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Bayer: Good News, Bad News
Even as company opens new facility, Baycol recall casts cloud over pharma unit's future.
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Business New Haven
8/20/2001
By: BNH
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August 2 was a big day at the North American Bayer Research Center in West Haven as company executives unveiled the firm's new chemistry building. The 125,000 square-foot facility will house 125 scientists, concentrating on drug development for cancer, diabetes and obesity.
According to Wolfgang Plischke, executive vice president of the Leverkusen, Germany-based Bayer AG and president of Bayer Pharmaceutical North America, "The new chemistry building doubles our chemistry research capabilities here."
There are more than 700 scientists and ,350 employees at Bayer's West Haven site. The new chemistry building caps an $83 million brick-and-mortarexpansion which includes a high-technology center, also in West Haven, and the addition of 200 chemists and biologists.
Bayer's pharmaceuticals division has also been aggressively pursuing biotech partnerships in an attempt to expand its position in a lucrative pharmaceuticals industry. Recent deals with Millennium Pharmaceuticals of Cambridge, Mass. and CuraGen Corp. of New Haven represent as much as $2 billion of collaborative investment.
Sales for Bayer's pharmaceutical division (drugs requiring prescription) are approaching $3 billion annually and account for about ten percent of Bayer AG's worldwide sales. Still, that business isreelatively modest compared to Pfizer's $22 billion annual sales of human pharmaceuticals.
Bayer backed the expansion of its potentially highly profitable pharmaceutical business to offset the cyclical results of its core chemical assets.
The company announced that it would list its shares on the New York Stock Exchange (they are currently listed on Germany's DAX) on September 26, hoping to expand the base of investors for the company.
Now, however, less than two weeks after the chemistry-building dedication, the outlook is dramatically different for the company, with a potentially profound impact for its West Haven division.
Bayer AG, the company that invented aspirin, is reviewing options for its flagship drug business, including a joint venture or an outright sale of its pharmaceuticals unit.
According to an article in the August 14 Wall Street Journal, Bayer, whose North American pharmaceuticals division is headquartered in West Haven, has been approached by two unnamed drug-makers about some sort of collaboration. One option would be to place Bayer's drug arm in a joint venture operated by a larger pharmaceuticals company.
The newspaper named Bristol-Myers Squibb Co. and the Switzerland-based Novartis AG as likely suitors. Bristol-Myers, in particular, has been aggressive on the acquisitions front, having gobbled up the DuPont Co.'s pharmaceuticals unit earlier this summer.
Bayer has taken a number of hits in recent weeks. Its stock (listed on Germany's DAX) plunged 20 percent following the August 8 recall by the company of its cholesterol-lowering drug Baycol in the wake of a number of patient deaths. The problems appear to have come primarily with patients using a high dosage of the drug or in conjunction with another cholesterol-lowering drug, Pfizer Inc.'s Lopid.
The following day the Leverkusen, Germany conglomerate announced a 45-percent drop in second-quarter operating profits and announced plans to pare 5,000 jobs.
During the second week of August, Bayer announced that operating profits for the second quarter fell 45 percent to 508 million euros ($454.1 million), while sales grew by just 2.1 percent to 8.1 billion euros.
According to the Journal the company will continue sell the drug in Japan where netiher the high dosage version or Pfizer's Lopid is available.
Baycol is responsbile for almost 25 percent of the company's prescription pharmaceutical sales. The drug is manufactured at the company's West Haven facility, some workers claimed that second and third packaging shifts had already been cancelled.
A joint venture or sale would mark a fundamental change for Bayer, one of the last remaining companies to manufacture both drugs and chemicals.
During the second week of August, Bayer announced that operating profits for the second quarter fell 45 percent to 508 million euros ($454.1 million), while sales grew by just 2.1 percent to 8.1 billion euros.
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