Now that Bayer has put its pharmaceutical business into play, industry watchers are speculating on what form a deal might take. At the same time, they caution that the prospect of lawsuits surrounding its Lipobay/Baycol cholesterol drug will muddy the deal-making waters.

	FOTO UNIVERSAL

Bayer Chairman Manfred Schneider became more receptive to a pharmaceutical transaction two weeks ago after the company was forced to withdraw the fast-growing drug from world markets (C&EN, Aug. 13, page 12). In particular, he retreated from an earlier condition that Bayer would have to control any drug partnership in which it was involved.

The company contends this new position still precludes an outright sale of its pharmaceutical business. Most analysts, however, are of the opinion that such a sale is not out of the question.

"The company is having trouble finding the right words, but it is basically stating that it is keeping all options open right now," says Michael Vara, an analyst who covers Bayer for Commerzbank Securities in Frankfurt.

Vara says Bayer managers want to stay involved in the drug business, but he believes they would settle for a sale if a partnership can't be worked out. "They can't live with the scenario that for the next four years they are going to have very modest or even negative sales growth in pharmaceuticals," he says.

Despite this pessimistic outlook, Vara says Bayer's $9 billion drug business would be an attractive partner or purchase for another firm. A new erectile dysfunction treatment is due out next year, and the business has a strong pipeline of early- stage drugs that should hit the market around 2005. Plus, he says, it represents one of the few pharmaceutical acquisition candidates left in a field that has consolidated significantly in recent years.

The spoiler for possible partners is potential liability from lawsuits filed over Lipobay/Baycol, which is blamed for 52 deaths around the world. According to the Chicago law firm Kenneth B. Moll & Associates, several individual and class-action lawsuits have already been filed, and "hundreds of more cases are expected to be filed in state and federal courts nationwide, each arising from claims of injury as a consequence of Baycol."

Moll & Associates, which says it filed the first of the class-action lawsuits, is seeking to consolidate the cases under a single court's supervision.

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