Pharma problems push Bayer into red

Major setbacks in Bayer's pharmaceutical business were chiefly responsible for a net third quarter loss for the group of €183m (US$161m) – the first ever quarterly loss in the company's history. The withdrawal of its cholesterol-lowering drug Lipobay/ Baycol in August is estimated to have reduced earnings by around €900m (US$791m) this year.

Although overall sales in the first nine months of the year were up 3%, the operating result for the period fell by 60% from €1.6bn (US$1.4bn) to €1bn (US$879m). Exceptional items amounted to €508m (US$466m), of which the Lipobay/Baycol withdrawal alone accounted for €294m (US$258). Added to this were operating losses of €479m (US$421m) in the pharmaceuticals business, partly due to Lipobay/Baycol but also to continuing production difficulties for the company's biologicals – mainly its haemophilia treatment Kogenate.

January-September sales in the pharmaceuticals business group were down 7%. By contrast, the consumer care and diagnostics business groups turned in sales growth of 6% and 4%, respectively.

Bayer, like many companies, is feeling the increasing weakness of the global economy and a downward trend in key markets, exacerbated by the terrorist attacks in the US, the full economic effects of which still cannot be gauged.

'The cautious optimism we had at the beginning of the year regarding a gradual economic recovery in the US has evaporated,' said Dr Manfred Schneider, chairman of the board of management. 'We are simply unable to absorb the withdrawal in August of our cholesterol-lowering drug Lipobay/Baycol and the severe downturn through the third quarter.'

A headcount reduction of 1,300 is planned for the pharmaceuticals business group in response to the product withdrawal and the sales shortfalls.

The outlook for Bayer's pharmaceuticals business is not altogether negative, however. The antibiotic Cipro has taken on added significance in the wake of events in the US.

Preparations are under way to create an independent corporate unit within the healthcare segment that includes the pharmaceuticals, diagnostics, consumer care and animal health business groups. The pharmaceuticals business will also be split into two groups: ethical products and biological products. But Schneider strongly denied that this was the precursor to selling off the pharmaceutical business.

Barring unforeseen events, he expects Bayer to be back in the black in the fourth quarter. He said: 'We must do all we can to improve our results internally.'