Investors Unfazed by Risks Associated With Bayer Drug

By MARK LANDLER

Published: December 22, 2004

FRANKFURT, Dec. 21 - The German pharmaceutical giant Bayer is no stranger to health and safety scares. Three years ago, it had to pull its cholesterol-lowering drug Baycol from the market and defend itself against a spate of lawsuits after the drug was linked to more than 100 deaths worldwide.

In contrast, this week's news that one of Bayer's over-the-counter painkillers may increase the risk of heart attacks and strokes barely fazed shareholders here. Shares of Bayer rose slightly on the Frankfurt Stock Exchange the day after the Food and Drug Administration issued a warning about the risks of naproxen, a generic drug marketed by Bayer under the brand name Aleve.

Negative publicity aside, analysts said Aleve was only a small part of Bayer's drug portfolio, generating annual sales of barely $100 million in a company with total health care revenues of nearly $12 billion.

"The impact will be marginal," said Dennis Nacken, an analyst at Helaba Trust in Frankfurt. "You can't compare this to Baycol, a big product protected by patent. Aleve is a generic product with small volumes."

Bayer has essentially been swept up in a much bigger scare over the health risks of members of a new class of painkilling drugs, among them Celebrex and Vioxx. For this $38 billion conglomerate, which developed aspirin in 1899 and once held it as a trade name, Aleve's potential problems illustrate the risks of trying to expand a generic drug into new areas of treatment, in this case, Alzheimer's disease.

Mr. Nacken said he expected the health warning to cut into sales of Aleve, which could crimp Bayer's campaign to establish itself as a major player in over-the-counter drugs in the United States.

Bayer currently markets Aleve in a joint venture with the Swiss pharmaceutical company Roche Holding, which developed it in 1976. But Bayer is buying out Roche's half of that venture - a $3.2 billion deal that both companies expect to go forward, regardless of the health warning.

Bayer said Tuesday it had not yet seen the results of the study that prompted the warning. It was notified by the Food and Drug Administration on Monday evening of the decision to suspend the study.

A spokesman for Bayer, Helmut Schaefers, said that Aleve posed no health risk when used properly. The F.D.A. recommended that patients taking naproxen without a prescription limit their use to two 200-milligram pills a day for no more than 10 days.

"We are in agreement with the F.D.A. that consumers carefully follow instructions on the label," Mr. Schaefers said.

In a study sponsored by the National Institutes of Health, nearly 2,500 patients were given either Aleve; Celebrex, a painkiller made by Pfizer; or a placebo, and monitored for three years. The objective was to see whether Aleve or Celebrex could help prevent Alzheimer's disease.

The patients taking Aleve had a 50 percent higher rate of cardiovascular problems - either heart attacks or strokes - than those given a placebo. Patients taking Celebrex did not have a higher rate of heart trouble - a finding that contradicted results in other tests of the drug, and pushed up Pfizer's shares.

In Germany, too, bad news for one drug maker was a boon for another. Altana, a rival of Bayer in the over-the-counter business, was the biggest gainer on the Frankfurt Stock Exchange, as some nervous investors switched their holdings. Another German maker of naproxen, Stada Arzneimittel, fell 1 percent, while in Switzerland, shares of Roche were flat.

Studies like the one sponsored by the National Institutes of Health carry risks and rewards for drug companies. If Aleve had been found to be effective in preventing Alzheimer's disease, without side effects, Bayer could have used that in its marketing of the drug, people at the company said.

Bayer has marketed aspirin as a pain reliever for people who suffer from arthritis. In other industry tests, these people said, Aleve has shown cardiac benefits, especially when compared with Vioxx, a pain reliever withdrawn from the market by its manufacturer, Merck, in late September.

For Bayer, the warnings about Aleve came just as it was putting the shadow of Baycol behind it. The company withdrew the drug in 2001 after reports that it caused serious side effects, and it has been fighting lawsuits ever since. Bayer has settled 2,895 suits; 7,169 are still pending. But it recently won the fourth case that went to trial, and has yet to lose a case over Baycol.

Analysts remain cool toward Bayer, citing its meager pipeline of new drugs. The company is also dealing with the expiration last year of its patent on Cipro, an antibiotic that became a household word after the terrorist attacks of September 2001, when it was used to treat anthrax victims.

"They have some nice products," Mr. Nacken said, "but they won't come to the market until 2006."