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Wednesday, 8 August, 2001, 20:04 GMT 21:04 UK
Bayer shares plunge
A Bayer lab
Bayer may have to sell its pharmaceutical business
Shares in German chemical and pharmaceutical giant Bayer plunged by 16%, after the firm withdrew one of its most lucrative products.

Bayer said it was pulling Baycol/Lipobay, its anti-cholesterol drug, with immediate effect, because of fears of what it called "a life-threatening side-effect".

The US Food and Drug Administration (FDA) said Baycol could be linked to 31 deaths from severe rhabdomyolysis - a condition that can lead to kidney and other organ failure.

The company has been hit hard by the withdrawal, since Baycol had been expected to generate over 1bn euros (619m; $876m) in sales this year.

In all, Bayer's 2001 profits could fall by 600m-650m euros - over and above an earlier profit warning from the firm.

The news caused a heavy sell-off in other drugs shares, with GlaxoSmithKline down 2.4% in late-afternoon trading.

Rescue plan

Bayer said it would announce restructuring measures on Thursday, when it presents its second-quarter results.

It would review its drug strategy, but ruled out selling the business.

Bayer's headquarters in Leverkusen
Bayer is dwarfed by the world's drug giants

"The pharma business of Bayer is not for sale," said Bayer chief financial officer Werner Wenning.

Not everyone agrees.

"Bayer has to implement a new strategy for pharmaceuticals, and the options include a joint venture in the business or a disposal," Commerzbank analyst Michael Vara said.

"Baycol was the last hope for Bayer to grow its pharmaceutical business organically. It has other drugs in the pipeline, but they won't come on stream for several years."

Bayer has been seen as a prime takeover candidate, after falling behind the global giants of the pharmaceutical business over the last 10 years.

Another chemical company is unlikely to bid for Bayer but a corporate finance house might make a break-up bid for the company, Commerzbank's Michael O Sullivan told BBC's World Business Report.

Drug problem

This is the second time this year that Bayer has been hit by problems in its pharmaceutical portfolio.

Shipments of the haemophilia drug Kogenate were halted in January after an FDA inspection found bacteria present in some of the manufacturing stages.

In late June, the firm warned that its 2001 profits would fall below expectations.

The company, which had earlier predicted an increase on last year's 3.3bn euro operating income, said it forecast a 10% drop.

Commerzbank's Michael O Sullivan
Bayer has now become a takeover target
See also:

27 Jun 01 | Business
Bayer warns on 2001 profits
22 Jun 01 | Business
Drug giant warns of lower profits
21 Jun 01 | Business
BASF shuts plants
21 Nov 00 | Business
Drugs - a high-risk business
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