August 20, 2001
Volume 79, Number 34
CENEAR 79 34 p. 12
ISSN 0009-2347
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Rebukes, lawsuits push company into rethinking its strategy


Suddenly beset by a host of problems, Bayer Chairman Manfred Schneider has done an about-face, saying the company might--just might--be willing to enter a partnership or joint venture, combining its pharmaceutical business with another company.

Since the company announced a recall of its anticholesterol drug, cerivastatin, marketed under the trade names Baycol and Lipobay, it has been rebuked by the French government for not notifying it first, and has been threatened with legal action. It has also been criticized by physicians and patient groups for not informing them before the company notified Frankfurt Stock Exchange officials, as the company was legally obligated to do. And it is facing class-action lawsuits in the U.S.

Another consequence of the drug recall is that Bayer will postpone its stock listing on the New York Stock Exchange from Sept. 26 to the beginning of February 2002. Schneider explains, "We don't want to list our shares on what is for us the world's most important capital market without being able to give convincing answers to the questions that have been raised."

Separately, but with exquisite timing, a warning letter to Bayer from FDA was made public, faulting safety standards at the company's pharmaceutical manufacturing plant in Clayton, N.C.

Shares in Bayer have fallen nearly one-fourth since the company announced its recall of cerivastatin because the products were implicated in some patient deaths. Bayer's shares are now trading at roughly $31.80; at the beginning of August, they were over $40.

The share drop also reflects investors' uncertainty about the company's ongoing strategy. Bayer has for years adamantly argued that it was happy being a hybrid company, balancing pharmaceuticals and various chemical businesses, and that it neither wanted nor needed any partnership where it did not have majority control.

It was just in March that Schneider confirmed that he and his team saw Bayer as a pharmaceutical company that happened to have chemical operations, rather than vice versa.

Whether Bayer will sell off its pharmaceuticals or put the unit into a joint venture--according to Schneider, two top large pharmaceutical companies have already expressed interest in some sort of deal--remains to be seen.

While the company "dithered," as one observer has put it, consolidation in the pharmaceutical industry has changed the sector. Fewer companies are of an equivalent size to Bayer, so the company will find it increasingly difficult to enter a partnership as an equal. Most likely, Bayer will be seen as the weaker half.

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