| Bayer bought himself some medicine The German chemical and pharmaceutical concern Bayer AG has entered into a deal that may allow it not only to forget about the financial troubles of recent years, but also to significantly strengthen its position in Europe as a drug manufacturer. Yesterday, Bayer representatives announced the purchase of a division of the Swiss Roche Holding AG, which produces over-the-counter drugs. The transaction value is estimated at 2.38 billion euros. “The acquired business has high value for the company. The resulting portfolio of medicines includes strong, trusted brands,” said Bayer CEO Werner Winning in an official statement.
The expansion will allow Bayer to become a more serious competitor to another German pharmaceutical giant, Pfizer Inc. -- in the field of sales of over-the-counter drugs. It is expected that the revenue of the “grown-up” Bayer will be 2.4 billion euros. “This is obviously good business for Bayer, since the company has a rather weak position in Europe, while Roche is one of the leaders,” said Andreas Theilsen, an analyst at WestLB bank in Dusseldorf. True, the deal did not cause much enthusiasm on the stock market: yesterday's trading in Frankfurt ended with a 1.21% drop in the value of Bayer shares (Roche shares rose by 1.88% on the “home” exchange in Zurich).
Bayer currently has only one prescription drug in its arsenal: a late-stage cancer drug. The rest of the medicines produced by Bayer are sold freely and form the basis of the concern's business. Despite the expansion of the over-the-counter drug market (it grew 3% in 2003, according to Bayer), the company's revenue fell 18% last year to 1.4 billion euros. This is largely due to numerous legal costs. Not long ago, the German concern completed a series of lengthy legal battles with consumers of the drug Baycol. It was discontinued and excluded from sale back in August 2001, but the main wave of complaints related to it hit the company a little later. In order to compensate patients for kidney problems observed while taking the cholesterol “miracle drug,” Bayer had to shell out no less than $1.6 billion. Currently, trials have been completed on 2,771 claims out of 8,048 filed.
By acquiring a part of Roche, Bayer management hopes to regain lost positions in profit in the near future. Thanks to the new assets, the company's costs will be reduced by 120 million euros in the first three years, Bayer believes. In turn, Roche will be able to pay more attention to its core business, which is built on the sale of prescription medications. Experts are placing their main bet on the medicine for the treatment of hepatitis C Pegasys. Denis UVAROV |
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