Glaxo 'eyeing Bayer drugs unit'

Glaxo is running short of new products

UK drug giant GlaxoSmithKline is reportedly mulling a bid for the pharmaceuticals arm of German firm Bayer.

Press reports at the weekend suggested Glaxo was considering a move, with the Independent on Sunday saying "significant talks" were underway.

Bayer said last week that it would consider ceding control of its drugs operation, which ran into trouble last year when its cholesterol drug Baycol was withdrawn after a number of deaths were linked to it.

It is thought that gaining control of Bayer's drugs unit - which makes the anthrax antibiotic Cipro - would cost 8bn euros (£5.1bn).

Neither Glaxo nor Bayer would comment on the reports.

Competition

Glaxo is not the only drugs firm thought to be interested in the Bayer unit.

"A lot of companies are running their slide rules over this, but on a scale of 'hot' to 'cold' it's still only at the 'lukewarm' stage," one unnamed source told the Reuters news agency.

Glaxo and Bayer currently have a joint marketing deal for an anti-impotence drug called Levitra, which will challenge Viagra when it is launched next year.

"The rationale for Glaxo would be to capture the full economic benefit [of Levitra]," said Jeff Stevens, an analyst at JP Morgan.

But on Monday, Glaxo's shares fell on fears that the firm may get drawn into an auction for the business, and end up overpaying.

Glaxo's shares closed down 23p at 1232p.

Investors were also uneasy at reports of a large pay package for chief executive JP Garnier, which could see him earn more than the £3.5bn he was paid in 2001.

And there was added concern that Glaxo's pipeline of new products was running short, after Mr Garnier told The Times newspaper that he had no current plans to hold a research and development day for analysts.