Most of the attention that the media and investors pay to pharmaceutical companies gets spent on the drug side of the business. Almost all the major companies have large agricultural divisions, however, it's just that most people find farming, well, boring. The bee death issue, however, could be about to change all that for Bayer.
Bayer's Cropscience unit earned 1.8 billion euros last quarter, and formed 19% of Bayer's total revenue, the company told investors. Thus, this drug company's stock price is dependent to a significant extent on its pesticide business. It is those pesticide brands -- such as the delightfully named Gaucho and Pancho -- that are moving to center stage in the controversy.
Last year, bee fatalities became a huge story in the U.S., as major media interviewed bewildered apiarists about their bee colonies, many of which seemed to have flown away and not come back -- or simply died en masse, seemingly overnight. In one region of Germany, 99% of all bees were lost.
The story was mysterious, depressing and dramatic all at the same time. Plus, it involved a cute animal whose only job is to provide us with honey, flowers and Haagen Dazs ice cream -- thus putting it on the mental front page for most editors. Several explanations were advanced for the deaths, including a virus ("bee AIDS") and mobile phones.
But this year attention is focusing on neo-nicotinoids, the type of pesticides marketed by Bayer under the generic name clothianidin. A German prosecutor has been asked by environmental activists there to investigate whether Bayer's pesticides are responsible for the bee deaths.
That move comes at the same time as a suit filed by The Natural Resources Defense Council, which which seeks copies of records related to Bayer's pesticides held by the EPA. The EPA asked Bayer in 2003 to study the effect of its chemicals on bees, but the agency has since declined to say whether those studies were done, or what they might say, according to the San Francisco Chronicle. Bayer spokesperson Greg Coffey told the Chron that controlled field studies have demonstrated that clothianidin, when used correctly, will not harm bees. And Dr. Richard Schmuck, an ecologist at Bayer CropScience, said in June:
All studies available to us confirm that our product is safe to bees if the recommended dressing quality is maintained. This is also shown by the product safety assessments which we have submitted to the registration authorities.Note that Bayer's line here is not that the chemical is safe for bees, but rather that it is only safe when used correctly. And this may the downfall for Bayer -- because unlike drugs, pesticides are not administered in controlled doses by professional physicians. They are sprayed all over the place by farmers on tractors, as Bayer well knows. It would be nice if Bayer could simply say that its products are safe for bees, period.
Bayer's PR folk ought to be worried. If public opinion concludes that its pesticides killed the bees then Bayer is ripe for a consumer boycott, as it has plenty of discretionary drug brands such as Aleve and Alka-Seltzer than bee-lovers can refuse to buy. Those consumer health brands for 4.5 billion euros of Bayer's annual 32.3 billion euro revenues.
In the meantime, Bayer had better hope that those EPA records exonerate its brands.