The Telegraph
Since 1st March, 1999
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Glaxo leads race for Bayer arm

London, Nov. 18 (Reuters): GlaxoSmithKline is among a number of companies considering a bid for the ailing pharmaceutical arm of Germany’s Bayer, industry sources said on Sunday. “A lot of companies are running their slide rules over this, but on a scale of ‘hot’ to ‘cold’ it’s still only at the ‘lukewarm’ stage,” said one person familiar with the situation.

Bayer, whose scientists invented Aspirin, effectively put its drugs unit up for sale last week by announcing it now no longer insisted on holding a majority in any partnership involving the business.

The move opens the door to a deal with leading global pharmaceutical companies that would not have considered taking a minority stake.

GlaxoSmithKline, Europe’s biggest drugs company, is in some ways the most obvious partner for Bayer, since the two companies already have a joint marketing deal for a promising anti-impotence drug developed by the German firm.

Bayer and Glaxo believe they have a potential $1 billion-a-year product in Levitra, or Vardenafil, which will rival Pfizer Inc’s Viagra in the fast-growing erectile dysfunction market, following its planned market entry next year.

“The rationale for Glaxo would be to capture the full economic benefit of Vardenafil,” said Jeff Stevens, industry analyst at JP Morgan. In this respect, a GlaxoSmithKline /Bayer tie-up could parallel Pfizer’s acquisition of Pharmacia Corp earlier this year, which was driven by Pfizer’s desire to win full control of best-selling arthritis drug Celebrex.

There is little else, however, in the Bayer new drug pipeline and GlaxoSmithKline would have to engage in some heavy cost cutting at the loss-making Bayer unit to ensure any deal boosted earnings, other analysts said.

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