Perform or be sold, BASF tells drug unit

EUROPE'S LARGEST chemical company, BASF, is set to sell its troubled pharmaceutical division in 2000 unless the business delivers a dramatic increase in sales over the next 16 months.

The German giant has set a sales target of more than DM6bn (pounds 2.1bn) for BASF Pharma if the division is to avoid being sold to one of BASF's rivals. This is a 46 per cent increase on last year's sales, which totalled DM4.1bn.

A sale of BASF Pharma would attract widespread interest from pharmaceutical groups such as Glaxo Wellcome and SmithKline Beecham of the UK, the Swedish giant Astra and Merck of the US, which will be keen to acquire the rights to market Meridia, the company's highly-regarded anti-obesity drug.

Eggert Voscherau, a member of BASF's board of executive directors, said: "If Pharma achieves DM6bn in sales by the year 2000, it will remain in the group. If it doesn't, the question [of a sale] will be answered. It does not make sense to have a pharma operation if it can't live up to expectations."

The division captures less than 1 per cent of the world's drug market and has suffered because of its small scale compared to most of its rivals. Experts say the fate of BASF Pharma depends crucially on the performance of Meridia. The slimming treatment won regulatory approval in the US in February and has so far racked up sales of DM152m. BASF expects sales to reach DM900m a year from 1999 after the expected approval of the drug by European regulators.

If Meridia meets expectations, BASF Pharma should comfortably meet its sales target and avoid the sale, according to observers. However, they warn that Meridia's sales could be hit by competition from Xenical, a rival slimming compound from the Swiss company Roche that won approval from the European regulators earlier this week.

The two rival obesity drugs are not expected to go head-to-head in the important American market until 1999, when Xenical is expected to gain US approval. So far the bulk of BASF Pharma's sales have come from the thyroid treatment Synthroid, which made DM622m in 1997.

Separately, BASF yesterday reported a 14.1 per cent increase in net profit for the first half to DM1.62bn on sales up 3.4 per cent to DM28.7bn. Jurgen Strube, the chief executive, said the economic crisis in Asia would cut around DM500m from 1998 sales as demand and margins for BASF's core chemical products fall.

The company also announced that it is to seek a listing on the New York Stock Exchange by 2000.