Germany's Bayer has continued the revamp of its business units by setting up its chemicals, technology services and healthcare activities as three separate legal entities. The move follows the carve-out of Bayer CropScience a year ago.
Bayer is emerging from a difficult period which has seen it withdraw a major new product, the cholesterol-lowering drug Baycol/Lipobay (cerivastatin) on safety grounds. The impact of this was increased by a number of legal complaints from patients claiming compensation for injuries suffered whilst taking the medicine; the group has paid out nearly $500 million in out-of-court settlements to date.
Pressure to reorganise the business has also come from what a number of analysts suggest is a weak late-stage pipeline. Bayer has only one product - the recently-launched erectile dysfunction drug Levitra (vardenafil) that is partnered with GlaxoSmithKline - with the potential to make annual sales of more than $1 billion until at least 2006.
There have been calls for a long time for Bayer to split its businesses, and particularly pharmaceuticals, into separate units, in order to generate a faster-moving and more flexible structure. Speculation that Bayer may choose to sell off its chemicals and other businesses to become a pharmaceutical pure-play has dogged the company for years, but it has repeatedly maintained its commitment to all its businesses.
Bayer group chairman Werner Wenning said: "The new structure promotes these units' individual responsibility, thereby reinforcing their entrepreneurial approach."
Bayer Chemicals develops chemical processes for its customers and manufactures intermediates and active ingredients for pharmaceutical and crop protection products. It also makes functional building blocks for system solutions, finishing processes and additives in electronics and optics, food products, dyestuffs, clothing, leather, textiles, paper, plastics, rubber, construction materials and advanced ceramics. Taken together, these products generated revenues for the division of €3.3 billion in 2002.
The Healthcare unit encompasses finished pharmaceutical products and drug discovery/development, as well as diagnostics, consumer health and veterinary medicines. It is the group's flagship business, with sales of €9.4 billion last year.
The Bayer Technology Services business specialises in the development, planning, construction and process optimisation of chemical and pharmaceutical production facilities, and had 2002 revenues of €690 million.
Plans call for the operating subgroup Bayer Polymers and the service companies Bayer Business Services and Bayer Industry Services to follow suit by the end of 2003.
"With this new corporate structure, we are creating the basis for future success," commented Wenning.