether we're delivering new products in Brazil or new products in North, South America or Europe or Asia. These are key to our overall strategy of how we continue to accelerate in breeding. And when you look at our vast experience and our capabilities in breeding, it's always exciting in terms of what I continue to see the tremendous progress we make in corn where, of course, we start with the benefit of having #1 or #2 positions in every key market around the globe and where we continue to grow market share in those key geographies. And our leading position continues to improve based on our technology and capabilities and help us to deliver additional value to our customers. What I'm also very proud of are just a couple of proof points. First of all, in the U.S., if you look at our branded share with our DEKALB and regional brands, we now have the #1 branded share position in the U.S. In addition to that, when we look at the National Corn Grower yield trials that they have every year, our genetics won 21 of 27 of those different trials. I think that's a testament to the tremendous work of our breeding organization and the delivery of products that make a difference for farmers. But it doesn't just start and end with corn. It continues with the other crops that we focus on. The deployment of many new products in soybeans, in particular with our XtendFlex platform, where we have a clear genetic advantage against the next competitor with Enlist; or it's the 80 pounds of lint plus that we deliver through our Deltapine brands and the many varieties that we deliver to growers in the United States; or in our vegetable space where around the globe, we participate in many different crops and we sell many, many different varieties, all often leading in their space, in their geography and in their market segment. But we're not stopping with how we do it today. We're continuing to keep an eye on how we can do things differently and take advantage of tools that we've put into place over the last several years. And I'm excited to tell you about the next generation of how we intend to do breeding, which we now refer to as precision breeding. The way I want you to think about precision breeding is the following. In the past, we would take our germplasm and our genetics, and we would use sophisticated tools to sort through and identify the very best genetics, test them across many environments and then decide where and when those different hybrids or varieties would then be placed in the market. We now have capabilities through our vast genetic understanding, our genomic understanding, our field sophistication with the data that we today collect, the calculations that we can make with petabytes worth of data and artificial intelligence that now allow us to combine environmental data, different technologies that allow us to simulate and putting it all together where we can design genetics for particular environments, for particular grower conditions, its customization at the front end before we even begin the breeding process. This is foundational and revolutionary and will help us to continue to increase the amount of production that we can deliver to every grower with our products in the future. It's an exciting time. And for someone that's been connected to breeding over many, many years, this is going to be a transformational shift in terms of how products are going to be produced through breeding in the future. Let's shift gears and talk about biotechnology and the traits that we bring to the market to help protect that tremendous productivity that breeding can deliver. It's an anchoring point of our nearly $2 billion licensing business that we have. And that EUR 2 billion business, of course, is delivered through our licensing of our seed and our trait technologies where more than 90% of that is actually licensed through small and midsized companies. So it's a key part of our business and it's critical, and we continue to deliver next-generation technologies that are important for growers. So let's take a look at those. It starts with soybeans and herbicide tolerance where weed control for growers continues to be a very critical part of the trait package that they look for. Last year, we brought XtendFlex into the market, and we had more than 16 million commercial acres in the U.S. and Canada. But we're not stopping there as we continue to evolve with our HT4 platform, which will bring additional modes of action to growers, give them additional optionality and help them to manage weed resistance with 5 modes of actions. And you can see the broad spectrum of different modes of actions on the slide. And not very far behind that, we have our HT5, adding PPO tolerance as well to the herbicide tolerance package of HT4. What's been exciting for me to see is that in the past, from Roundup Ready 1 to Roundup Ready 2 Yield, there was nearly a 20-year gap from one technology to the next. These new technologies are roughly spaced out in 5-year increments. And so it's tremendous to see the progress we've been able to make by continuing to bring upgrades to the grower and help them with their tough challenges like weed control. But it's not just about the U.S., it's also about other key markets in soybean like South America. This year in South America, we launched our Intacta 2 Xtend platform, and we have been able to achieve that on over 800,000 acres this year. Our plan in 2022-2023 is to continue to grow the Intacta 2 Xtend platform on 6 million acres. That's a tremendous growth in terms of and a clear testament, I think, to the experience that growers achieved and were able to see this year with our leading genetics and a tremendous technical platform that brings additional insect protection with multiple modes of action and additional weed control capability. But we're not stopping there. We have in our pipeline our Insect Protection 3. And we're just announcing also that we're advancing our Insect Protection 4 to Phase 1 in our pipeline. These are going to bring differentiating new proteins to help for insect protection in the soybean space. And it's a testament again to the tremendous capabilities and our ability to continue to bring upgrades, additional value and protect growers with this incredibly powerful technology. In cotton, we're excited that we are launching our ThryvOn technology. We have a stewarded launch this year with growers getting the experience of having the first-ever sucking, piercing insect technology to have access to. And it complements, of course, our Bollgard and our weed control Xtend franchise. But coming together with ThryvOn in the future, we have, just like you've seen in the other crops, our fourth-generation weed control and fourth-generation insect control platforms with HT4 and Bollgard 4, again, bringing additional modes of action for weed control and additional and new proteins to help continue cotton farmers' success in terms of controlling key insects and key weeds. It's all about delivering on the highly valuable cotton franchise, which is more than EUR 500 million of business for us. Another exciting launch that we have is our Corn Rootworm 3 technology, which is based on the very novel RNA interference capability and technology, which differentiates it from the PT proteins that exist in the market today. We're harnessing the power of Corn Rootworm 3 across the Americas. And pending some approval in the U.S., we will be able to launch with 3 different product types in Brazil and in the U.S., taking full advantage of this brand-new technology that will be a cornerstone over the next several years of corn rootworm control. And it's very, very timely given that there is significant increase in pressure with corn rootworm last year and anticipated to continue this year in the market in the U.S. Of course, I can't have a pipeline update without talking about the continued progress we're making in short-stature corn. This is a key pipeline product for us, and we continue to make significant advancement. Our breeding platform, which is our first opportunity to launch short corn, continues to advance, and we're now in a position to have our first commercial trials next year. This is an exciting milestone for us to be able to achieve. And we're excited to be able to bring terrific products as we start the journey of bringing short-stature corn to the market. This will help us to set the stage for the real key product, which will be our biotechnology product that we will launch later in the decade. This continues to make good product in our -- progress in our pipeline. And of course, because we see a fit of short-stature corn across every corn acre around the globe, we're also working on our gene editing solution that gives us 3 ways to be able to deliver this exciting and valuable product to the market. And the reason it is such a great fit is because it just provides some incredible capabilities for growers in terms of some things that they directly see like standability, as you can see on the picture on the left, where you can see short-stature corn standing after significant wind events, whereas conventional corn has been lodged over; or the fact that it allows growers to start to rethink and reimagine their agronomic practices by having infield access with their spray equipment instead of flying over with a fungicide; or if they need to be able to supplement with fertility and make that late-season nitrogen application to maximize the productivity of the crop. This infield access, combined with these direct features of standability, I think, are just tremendous value contributions for growers. It allows us to also help with growers to reimagine how we work together with them and build systems and solutions. We need to layer over the top of all of this data and digital because the combination of knowledge, combined with transformational products like short-stature corn, is the vision of what we have for agriculture in the future. We've been showing growers and talking to them about short-stature corn, and it's exciting for me to see the very high interest that growers have. In fact, when we walk growers through plots and ask them, would they plant short-stature corn? You can see that 75% of growers would say they would plant nearly 1/3 of their acres if they have short-stature corn available to them. This interest is so high. It's actually higher than some of the early biotechnology products that we developed. The grower excitement is literally palpable, and I think it's going to be really game-changing to see how growers take advantage of this technology in the future. And we'll be excited to launch in 2023 and continue to develop the market for short-stature corn over the next several years. Let's shift gears and talk about Crop Protection, a key portfolio for Bayer and a key enabler for growers to continue to deliver productive and sustainable agriculture for the market. We start with a terrific base. One of the proud things at Bayer is the fact that we have a very broad portfolio serving growers across the world in all of the key market segments, whether it's in row crops, fruits and vegetables and horticulture or the food crops. We have a tremendous environmental footprint with our products. And that's a great position to start from and one that we're continuing to be committed to is how we continue to discover and develop highly sustainable products that not only deliver for growers' value, but also ensure that we continue to deliver sustainability in agriculture. The space, of course, is changing and new technologies are emerging. And we're adapting our formulations so that growers can take advantage of new technologies like drone application. But I think one of the big key unlocks here is how we're going to be able to leverage and harness digital to help a grower really optimize the use of crop protection products. I believe this is a foundational enabler. And we are thinking about our own discovery and development pipelines on how data will mesh together and that knowledge will mesh together with what we do at the front end. Our strategy continues to be one of continued innovation in this space, whether it's through new formulations like Fox Supra, which will bring in a new mode of action with Indiflin in terms of bringing a brand-new mode of action for soybean rust into that key market; or it's bringing new active ingredient like Xivana, where we'll help growers achieve solutions that are environmentally more friendly and yet provide best-in-class control of key diseases like white molds in key products across the horticulture space. It's our commitment of innovation not just in formulation development, but also our continuous new pipeline where we continue to deliver new actives every year into the market space. What's exciting for me is not only that we continue to do that across a broad spectrum in fungicides, but also in classes like herbicides, whether it's bringing new formulations like Mateno or game-changing technologies like our new herbicide that continues to move through our pipeline in Phase III. We've talked about this molecule in the past, and I'll just remind you again that this is the first new mode of action in the row crop space for weed control in the last 30 years. It's a game-changing technology, and it's foundational to our commitment of bringing new modes of action into the market. And the team continues to be excited as they look at how this product is performing in the field and where we'll be able to bring a fit for many different markets into the future. One of the things that I think we want to make sure that you understand very, very clearly is our incredibly strong commitment to differentiating ourselves from others in the kinds of products we intend to bring to the market in crop protection in the future. We've completely retooled and redesigned our discovery engine, using state-of-the-art technologies that move us away from screening to being smart screeners by using target-based discovery and that many of the facets that I described for you in precision breeding also apply here. It's about data, new types of data and being very, very focused on taking advantage of key elements of artificial intelligence, design and screening and bring all those things together. We have in our pipeline nearly over 50 new targets that we're exploring. And you can see that in early discovery, 100% of our target discovery is focused on new modes of action. And we have rich early development capabilities. And in our early research and in our advanced research, you could see the number of new modes of action in terms of their total contribution to the work that we're doing. So over the next several years, we'll be able to announce in development brand-new molecules that are going to represent new modes of action in insect protection, disease protection and weed control. It's going to be exciting to see how this shift in our strategy really pays off and helps growers and brings brand-new solutions in the market. I want to close by talking about biologicals because they also represent a key element that's helping growers with sustainable solutions in agriculture. We have the #1 trusted brand in the biological space. And we have a large portfolio of products that we deliver to the market in both seed growth and also in direct application through foliar and soil application. It's a great testament to the power of Bayer to be able to use our crop protection products and biological products to better serve customers. And we're actively working to in-license additional products into the biologics space to serve unmet needs for growers. Our vision of how to best use biologicals is often together with existing chemical crop protection products. It creates a very nice 1-2 punch to solving grower problems, and it also helps to provide solutions that open additional markets for growers. You could see in the examples here, whether it's leveraging our genetics with some of their inherent protection against disease combining with a biologic solution or it's the combination of a chemistry like Sivanto together with FLiPPER that helps a grower to manage their crop in the best way possible and bring harvestable fruit to the market. This combination of bringing our products together and leveraging biologicals in a very smart way, we see as a very important part of how we're going to deliver additional solutions to customers. With that, we'll shift gears and we'll talk about digital, and I will turn it over to Jeremy Williams. Jeremy?

Thanks, Bob, and it's a pleasure to be with all of you. No matter where you look today, whether it's agriculture, automobiles, service industries, the use of data and analytics continues to advance at really at an incredible pace. We led the industry with our foray into this space with the purchase of The Climate Corporation a few years ago, and that really began the push into how the data was going to transform and ultimately benefit agriculture. Today, data informs our interactions with customers as well, as you heard from Bob, the creation and deployment of our products. But really, this is just the beginning. The possibilities are really just getting started. We now see the opportunity to monetize data in 3 distinct areas: first, by driving franchise value; second, by allowing us to access new downstream value pools; and third, by enabling new digital platforms. Well, let's start with a quick recap of where we are today. Last year, we reached more than 180 million subscribed acres in 23 countries. And we've continued to earn the distinction of being the #1 brand in digital ag, given the breadth of FieldView's capabilities and insights. Now a few concrete examples of the value of the FieldView platform are highlighted here on this slide. Notably, we see higher sales of Bayer products when growers can compare and track performance through a digital interface. For example, within the U.S., for corn and soybean growers using our FieldView tools, for a few years, we see increased seed sales. In fact, sales to Bayer corn seed customers who use FieldView Plus for the past 2 years were more than 5% higher than for nonusers. Now the increased transparency by the FieldView platform and what will come from additional innovation like Seed Advisor and Seed Showcase, we believe this will further demonstrate the strength of our portfolio and drive additional sales. In addition, as we go forward, we will use this platform to enable tailored solutions and unlock growth from new digital business models, and this is really where we see the future headed. So now beyond being able to just enhance the sale of existing individual seed or crop protection products or the tailored combinations I mentioned, FieldView will also allow us to access entirely new value pools, and one example of that is our work in carbon. The quality of the machine-generated data, for example, from our FieldView Drive, that will be key for the verification and the integrity of carbon quantification. Now this is a rapidly evolving area. We've made some big strides, but we're really just beginning to tap into what is a very significant market valued at more than $200 billion annually. And importantly, it's a market that really aligns with where society wants us to go in terms of providing sustainable solutions. Now the actual Bayer Carbon Initiative launched in the mid-2020s already has approximately 2,500 participating farmers in Brazil and the U.S. alone. These farmers are currently working with Bayer to create carbon assets. These are things like offsets or insets from emission reductions. You may have seen our recently announced agreement with CHS, the largest ag coop in the U.S., serving over 75,000 growers. Now this will enable the acceleration of grower participation in the creation of those carbon assets. Now in addition, the Bayer Carbon Initiative is expanding to create low-carbon feed, fuel and fiber products with the announcement of Project Carbonview in the U.S. Now this is a collaboration with Bushel and Amazon Web Services. And it really is the first use case that aims to develop low-carbon ethanol by quantifying, monitoring and tracking reductions in the carbon footprint along the value chain. And we are also very proud to announce today that The Andersons, one of the leading ethanol producers in the U.S., will also be joining Project Carbonview. But these are just a few examples that scratch the surface of how data and analytics can enable climate-smart business models at Bayer. They help us inform grower decisions and ultimately maximize sustainability, productivity and profitability of grower operations. So let's now talk briefly about what we see as the third value driver, and this really comes from being the platform of choice and participating in a broader ag and food ecosystem. Now there's a lot of work happening outside of Bayer, and we intend to really harness and leverage all of that external innovation. For example, we now have more than 70 partnerships on the FieldView platform, and we're currently working and we are constantly working to expand this ecosystem because it brings additional value to our customers. But very importantly, recently, we announced a partnership with Microsoft that we think will be transformative because it combines our expertise in agriculture and data science with Microsoft's cloud technology and business-to-business solutions. Together, we expect we will bring new infrastructure, new foundational capabilities, things such as better farm management, the ability to more effectively ingest satellite imagery and data from OEMs. All of this will allow us to accelerate innovation, boost efficiency and, importantly, support sustainability across agriculture and broader food value chains. This will offer more partners the ability to innovate effectively in agriculture. Now we also want to make sure we offer optimal digital platforms for all of our customers regardless of where they farm. In Brazil, for example, our Orbia marketplace helps growers compare offers and purchases, and they can also access credit, collect loyalty points and trade farm outputs. It is an incredibly popular model. And it's reaching now more than 185,000 farmers, and it covers over 70% of planted acre -- acreage in Brazil alone. But importantly, Orbia is growing and it's expanding with that throughout Latin America. So if you step back and think about what we shared today, we have a really strong, a very long and extensive track record of converting R&D into compelling value-added solutions for growers that enhance sustainable productivity on their farms. This update is just another example of that long track record that we have. Now we expect a strong return on the EUR 2 billion annual investment you heard about from Bob with a pipeline that has the potential to produce up to EUR 30 billion in peak sales. Now we're complementing that internal R&D with our Leaps investments, which helps us to transform the long term while delivering in the near term. As you heard from Bob, we've commercialized hundreds of hybrids and varieties and protected their yield with new traits, new crop protection technologies, and these include some of the trait launches you heard about from Bob and some of the new product registrations. We are not only performing in our core business, driving leading innovation, but we're also transforming agriculture with our digital farming solutions, moving into new value pools like carbon, but also while optimizing our portfolio to ultimately benefit our farmer customers and broader society in the planet. Now we look forward to updating you as we continue this journey. Thank you again for joining us today. And with that, I will hand it back to Oliver to begin the Q&A. Oliver?

Thank you very much, Jeremy. Also, thanks to you, Bob and Rodrigo, for your insights. And with that, we'd be happy to address potential questions. [Operator Instructions]

I've seen some questions already. And I think our first question comes from Vincent Andrews. Vincent, you're first.

I wanted to ask on short-stature corn. You mentioned a EUR 1 billion target for revenue in the North American market, and I'm wondering if you could just break that down for us. Is that sort of if you assume it got on the entirety of the North American market? Are you just talking about the existing acreage that you sell yourself and with your regional seed brands and so forth? And within that, how do you define the value proposition to the grower in terms of what is it that they're paying for, whether it's a yield benefit or whether it's a convenience benefit or reduction in crop chem or fertilizer use? How is that pitch going to be made?

Thank you, Vince. And Bob, I'll let you answer first, and I will complement.

Yes, sure. Vincent, thanks for the question. So starting with sort of the picture of what the total value comes from, it's a combination, of course, of our existing footprint. And I think we're expecting, of course, that we can gain share in the market with such a product like short-stature corn. So the core of it will come from our existing footprint, but we would anticipate some share gain built into that as well. So that kind of gives you the full picture of it. As far as the value proposition pieces, it's all the things you just described, right? So there are many different attributes and features that I think the product delivers, some of them direct where I think the grower is going to -- for example, if you have standability, and I think growers recognize the value directly of standability, there's going to be a value proposition that we'll price into that for. But in addition to that, these, I'll call them, simplicity and additional features that bring additional value to the grower are going to get priced in as well. So it's really that full comprehensive package that we'll eventually want to price into.

And if you allow me, Vincent, and you will probably remember when you were visiting São Paulo, right, we talked a lot about how we engage the farmers on that value proposition, right? The similar approach here. We have, this year, thousands of trials, and we are working. I had the opportunity to be in highway and visiting customers with short-stature corn. We are engaging with them. We have those trials to really discover that value, and then we're going to have the value-based proposition that we normally have, and we share the value with the growers. But this season is a very important season for us because the trials are in the market, and we're going to see a lot of customer data coming to the pipeline as well.

Thank you, Rodrigo. I hope that answers your question, Vincent. And then the next question would come from Michael Leuchten, UBS. Michael, you're next.

Two questions, please. Just going back to short-stature corn and thinking about the supply. If this product lives up to expectations, I think the demand, as you had in your survey slide, will be quite substantial quite quickly. Do we need to worry about how you phase that into the market? Is there enough supply from the go? Or will it have to be somehow staggered? And then just quickly going back to your comment on Orbia, is that a way of sort of cutting out third-party middleman over time? Or is that the wrong way to think about that digital marketplace?

Thank you. Thank you very much. Bob, I'll let you answer the short-stature corn, I come back on the Orbia, if you don't mind. And I think to reinforce the breeding, biotech and gene editing aspect of short-stature corn, Bob, please.

Yes, precisely. So the way I want you to think about kind of the scale-up and ramp-up of this is we're going to really use the breeding trait as a way of introducing the technology to growers and build interest and confidence in the platform, right, and to really establish the various value propositions in the market. So initially, it's going to be a somewhat slow ramp as we take advantage of the breeding technology. And there are some limits in terms of our genetic deployment that we can have with the breeding solution. When we get to the biotech solution, that's the big unlock because that really creates the opportunity for us to put it broadly across our germplasm, which then services many, many, many acres in the market, as the question earlier from Vincent alluded to. And we get the full unlock of the technology. And by then, we should have also matured the value proposition with growers. Seed supply itself, given that we can put it and deploy it across our entire genetic platform, we have the sophistication and the experience on how we quickly ramp up in terms of seed supply and access to the market once we've established all the other parameters.

Thank you, Bob. And on the Orbia question, interesting that I'll use the example of Brazil, we have 30% of our sales that are direct to farmers, right? And 70%, you have either dealers or corporates participating on the process. The beauty of Orbia, that is inclusive, right? So the marketplace today, it's including these dealers on that offers. Not only offer our products, to be clear, but also fertilizers and other products to provide a complete solution for the farmers. So the input marketplace is growing a lot on that one, but also the trade one that was mentioned by Jeremy. So if you think, the goal here with Orbia is that when you combine FieldView and all our agronomic data and you have the marketplace platform, you can provide a really comprehensive digital experience for the farmers in South America. And potentially in the future, we are expanding that.

Great. Thank you, Rodrigo. Thank you, Bob. I think next in line, I see Dominic, Dominic Lunn from Credit Suisse.

Two questions, one big one and one with a few more parts. So on the next-generation herbicide, the new mechanism of action, can you just remind us on any time line? So any time lines for next steps or data or launch perhaps? And then secondly, could you just give a bit more color on the glyphosate third-party supply issue? So I think you said it will take about 3 months to resolve, but just trying to get a sense of what this means to Bayer. I think you talked to a marginal impact on full year '22 production. But in the near term, could you lose out on some U.S. orders? Or have the deliveries already mainly occurred? And what about LatAm? And could you offset some of that volume with price?

So let me address that upfront, Bob, then I pass to Bob one in here, new herbicide. On that one, let me be clear, it's a marginal impact on our overall production of the year. We needed to issue a force majeure for legal reasons as to ensure that we have some of the impact here, but it's marginal. It's one supplier that we have that had a mechanical issue on their site. That has an impact. That will have an impact now in Q1, Q2. When you think about the overall year of production of glyphosate, this event is a marginal one. Bob?

Yes. And on the herbicide, so end of decade, Dominic, is the answer, pending regulatory approval, which it has a beautiful safety profile, but we still obviously have a lot of regulatory work to do across the regions. So it will be end of decade.

Great. Thank you. Next question I see from Keyur, Keyur Parekh from Goldman Sachs.

A couple of questions, please. One, kind of as we think about the time lines from the short-stature corn perspective, so you're kind of saying you're going to start the U.S. commercial trials in 2023. So what does that mean relative to it you being -- actually being able to commercialize? Should we think of that as '24 or '25? And then separately, kind of on the biotechnology side, again, kind of sticking with short-stature corn, should we think of that as being '26, '27 kind of commercial impact to your business? Secondly, as I look at kind of the slide you have on longer-term kind of commercial value of this, it feels like a large part of that is linked to kind of the short-stature kind of both corn and soy that you are talking about. What do you see as kind of the risk of disappointment there between now and kind of you being able to launch this product? Because as I see this, kind of you're saying 40% of EUR 30 billion by 2031, so about EUR 12 billion or so, and all of that corresponds to the corn value, soy on top of that. So about half of that EUR 30 billion seems to be linked with the short-stature part of your kind of R&D program. So just wondering how you would characterize any risk there.

Bob, you go there?

Sure. So let's start again with the scale-up of it. So as we are '23, right, '23 will be basically an experience with a few hundred growers, right? This is just really to get the market and get grower experience building the foundation. And then, of course, it will be expanding into the thousands and probably tens of thousands of growers as we get into '24, '25 and beyond. Our goal is to get some amount of short-stature corn on to -- with every grower where -- a large proportion of the growers. So they're really starting to experience the product and learn and, with us, together unlock the value proposition of the entire system. The overall impact in terms of acreage is going to be somewhat modest because, again, we can't deliver it across a broad amount of genetics. And we're really there to help make sure that we can unlock and make sure that growers have a very, very positive experience with the new technologies that candidly means they're going to be farming a little differently than they have in the past. So the big -- again, the value -- big value proposition comes with the biotechnology trait and then as we continue to expand that. But that overall contribution to our total growth potential and our peak sales potential, candidly, by 2030, is still quite modest because our -- the rest of our portfolio has huge and substantial contribution to our overall incremental growth in our base. So short-stature corn is obviously a really important product, but it's far away not going to be the biggest contributor when I compare it to everything else that we've got because we've got large contributions coming from our existing base and the growth that we see in that existing base with all the other things that we talk about. So short-stature corn, important. But in the broad context of everything else, it's a great add, but it isn't the one that's going to break our back if, for example, it's a bit slower or there are some other things that happen.

So apologies, maybe I...

Okay. Thank you, Bob. Yes, go ahead, Keyur.

Maybe I missed your time line on the biotechnology short-stature because I don't think you gave us a time line for that.

So roughly, assuming regulatory approval, we'd be launching around '27, and then we would scale from there. But as you know, if you look back and let's use our Intacta 2 Xtend example, right, typically, you're launching on a rather limited number of acres, so it's usually a few hundred thousand. And then in the second year, you get into the real ramp-up. So if we get an approval in '27, we may be launching in the '27 season or early '28 season. Then the big ramp-ups happen in the follow-on years. So -- and you typically, with these technologies, you're talking about getting to your peaks over a 4-, 5-year period. So that hopefully gives you a little more context on how the ramp-ups might look.

Thank you, guys. Next question comes from Christian, Christian Faitz from Kepler Cheuvreux.

Two questions, please. First of all, in FieldView, you said you were present in 23 countries. Which would be the next major markets you would be looking at introducing FieldView? And then second, coming back to the new AI in herbicides, will this in your view eventually completely replace other modes of action, at least until new resistances pop up?

Jeremy, do you want to start providing a little bit of the overview of new FieldView expansions?

Yes, and great question. So FieldView, as you said, has now very extensive global reach. I would say the next countries are going to be, for example, Australia and additional expansions in South America and Europe. But very importantly, there's also a particular focus on continuing to upgrade the way that growers interact with the interface. We're not only focused on expansion, but also focused on growers leveraging the full power of the technology, including for outcome-based models, which is a key part of our focus in the next 2 to 3 years.

Bob, do you want to...

And on the new herbicide, the answer is maybe a little bit of both. I mean, clearly, obviously, you bring a new mode of action. If it's a very powerful one, there will be some supplanting of existing modes of action in the market. But if you look back historically, typically, they complement what exists in the market versus necessarily replacing something in its entirety. What typically replaces modes of action is a combination of the chemistry safety profile and whether it continues to be able to be approved from a regulatory perspective and its efficacy in terms of weed resistance. They typically don't go away completely, but they maybe get supplanted in key market segments. I do want to mention one additional part of this new molecule, which is it's the first of what we believe will be a family of different molecules in this class. We have others in our early pipeline that we're also very excited about. So this is going to be a continued expansion of this new mode of action, in addition to additional modes of action that we're working on. So hopefully, that gives you a little bit more color on it.

Thank you, Christian. Thank you, team. Next question comes from Joel, Joel Jackson from BMO. Joel, you're next.

Can you give us what your thought is right now on what the -- maybe the value uplift will be that growers will pay for Intacta 2 Xtend over Intacta? I'm trying to think of -- I can think of some prior Monsanto releases and what the premium was for the next generation. What are you expecting now?

Let me address that one, Joel. We have a premium of 5% Intacta 2 Xtend over Intacta. What excites us with Intacta 2 Xtend, as Bob said, we have 3 mode of actions for insect control. But I think it's extremely important for the tropical environment of Brazil in resistance, and that's why we are so excited to see that the first year, we already had 800,000 acres, and we are going to 6 million acres. And then we have competition in the market in Brazil as well, but we are very happy with the performance that we are seeing, including the fact that we have -- and again, I want to reinforce that piece that Bob did today about our breeding, right? The breeding here is the base of all the things that we are talking here. We have more than 50 varieties with Intacta 2 Xtend in the market. That is extremely important as well. Thank you for your question, Joel.

And my second question is on data science and digital ag. You talked before about how FieldView is starting to generate more franchise value. When you think of the ROI on what you're spending in digital and the 3 buckets you laid out today for the opportunity, what rough percentage of the value do you think it's in franchise value? Is that the majority -- the vast majority of it? And how has that thinking evolved over the last year or 2?

Yes. Thanks for the question. I would say the way to think about this is that the value split evolves over time. So I would say in the near term, there is a more significant component coming from the support of the existing individual products and also supporting new systems like short-stature corn in addition to tailored combinations of products. But as you look into the future, there will be an increasing fraction of that overall value that will come from new business models, new value pools like carbon and very importantly also these developments in the digital marketplace segment. So if I look at 5, 10 years from now, I would expect that things like the Microsoft platform, the Orbia platform and other marketplaces of that sort will be a significant -- a more significant component of the overall value pool.

Yes. If you allow me, Jeremy, just to complement on that one, we're going to talk more about that on the earnings call on 1st of March. But that's why we reinforce so that we are performing and transforming the business at the same time. And I'm extremely confident that we can perform the core business with a discipline on the execution of our plans with the new hybrids, new varieties with available traits that we have, the crop protection innovation. But at the same time, it's very important that we continue to invest in our transformation because I'm sure that when we're going to have this call 5 years from now, we're going to have this shift that you just mentioned on your question.

Thank you, Joel. Thank you, Rodrigo. I think we have time for a couple more questions, trying to keep the time keeper. And I think the next question comes from Sebastian Bray from Berenberg. Sebastian, you're next.

I would have one on the way in which this pipeline has progressed relative to 2 or 3 years ago. If you were to have held this presentation 2 or 3 years ago, what would have moved back in terms of expected market launch? What would have moved forward? And would the sales figure have been substantially different to the EUR 30 billion peak currently forecast? I have a second smaller question, but I'll just affix to that, which is the market share implicit in the short-stature corn. Is the EUR 1 billion estimate that Bayer is providing just an accessible market or it's a share of the market that Bayer believes it will be able to claim for itself with this product?

Rodrigo, do you want me to take those? Yes. So -- and I hope my memory is good here. I think if we go back a couple of years, we probably were talking about a peak value of roughly EUR 28 billion or something to that effect, so I think -- or EUR 29 billion. So I think our -- we appropriately and would expect and want to see growth in the total value of our peak sales, opportunities with the product portfolio we have. So that's the first piece. If we look at the progress, I think it lines up very well with what we would expect. There's -- our pipeline -- some parts of our pipeline, I would argue, have high certainty. We have a tremendous track record, of course, in being able to deliver genetics to the market, and that's a very consistent capability that we have where we have higher-performing products that we are able to deploy year in, year out. And we know how to do that really well. If we look at traits, once we get traits into Phase 1, they almost always get to the market. Again, lots of experience. The safety profiles are well established. The work to be done by us because of our competency in the space to be able to stay on time and on track with those, we have an exceedingly high track record of getting them to the market. Crop protection is a little bit more variable. We have had a couple of candidates in the last 3 years that we've lost in the development pipeline, not unexpected, not atypical. And candidly, we have fewer late-stage failures than others because we do early safety screening in our strategy that allows us to limit the number of candidates we lose in development. But you still lose some because you can't predict everything when it comes to the regulatory trials that have to be done relative to either human safety or environmental safety. So we have a bit of attrition there. We anticipate that, and that's all part of our strategy and plan in terms of ensuring though that we have a full and robust overall pipeline. So no surprises and continued overall value growth.

If you just allow, Sebastian, your question is a nice location if you go back 3 years ago, right? 3 years ago, we had 2 intense years of integration. 2021, we're going to talk a lot about that one coming soon. But what I think is also interesting is what we were talking here today is the holistic approach, right? If you think about a corn farm today, we have the precision breeding coming, you have SmartStax PRO with RNAi technology or VTPRO4, then you have biologicals and crop protections and you have the digital tools. I think when we came together, the key aspect here is like how we integrate all of that innovation to help the farmers on a holistic approach and helping them to be successful. I think that is a tremendous progress when you see what Jeremy said again, having these digital tools helping the core and helping new business models like carbon or outcome-based models. And that integration of technology innovation will really make a difference in the next years. Thank you.

Thank you, Sebastian. Last question, and I think last question comes from Andreas Heine from Stifel.

The first question is, you said small-stature corn is not the most important product in your pipeline. What you would say is the most powerful you have right now? And secondly, coming also back on the small-stature corn, as you said, it is a different way on farming. So it might need also different equipment and different way of crop protection protocol. Are you working on this all together? So have you corporations in -- with the equipment producer that you can -- that can be launched in the best way? And then the last one is on XtendFlex. You have given what you have been in acreage in 2021. Would you share your view what the acreage might be for XtendFlex in the year 2022?

Do you want me to start that, Rodrigo, and then you can add in?

Yes.

Yes. So maybe on your first question, maybe just to be very clear, it's the -- probably the biggest incremental product that we have in our pipeline is a brand-new product that adds to our portfolio. So it is a very important one, don't get me wrong. My point though is, just as an example, our base genetics, that 500 varieties that we launch into the market every year, they create a tremendous base for us and tremendous growth because each year, we incrementally are adding new value to growers in terms of productivity as we launch products year in and year out. So those -- that alone is a huge value driver. So in comparison to that, it's not as significant. But as a stand-alone individual new technology and opportunity for our business, it is the biggest single one by itself. So sometimes, it's a little bit hard to compare those 2 kinds of things together, right? So just to give you a little bit of context there. And I'm sorry, remind me on the other questions real quick. The XtendFlex question, which I would probably defer to saying that probably we can bring a little more color when we get to our earnings call on where we stand on that. So that's probably one I'd just defer. And then you had one other one, and I apologize.

Well, that was your holistic approach in the small-stature corn. Do you work together with equipment producers, having the right...

Equipment. Yes, yes, absolutely, right? So that's all part of our strategy here is just how we can help not only introduce it to growers, but we're also talking to and working with the equipment folks in terms of what could be done differently with equipment to better take advantage and harness the product. So that -- those are discussions we've been having and will continue to have. And so we also anticipate equipment innovation coming together with short-stature corn as well because that makes total sense.

I cannot lose the opportunity, Andreas, just to reinforce what the challenge that we had on this pipeline review when we were preparing this session, right? We have such an amount of innovation. If you think about it, some companies would only focus the launch of ThryvOn in cotton. That is the first sucking pest biotech trait in the market ever where some other companies could do only a session about RNAi technologies in corn that we are launching for the new herbicide mode of action or the precision breeding that Bob alluded here that I hope that you can come with us in the field in late August that I think Oliver will mention a little bit on invitation for you right now. That's the beauty. And if you go to digital, the carbon, more than 2,000 farmers already with us on that platform, on that program as well. So that's the beauty of this pipeline. I hope that you get the same conclusion that the farmer had, that we have a very robust pipeline, and I think we have what we need to take to perform in the short term as well. Oliver?

Great. Thank you so much, Rodrigo. That was, I think, the perfect word to end on. That concludes our webinar for today. Thanks for your questions. And I know there were still some hands on, so please feel free to follow up with the Investor Relations team. We hope also that you can join our upcoming year-end earnings call on March 1 and that you will also be able to join us later this summer as we also intend to do a, what we call, a field innovation showcase on August 11, as it looks like, to see how all these technologies come together in the field that the Bayer team was just talking about. And I think look for more details in the weeks ahead as we send out save-the-dates and invitations. And with that, I'd like to end the webinar. I'd like to thank the Bayer team for the preparation and taking the time, very much appreciated. Also for all the participants listening in, stay safe and have a great rest of the day. Thank you so much.