Research, Development, Innovation Bayer Group expenses for research and development increased by 8.9% (Fx adj.) to €1,261 million in the second quarter of 2018. (XLS:) Download XLS Research and Development Expenses R&D expenses R&D expenses before special items Q2 2017 Q2 2018 Change H1 2017 H1 2018 Change Q2 2017 Q2 2018 Change H1 2017 H1 2018 Change € million € million Fx adj. % € million € million Fx adj. % € million € million Fx adj. % € million € million Fx adj. % Pharmaceuticals 707 765 +11.5 1,419 1,458 +6.6 638 722 +16.5 1,317 1,415 +11.5 Consumer Health 65 55 −9.7 124 110 −4.1 59 57 +2.9 116 112 +4.1 Crop Science 275 390 +7.5 558 647 +1.8 273 383 +5.5 555 637 +0.5 Animal Health 38 37 −0.3 71 67 −1.8 38 35 −5.0 71 65 −4.8 Reconciliation 12 14 +21.7 19 19 −1.6 12 14 +21.7 19 19 −1.6 Total Group 1,097 1,261 +8.9 2,191 2,301 +4.4 1,020 1,211 +12.0 2,078 2,248 +7.5 Pharmaceuticals We are conducting clinical trials with several drug candidates from our research and development pipeline. Progress in Phase II clinical projects The following table shows our most important drug candidates currently in Phase II of clinical testing: Research and Development Projects (Phase II)1 Projects Indication 1 As of August 27, 2018 2 This trial did not meet its primary endpoint. However, it has not yet been terminated. Additional studies investigating anetumab ravtansine as a treatment for different forms of solid tumors are ongoing. See the Bayer Annual Report 2017 for more information. 3 Sponsored by Ionis Pharmaceuticals, Inc. The nature of drug discovery and development is such that not all compounds can be expected to meet the predefined project goals. It is possible that any or all of the projects listed above may have to be discontinued due to scientific and / or commercial reasons and will not result in commercialized products. It is also possible that the requisite U.S. Food and Drug Administration (FDA), European Medicines Agency (EMA) or other regulatory approvals will not be granted for these compounds. Moreover, we regularly review our research and development pipeline so that we can give priority to advancing the most promising pharmaceuticals projects. Anetumab ravtansine (mesothelin ADC)2 Malignant pleural mesothelioma BAY 1093884 (anti-TFPI antibody) Hemophilia BAY 1128688 (AKR1C3 inhibitor) Endometriosis Fulacimstat (BAY 1142524, chymase inhibitor) Heart failure Fulacimstat (BAY 1142524, chymase inhibitor) Chronic kidney disease BAY 1193397 (AR alpha 2c rec ant.) Peripheral artery disease (PAD) BAY 1213790 (anti-FXIa antibody) Prevention of thrombosis BAY 1902607 (P2X3 antagonist) Chronic cough BAY 2253651 (TASK channel blocker) Obstructive sleep apnea BAY 2306001 (IONIS-FXIRx)3 Prevention of thrombosis Levonorgestrel + indomethacin combi IUS Contraception Neladenoson bialanate (BAY 1067197) Chronic heart failure with reduced (HFrEF) and preserved (HFpEF) ejection fraction Radium-223 dichloride Breast cancer with bone metastases Radium-223 dichloride Multiple myeloma Riociguat Systemic sclerosis Rogaratinib (pan-FGFR inhibitor) Urothelial cancer Vilaprisan (S-PRM) Endometriosis The Phase II trials with nesvacumab plus aflibercept (tradename: Eylea™) in the indications diabetic macular edema and wet age-related macular degeneration have been concluded. In August 2018, the first data from the Phase II PANTHEON trial with neladenoson bialanate (BAY 1067197) in patients with heart failure with reduced ejection fraction (HFrEF) were presented at the European Society of Cardiology (ESC). Neladenoson bialanate is an oral selective partial adenosine A1 receptor agonist. The aim of the study was to investigate the safety, pharmacological profile and optimal dose of neladenoson bialanate in once-daily administration. The study did not achieve the defined primary endpoint for efficacy. No safety concerns were identified. The study data are being further analyzed and the next steps considered. Progress in Phase III clinical projects The following table shows our most important drug candidates currently in Phase III of clinical testing: Research and Development Projects (Phase III)1 Projects Indication 1 As of August 27, 2018 2 This trial was unblinded ahead of schedule and there are no patients who are still receiving the combination therapy. Otherwise, however, the trial is continuing, especially with regard to per protocol patient monitoring. The final assessment has not yet been completed. For more information, see the Bayer Annual Report 2017. 3 Sponsored by Janssen Research & Development, LLC 4 Sponsored by Merck & Co., Inc., U.S.A. The nature of drug discovery and development is such that not all compounds can be expected to meet the predefined project goals. It is possible that any or all of the projects listed above may have to be discontinued due to scientific and / or commercial reasons and will not result in commercialized products. It is also possible that the requisite U.S. Food and Drug Administration (FDA), European Medicines Agency (EMA) or other regulatory approvals will not be granted for these compounds. Moreover, we regularly review our research and development pipeline so that we can give priority to advancing the most promising pharmaceuticals projects. Copanlisib (PI3K inhibitor) Various forms of non-Hodgkin lymphoma (NHL) Darolutamide (ODM-201, AR antagonist) Castration-resistant nonmetastatic prostate cancer Darolutamide (ODM-201, AR antagonist) Hormone-sensitive metastatic prostate cancer Finerenone (MR antagonist) Diabetic kidney disease Molidustat (HIF-PH inhibitor) Renal anemia Radium-223 dichloride2 Combination treatment of castration-resistant prostate cancer Rivaroxaban3 Anticoagulation in patients with chronic heart failure Rivaroxaban3 Prevention of venous thromboembolism in high-risk patients after discharge from hospital Rivaroxaban Peripheral artery disease (PAD) Rivaroxaban VTE treatment in children Vericiguat (sGC stimulator)4 Chronic heart failure Vilaprisan (S-PRM) Symptomatic uterine fibroids At the ESC congress in Munich in August 2018, Bayer and development partner Janssen Research & Development, LLC, United States, presented the results of the clinical Phase III COMMANDER HF and MARINER trials investigating the oral Factor Xa inhibitor rivaroxaban (tradename: Xarelto™). The COMMANDER HF trial investigated whether, when administered additionally to the standard therapy, rivaroxaban reduces the risk of cardiovascular events in coronary heart disease patients following an episode of worsening of heart failure. The data showed a reduction in thrombotic events in patients treated with rivaroxaban, but this was outweighed by the high rate of nonthrombotic events in both study arms, resulting in failure to achieve the primary endpoint of the study. The MARINER trial investigated whether rivaroxaban is superior to placebo in the prevention of venous thromboembolism (VTE) after hospital discharge for medical patients at high risk of VTE. The evaluation showed that the VTE event rate after discharge in patients who had received adequate antithrombotic treatment in hospital was so low that there was no discernible difference. Filings and approvals The most important drug candidates in the approval process are shown below. Main Products Submitted for Approval1 Projects Indication 1 As of August 27, 2018 2 Submitted by Janssen Research & Development, LLC 3 Submitted by Loxo Oncology, Inc. Damoctocog alpha pegol (long-acting rFVIII) Europe, U.S.A., Japan: Hemophilia A Rivaroxaban U.S.A.: Prevention of major adverse cardiac events (MACE), COMPASS trial Rivaroxaban2 U.S.A.: secondary prophylaxis of acute coronary syndrome (ACS), Rivaroxaban in combination with dual antiplatelet therapy (DAPT), ATLAS trial Larotrectinib (LOXO-101, TRK fusion inhibitor)3 U.S.A.: Solid tumors with NTRK gene fusions In May 2018, Eylea™ (active ingredient: aflibercept solution for injection into the eye) was approved by the Chinese regulatory authorities for the treatment of visual impairment due to neovascular (wet) age-related macular degeneration (nAMD). Also in May 2018, the United States Food and Drug Administration (FDA) granted priority review status for the development candidate larotrectinib. The registration application refers to the treatment of adult and pediatric cancer patients with locally advanced or metastatic solid tumors in which neurotrophic tyrosine receptor kinase (NTRK) genes that code for the tropomyosin receptor kinase (TRK) receptors have fused with other DNA segments. In August 2018, Bayer filed an application seeking approval of larotrectinib in the European Union as well. In July 2018, Kovaltry™ (active ingredient: octocog alfa) was approved by the Chinese regulatory authorities for use in adults and children with hemophilia A for routine prophylaxis, on-demand treatment and perioperative management of bleeding. Kovaltry™ is a full-length recombinant Factor VIII product. In August 2018, the European Commission approved a new treatment approach for Eylea™ that enables early extension of the injection interval for patients with neovascular age-related macular degeneration (nAMD) already in the first year of treatment. The new regimen allows clinicians to extend patients’ individual injection intervals based on visual and/or anatomic outcomes. Also in August 2018, the European Commission approved a combination of Xarelto™ (rivaroxaban) 2.5 mg twice daily plus acetylsalicylic acid (ASA) 75 to 100 mg once daily for the prevention of atherothrombotic events in adults with coronary artery disease (CAD) or symptomatic peripheral artery disease (PAD) at high risk for ischemic events. The E.U. approval is based on the findings from the clinical Phase III COMPASS trial, which demonstrated that rivaroxaban in the specified dose reduced the risk of the composite of stroke, cardiovascular (CV) death and heart attack by a significant 24% (relative risk reduction) compared with ASA 100mg once daily alone in patients with CAD or PAD. Cooperations In May 2018, Bayer and the MD Anderson Cancer Center at the University of Texas in Houston, United States, signed a five-year collaboration agreement to accelerate the development of novel targeted treatments based on patient or tumor characteristics for which current therapies have not shown satisfactory clinical efficacy. In June 2018, Bayer and the Broad Institute of the U.S. universities MIT and Harvard expanded their strategic research collaboration for the development of new therapies for patients with cardiovascular diseases such as heart failure. Researchers from the Broad Institute and the Bayer Group are working together in a joint Precision Cardiology Laboratory at the Broad Institute in Boston. The collaboration is focused on better understanding cardiovascular diseases on a molecular level and developing new therapies for patients. In August 2018, Bayer and Haplogen GmbH, Austria, entered into a multi-year research collaboration agreement to identify and develop new drug candidates for the treatment of pulmonary diseases such as chronic obstructive pulmonary disease (COPD). Crop Science Research and development pipeline The existing innovation activities of Crop Science are now complemented by the product innovation pipeline of Monsanto. The acquired pipeline includes multiple next generations of insect and weed control biotech plant traits, several new seed treatments to be launched through 2020, and more than 35 projects in the Climate FieldView pipeline. The table below shows Bayer’s current product innovation pipeline: Product Innovation Pipeline1 Market launch Product group Indication / crop Product / trait 1 The product innovation pipeline comprises planned market launches of selected new products. As of August 1, 2018 2019 Seeds Rice Salt and flood tolerance (native trait) 2019 Chemical crop protection Insecticide Tetraniliprole 2019 Chemical crop protection Fungicide Tiviant™ 2019 Seeds Rice Dual disease tolerance (native trait) An updated, integrated pipeline overview will be available in the next Annual Report. Cooperations, new products and registrations We signed the following cooperation agreements in the second quarter; activities related to the newly acquired business have been included since the transaction closed on June 7, 2018. In April we joined with International Finance Corporation (Washington D.C., United States), Netafim Ltd. (Tel Aviv, Israel) and Swiss Re Corporate Solutions Ltd. (Zürich, Switzerland) in launching a global alliance named “Better Life Farming.” The aim is to provide holistic and innovative solutions for smallholder farmers in the developing world with less than two hectares of land to enable them to grow their farms into sustainable businesses. In June, Bayer – through Monsanto Company (St. Louis, Missouri, United States) – and Corteva Agriscience™ (Indianapolis, Indiana, United States), the agriculture division of DowDuPont Inc., reached an agreement on an expanded license for Roundup Ready 2 Xtend™ technology in soybeans. Through this license, Corteva Agriscience™ will offer U.S. and Canadian growers additional weed control flexibility through broader access to Roundup Ready 2 Xtend™ technology across its North America seed brand portfolio. Animal Health In July, Bayer Animal Health and Mitsui Chemicals Agro, Inc. (MCAG), Tokyo, Japan, signed a global license agreement to develop and commercialize novel parasiticides for companion animals based on intellectual property from MCAG.