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Baycol linked to 52 deaths

August 13, 2001 Posted: 1011 GMT

LONDON (CNN) -- Germany's Bayer said on Monday 52 people are thought to have died after taking the anti-cholesterol product Baycol, its fastest-growing drug.

Bayer said it was reviewing the future of it drugs arm but would not ditch its strategy of producing both chemicals and pharmaceuticals, and denied it was "a company in need of rescue."

The company, one of Germany's big two chemicals and drug makers, said two big drugmakers had shown interest in buying its pharmaceuticals arm. A sale was a possibility, but not the company's preferred option, said Chief Executive Manfred Schneider.

The company pulled the drug, also sold as Lipobay, last Wednesday after it emerged it was linked to deaths of about 40 people. Bayer shares plunged 18 percent on the day.

  This extraordinarily unfortunate series of problems ... poses no threat to Bayer's existence.  
  Manfred Schneider
Bayer CEO

The axeing of the drug came after increasing evidence that the drug caused deterioration in muscle tissue, a condition called rhabdomyolysis, which is known to cause severe pain and potential kidney failure. However, the company stressed "that there is currently no proof that" the drug is the cause of the deaths.

"Even this extraordinarily unfortunate series of problems -- whether home-made or caused by external factors -- poses no threat to Bayer's existence," Chief Executive Manfred Schneider said.

"Our sales this year will increase even though Baycol will now be absent," Schneider added. But he warned shareholders that the company would have to cut its dividend for this year.

"We now see the strength of our 'four-pillar' strategy, even if only two of those pillars -- namely agriculture and chemicals -- currently show a stable earnings trend overall."

The company has come under intense pressure to create separate businesses for its chemicals and healthcare operations, or take on a partner for its drug business, to enable it to compete with the world's giants, such as GlaxoSmithKline (GSK) of the UK and Pfizer (PFE: Research, Estimates) of the U.S.

As well as thses two arms, Bayer has separate units producing polymers and agricultural chemicals.

While Schneider said it was not yet clear if anti-cholesterol drug Baycol would be relaunched in future, the company's head of pharmaceuticals, David Ebsworth, described a relaunch as unlikely.

graphicSchneider reiterated earlier downbeat earning assessments. The drug was expected to generate sales of graphic1 billion ($900 million) this year, up from graphic636 million last year. The company expects earnings to be reduced by between graphic600 million and graphic650 million this year due to the loss of Baycol.

"Since the economy is unlikely to improve before the end of the year, our operating income will be further impaired by the economic situation," Schneider said.

Jobs, costs to be cut

Bayer, which makes products ranging from Aspirin to chemicals for industry and fragrances for perfume, said it has initiated a programme to reduce costs by graphic1.5 billion a year by 2005. The company plans to axe 5,000 jobs in the process.

The company said it has other drugs in the pipeline. They include a rival for Viagra, called Vardenafil, which is due on the market by 2002, along with a new antibiotic and two cancer drugs. "But they cannot compensate for the loss of Baycol," Schneider said.

Bayer, which was forced to halt shipments of its haemophilia drug Kogenate in January after the U.S. Food and Drug Administration found bacteria present in some of the manufacturing stages of Kogenate, said it health care business would no longer meet its target of improving profit margins by 20 percent.

The company said it is still negotiating with Franco-German drugmaker Aventis to buy Aventis CropScience. The acquisition "will boost the earnings situation in the Group as a whole in the short tern," said Schneider. "This is a step of exceptional strategic importance, so there is no reason to question it because of the problems in pharmaceuticals." 

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