Bayer shares fall as Baycol woes mount Mon February 24, 2003 07:20 AM ET By Sitaraman Shankar FRANKFURT, Feb 24 (Reuters) - Shares in Bayer AG fell five percent on Monday after a U.S. newspaper reported that senior company executives knew of the risks associated with its Baycol cholesterol drug long before it was recalled. The new claims deepened investor concerns about liabilities surrounding the drug, once the mainstay of a pharmaceuticals business which the German chemicals and drugs group is now trying to spin off. Bayer shares, a constituent of the blue-chip DAX index .GDAXI , were down 74 cents at 15.09 euros by 1205 GMT, at which point the benchmark was down 1.4 percent. The New York Times cited at the weekend newly disclosed company documents which indicated Bayer executives knew of problems with Lipobay or Baycol, an anti-cholesterol drug, long before it was pulled from the market in August 2001. The newspaper said documents made public by lawyers suing Bayer, including memos, e-mail messages and sworn depositions, suggest the company promoted Baycol even as its own analysis found patients on it were contracting a rare muscle disorder at a higher rate than patients on similar drugs. The article also said that more than 10,000 patients who took Baycol or the families of those who died had filed lawsuits against Bayer and its marketing partner GlaxoSmithKline GSK.L . The figure is significantly higher than the 7,800 suits Bayer said earlier this month it was facing. Industry analysts said Baycol could grow in significance as Bayer's search for a partner for its drugs unit progresses. "If Bayer are going to be tied up with Baycol, this will divert managerial resources away from finding a partner, though any partner will insist on the liabilities being ringfenced," said a London-based analyst. "The number of cases has been climbing, and it would be no surprise if it is indeed 10,000," he said. A Bayer spokesman declined to comment. The company, which is seeking a partner for its struggling drugs unit, is now valued at just over 11 billion euros ($11.83 billion) after its shares lost more than a quarter of their value since the beginning of the year. Three months ago, industry sources valued the pharma division alone at around 10 billion euros. CASTS LONG SHADOWS Bayer withdrew Baycol, which was sold under the name Lipobay outside the United States, after it was linked with more than 50 deaths worldwide. The number of deaths linked to the drug has since risen to more than 100. The liabilities related to Baycol's recall could be large. In a research note on January 28, HSBC quoted a lawyer for plaintiffs in the case saying the number of court cases could touch 15,000. It said the worse-case cost to Bayer would be $1.6 billion. HSBC quoted attorney Kenneth Moll as saying Bayer was paying up to $1.25 million in out-of-court settlements in each case involving death. Bayer had hoped to find a partner for its drugs business by the end of 2002 -- but the list of drugmakers who have said they are not interested is growing. They include Franco-German Aventis AVEP.PA , Germany's Schering SCHG.DE and unlisted Boehringer Ingelheim, Denmark's Lundbeck LUN.CO and Dutch Akzo Nobel AKZO.AS. Last year industry sources saw GlaxoSmithKline GSK.L as a likely suitor, but the British group's interest has also waned since.