Drug pipeline slowed

Bayer gets FDA warning over quality control

Bayer AG
Bayer's drug division needs to clean up its act. Source: DPA

The US Food and Drug Administration has issued a stark warning to the German pharmaceutical giant Bayer Tuesday over unsanitary conditions at the company’s German headquarters in Leverkusen.

In a letter to Bayer CEO Werner Baumann that was sent in November but only now disclosed, the FDA listed numerous quality issues, including inadequate equipment cleaning. The FDA also accused Bayer, which is taking over US-based seed maker Monsanto, of not having sufficiently improved its procedures after an initial complaint in January 2017.

Bayer said that there is no evidence that patient safety was at risk.

The FDA’s so-called “warning letter” is the second of three steps it can use to address quality issues with pharmaceutical or food manufacturers. If the company’s response to the warning letter is deemed unsatisfactory, the FDA can ban imports of products to the US and deny approval for new drugs offered by the company.

After receiving the letter, Bayer started implementing “corrective measures and modernization work” at its production facilities in Leverkusen, the company said in a statement. But it warned that this could lead to “temporary supply disruptions affecting our mature product portfolio,” including the erectile dysfunction treatment Levitra and blood pressure medication Adalat Oros.

While neither drug is among the top sellers in Bayer’s pharmaceuticals portfolio, the company sold €624 million ($776 million) worth of Adalat in 2016.

The group said it wanted to minimize supply interruptions as much as possible, but warned that the corrective measures could negatively affect its 2018 earnings. Citibank analyst Peter Verdult said he expected the problem to reduce earnings before interest, taxes, depreciation and amortization (EBITDA) by around €300 million.

For Bayer, with an EBITDA of around €9 billion last year, the damage from the FDA action would have an only minor impact on the company’s overall earnings. But it would nonetheless hurt the successful pharmaceuticals division, which has long been the key to Bayer’s growth. It also comes at an unfortunate time, as the company’s Monsanto acquisition is being weighed by European antitrust authorities.

In a similar move five years ago, the FDA highlighted production and quality control deficiencies at the German pharmaceutical company Boehringer Ingelheim. As a result, Boehringer’s head of production lost his job and the company was forced to undergo a lengthy restructuring of its quality assurance division.

Bert-Friedrich Fröndhoff leads a team of reporters covering the chemicals, healthcare and services industries at Handelsblatt. Siegfried Hofmann is Handelsblatt’s chemical and pharmaceutical industries correspondent. To contact the authors: froendhoff@handelsblatt.com,hofmann@handelsblatt.com

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