German drug and chemicals major Bayer has reported a decline in net profits for the second quarter of 2003, but said comparisons were skewed by a significant gain during the same, year-earlier period. Sales were also down, falling back 3.3 per cent to €7.50 billion euros.
Analysts at Lehman Brothers lowered their 2003 earnings estimates for the group on the back of the figures, as well as the outlook provided by fellow German chemical firm BASF. They also pointed to the potential impact of litigation regarding two withdrawn products, i.e. Baycol (cerivastatin), a cholesterol-lowering drug that Bayer withdrew from the market on safety grounds, and phenylpropanolamine, a cough and cold product ingredient.
The company has already paid out €378 million to settle lawsuits relating to Baycol, which was linked to a rare muscle-wasting side effect.
Bayer said that pretax profit rose 6.4 per cent to €1.10 billion, buoyed by a 15.2 per cent improvement (albeit in local currency terms) in sales of pharmaceutical and biological products and cost-cutting measures.
Second-quarter net profits slumped 56.3 per cent to €128 million, not helped by the inclusion of a €269 million tax-free gain in second quarter 2002 from the sale of Bayer's remaining interest in photography unit Agfa-Gevaert. For the first half of 2003, net income was down 12.5 per cent to €714 million.
"For the time being, we cannot expect any stimulus for our business through an improvement in the economy," chief executive Werner Wenning said in a statement. "So we will drive forward our thorough internal restructuring with even greater vigour in order to sustainably improve our earnings power," he continued.
Operating profit at Bayer's chemicals unit sank to €2 million from €32 million a year ago, and sales fell by a quarter to €1.19 billion.
In the health care franchise, turnover of pharmaceuticals and biological products totalled €1.19 billion, up 2 per cent when adjusted for currency effects and underpinned by strong sales of Kogenate (recombinant Factor VIII) for haemophilia and the start of shipments of the antibiotic ciprofloxacin to US generics maker Barr Laboratories. Pretax earnings in this sector rose 43.1 per cent to €146 million.
Meanwhile, Bayer said that US marketing approval for its erectile dysfunction treatment Levitra (vardenafil) is expected in the third quarter of 2003.