Dr. Rath Health Foundation

Dr. Rath Health Foundation

Responsibility for a healthy world Dr. Rath Research Institute 100+ Studies Published In PubMed

The Baycol / Lipobay - Scandal

Bayer Says Baycol Costs May Exceed Its Insurance

BERLIN (The New York Times / March 13, 2003) -- Bayer, the German chemicals and pharmaceuticals giant, said today that its insurance coverage might not be adequate to cover its potential liabilities in connection with Baycol, a cholesterol-reducing drug the company withdrew in August 2001 after it was linked to more than 100 deaths. Bayer also reported a sharp fall in profits for 2002.

The company's chief executive, Werner Wenning, said that there were now 8,400 personal injury suits pending against Bayer over Baycol, and that 500 more had been settled out of court at a cost to the company of $150 million. A verdict is expected in the next few days in a Baycol case in Corpus Christi, Tex., the first to go to trial.

"It is possible that Bayer could incur charges in excess of its insurance coverage," Mr. Wenning said. "The uncertainty of the outcome and the financial effects of the predominantly American litigation makes it impossible to draw conclusions."

Mr. Wenning declined to give details about the company's insurance. He said the company might have to set aside some earnings to cover the uninsured costs, but that it was not yet possible to estimate how much money would be needed.

The company, based in Leverkusen, said it was also being sued by a group of American shareholders over the Baycol problem. The suit accuses Mr. Wenning and a former chief executive, Manfred Schneider, of improperly withholding and misrepresenting information about the drug.

Mr. Wenning defended Bayer's handling of Baycol and said the company would vigorously contest the suit.

For 2002, Bayer reported a 46 percent drop in profits from operations, to 989 million euros ($1.07 billion), reflecting rising raw material costs and sagging demand, especially in its industrial chemicals division. The results in the agricultural chemicals division were hurt by the costs of integrating Aventis CropScience. The company's net income rose 10 percent for the year, to 1.1 billion euros ($1.2 billion), because of gains on asset sales.

"It's not a good set of figures," said Andrew Benson, an analyst for Schroder Salomon Smith Barney in London. "Hopefully continued restructuring will bring improvement."

The company said it expected better operating results for 2003 and set a goal of increasing its cash flow by 21 percent over the next three years.

"The operating basis is weaker than expected," said Ulrich Huwald of MM Warburg in Hamburg. "On the other hand, the outlook isn't bad given this economic environment."

Bayer has much of its hopes for improved performance pinned on Levitra, the anti-impotence drug that recently won approval in the European Union. American regulators are expected to follow suit later this year. The company expects that the drug can reach peak sales of more than 1 billion euros ($1.1 billion) a year.

"The view is, it's a best-in-its-class product," Mr. Benson said. "If it takes off and they can turn the company around, than Bayer is worth more than its current price."

The company is still searching for a partner for its pharmaceutical division, which is regarded in the industry as not quite big enough to compete effectively on its own with giants like Merck and Roche. In the meanwhile, it is striking individual deals, like its agreement to market Levitra in partnership with GlaxoSmithKline.

But analysts said the most important question for the company now is the Baycol litigation.

"The key is uncertainty," said Andreas Theisen of WestLB Panmure in Düsseldorf. "Estimates of Bayer's liability costs now range from $1 billion to $10 billion. We simply don't know how much the damages will be."

Shares of Bayer rose 2.8 percent today, to 10.85 euros ($11.72). Shares traded above 22 euros in January.

"The good news is, a huge amount of potential liability is already in the current share price," Mr. Theisen said. "If you could say for certain that the liability would be $5 billion, the share price would already be higher."